Published by ChinaMNC · Renhe

Major Water Projects Speed Up Across China: Infrastructure Signals for Foreign Founders

China is accelerating major water infrastructure projects, from the Xiangjiaba irrigation zone to the South-to-North Water Diversion. For foreign founders, these developments indicate growing opportunities in construction, equipment, logistics, and water management sectors. This article summarizes recent progress and practical considerations for registering or operating a company in China.

Major Water Projects Speed Up Across China

On October 25, the central arch ring of the Ma'eryan aqueduct, a control node of the Xiangjiaba Irrigation Zone, was completed. The Xiangjiaba Irrigation Zone is the first large-scale irrigation zone from the Jinsha River to the Yangtze River. In February last year, the first phase (step one) of the project was completed and began delivering water. The currently under-construction first phase (step two) is expected to be completed by the end of 2028. At that time, water diverted from the Jinsha River will be delivered to 11 counties and districts across four cities: Yibin, Zigong, Neijiang, and Luzhou.

The Central Yunnan Water Diversion Project, the largest water resource allocation project in Southwest China, has recently seen new progress. The Shigu water source project, the leading source of the project, is in its final sprint. The Xianglushan tunnel, the first gateway from the Jinsha River, has now been excavated beyond the halfway point, with less than 30 kilometers remaining. Builders are using traditional drill-and-blast methods to advance meter by meter. As of mid-October, the cumulative excavation of the main water conveyance canal of the first phase of the Central Yunnan Water Diversion Project reached 637 kilometers, accounting for 96% of the total length.

The Shushan hub of the Yangtze-to-Huaihe Water Diversion Project has reached a new milestone: its key navigation hub, the Shushan double-line ship lock, has entered trial operation. The double-line lock and the existing single-line lock now operate in parallel with two-way traffic. This upgrade enhances the navigation capacity of the Jianghuai Canal. As the Yangtze-to-Huaihe Water Diversion Project advances, the Jianghuai Canal has connected with the upstream Shaying River and the downstream Wushen Canal, becoming China's second north-south water transport corridor, shortening bulk cargo voyages between north and south by 200 to 600 kilometers.

As a landmark project of the national water network's main skeleton and artery, the South-to-North Water Diversion Middle Route's Yangtze-to-Han River project has reached a key milestone. Nine super-large diameter hard rock tunnel boring machines (TBMs) are operating simultaneously, and the main tunnel excavation has exceeded 40 kilometers, completing one-fifth of the total length. Meanwhile, as the information hub of the project, a digital twin platform can collect over 9,000 parameters across seven major categories from the TBMs in real time, enabling coordinated operation of excavation equipment scattered beneath the mountains and tens of kilometers apart.

What This Means for Foreign Founders

These large-scale water infrastructure projects represent significant opportunities for foreign founders in sectors such as construction, heavy machinery, water treatment, logistics, and engineering services. The projects involve extensive tunneling, dam construction, irrigation systems, and navigation infrastructure, requiring specialized equipment and expertise. Foreign companies with advanced technologies in these areas may find opportunities to supply equipment, provide engineering services, or form joint ventures with Chinese partners.

For foreign founders considering registering a company in China to participate in such projects, it is essential to understand the regulatory environment. China's negative list for foreign investment specifies sectors that are restricted or prohibited for foreign investment. While many infrastructure-related sectors are open, some may require special qualifications or partnerships with Chinese entities. It is advisable to consult with local authorities or professional advisors to determine the specific requirements for your business scope.

Practical Steps for Company Registration

Foreign founders typically establish a Wholly Foreign-Owned Enterprise (WFOE) or a Sino-foreign joint venture. The registration process involves several steps: name pre-approval, submission of articles of association, capital verification, and obtaining a business license. The required documents often include proof of identity, feasibility study reports, and lease agreements for office space. Additionally, certain sectors may require industry-specific approvals, such as those related to construction or environmental protection.

Operating a company in China also involves compliance with tax regulations, labor laws, and foreign exchange controls. Foreign-invested enterprises are generally subject to the same tax laws as domestic companies, including corporate income tax and value-added tax. It is important to maintain proper accounting records and file tax returns timely. Labor contracts must comply with Chinese labor law, including provisions on working hours, minimum wage, and social insurance.

Opportunities in Water Infrastructure

The projects mentioned above are part of China's broader efforts to improve water resource management and transportation networks. The Xiangjiaba Irrigation Zone will support agricultural development in Sichuan province. The Central Yunnan Water Diversion Project aims to alleviate water shortages in Yunnan. The Yangtze-to-Huaihe Water Diversion Project enhances navigation and water supply in Anhui and Henan provinces. The South-to-North Water Diversion Middle Route's Yangtze-to-Han River project will increase water supply to the Han River basin. These projects may create demand for water-saving technologies, smart water management systems, and environmental monitoring equipment.

Foreign founders with expertise in these areas could explore partnerships with Chinese state-owned enterprises or private companies involved in these projects. However, it is crucial to conduct thorough market research and understand local procurement processes. Building relationships with local stakeholders and demonstrating a long-term commitment to China can be beneficial.

Key Considerations for Foreign Founders

When setting up operations in China, foreign founders should consider the location of their business. While major cities like Beijing, Shanghai, and Shenzhen offer robust infrastructure and talent pools, smaller cities may offer lower costs and specific industry clusters. For infrastructure-related businesses, proximity to project sites or industrial hubs could be advantageous.

Intellectual property protection is another important aspect. China has laws and regulations for IP protection, and foreign companies should register their patents and trademarks in China to safeguard their rights. It is also advisable to include confidentiality and non-compete clauses in employment contracts.

Finally, foreign founders should stay informed about policy changes. China's foreign investment policies are periodically updated, and local governments may offer incentives for certain industries or regions. Engaging with local business associations or chambers of commerce can provide valuable insights and networking opportunities.

This summary is based on information published by the relevant Chinese government website and is general information, not legal or tax advice.