Study On The Model Of Water Market Privatization Reform

Recently, with the rapid development of industrialization and urbanization in China, the natural monopoly water industry are confronted with many difficulties, such as aging facilities, backward management, high operating costs, lack of wastewater treatment capacity and so on, cause a heavy financial burden. It is difficult for the government to meet the growing demand of urban water industry merely by public finance. In order to solve these problems and break the existing monopoly market structure, with the imposition of a series of reform and open-up policies, the Chinese water industry has entered an unprecedented development era. By now, although the water privatization reform has made remarkable achievements, it also faces a lot of problems. This situation is mainly because the lack of systematized and deep understandings and studies of privatization. The mechanism of water market and the relationships between the key factors:privatization, competition, efficiency are not clear. When the relevant legal and regulatory systems are imperfect, the duties and responsibilities of government and private sector are less specified, privatization is simply equated with selling. The concern of efficiency and service quality are always neglected. All these lead to the result that failed reform cases and even conflicts are not rare. The areas where the investments are most needed, such as the small less-developed towns, remote villages and suburban areas of big cities, didn’t receive sufficient help for privatization process either. So it is important to look closely into the structural characteristics of water industry, learn from the experiences of other countries and rethink the water privatization process.China and the United States are both big economies with large population; there are certain similarities in responding to internal differences. Meanwhile, the United States as one of the most developed economies with an advanced market system; its water industry development experienced a "mainly private-public keep pace with private-the public dominant" course. Today, although the public systems are still the most common, the water market in United States is characterized by a wide range of participators, highly diversified models of private participation and an advanced legal and regulatory system. The market has profited a lot from both the active public-private participation and the widely performance improvements of public sectors. The causes, gains and losses of the United States’experience have important significance for the water industry reform in China. Due to the fact that the population in China is even larger, the local community autonomy is not as high as United States, it is impossible to just simply copy and imitate the American model. This means that a comprehensive study of water privatization is necessary. We should improve the scientific management system, allow the diversity of private models, establish an effective market system, redefine the role of the market, government and private participators, and finally help the local community to improve their autonomic management capability. Accordingly, these studies will help deepen the reform process of Chinese water industry, provide strategies for the establishment of policy systems, and also of great importance for the improvement of water environment.The innovation of this thesis is to clarify the connotation of monopoly, competition, efficiency and privatization under the situation of water industry, from the view of both the theoretical analysis and empirical research. It is concluded that the efficiency of the water utilities is not solely determined by the type of ownership; there is no inherent advantages between private and public. Besides, based on the economic analysis, this thesis gives a systematic and scientific review of the water industry in the United States, and finally proposes strategies and advice for the reform process of Chinese Water Industry.