For the first time in the country, foreign investors will participate in the entire process of waterworks business -- from water processing to water distribution.

"It is a bold trial but it signals a trend that the public welfare industry has to draw social and overseas investment," said Chi Jianguo, board chairman of the Shanghai Water Assets Operation and Development Co, Ltd.

The contract period is 50 years, and the price paid by the French buyer remains unidentified, according to Chi, whose company falls under the Shanghai Water Authority and Shanghai Urban Construction Investment and Development Company. It is responsible for providing financing for the water industry, supervising its operations and managing the assets of the State-owned industry.

The water industry was previously monopolized by the municipal government and had losses of over 800 million yuan (US$97 million) in 1999. Then the municipal water supply sector underwent radical reform and converted the 10 water factories into four limited companies.

With the employment of market economy principles, the industry began to make gains last year but problems such as low efficiency and poor management still need to be addressed.

"To break the monopoly is the first step in reform. We have to import foreign technology and management to create more value to increase our competitiveness in the local market," Chi said.

Established in December 1999, Water Pudong has 1.5 billion yuan (US$180 million) of fixed assets and provides water to 1.71 million residents in Pudong District with a daily supply of 1.27 million cubic metres of water.

In July 2001, the company opened a bid to attract overseas participation, which caused a big stir and attracted worldwide water leaders from France, Britain and Italy.

(China Daily May 23, 2002)