Operation Mood Of Chinese Water Service And Regulation

During the development of the public water service industry, almost all countries choose to make it monopolized by companies which are controlled by government, for this industry has the characteristics of public utility, this mood is regarded that could make sure to guarantee the characteristics of public utility. Another advantage of this mood is that reduction of cost as to reach economies of scale. But since 1980s, some problems occurred in water service, specially problems such as the shortage of capital that originally given by the government, low running efficiency etc. in many developed countries. And then, these countries began to launch their reform, mainly including change the investor from government to private, introduce private organization to industry management, and let the market decide where and how the resource flows. It has been a long period that water service industry in China operated by semi-government companies, these companies are on the absolute monopolizing position in the market which divided by the borders of the cities where they in. To this day, water service industry in China now facing the same problems which the developed countries ever had in 1980s, i.e. capital shortage and low operating efficiency, this restrict the development of the industry. So reform on the operating mood of water service must be carried out so as to meet the demand of the economic and social development.Here we think, in resolving the problems laid out, it is necessary to refer to the experience which we got in the reform in developed country and other net utility such as electric power industry. Experience there tell us that the key is to set market mechanism the means to dispose resources, but it also should be remain monopoly in some phase in this industry for water service is a kind of public utility. Industry organization economics, especially economics on regulation is used to analyze the dilemma of market and monopoly. Water must be transported in closing pipeline, monopoly where water is transported is good to economy of scale, regulatory agency should take incentive regulation, such as price cap, to reach the point that make sure the water a public utility in one hand, and rational interest of operator in the other hand. In the other field of this industry, handicaps to capital and entry should be canceled, only without handicaps, the power of market mechanism could burst out, the price will reduce, the quality of products and service will be enhanced, and the consumers will be who get profit in this reform. The government then will turn its character from an operator and regulator to a pure regulator.Reform of water service industry has begun in many cities, and many international professional companies have taken part in this field, but it is important to considering the local circumstances, because we still have problems such as there is no special law and regulatory agency in this industry. Competitors and the government should consummate themselves and the market so as to bring better products and service to consumers.