Drought in China: Nearly 5 Million Short of Water

Robert Hsu, August 25, 2009

I've just returned from the San Francisco MoneyShow, and I always enjoy these trips as they give me an opportunity to speak one-on-one with subscribers. And this year was no different.

Aside from meeting with subscribers and discussing the nature of the global economy and stock markets, I also made a little discovery outside of investing. On this trip, I learned that China and San Francisco have something in common -- both are suffering from a severe drought.

San Francisco is facing a three-year drought, and the city has formulated a checklist to help people use less water. A few of the items on the list: higher water prices, restaurants disallowed from automatically offering water to diners, only allowing sprinklers two days out of the week and finally water cops. Basically, they issue citations to individuals and businesses found wasting water -- all with the goal of trying to reduce water usage.

While San Francisco's water situation is a serious matter, it's nowhere near as serious here in the U.S. as it is in China. There, the severe drought that has affected northern China since late July is spreading.

A total of 4.6 million people are finding it difficult to access clean drinking water. That's a quick and drastic increase from the 3.9 million people affected just a week ago. And it's likely to continue increasing as conditions worsen due to high temperatures and a lack of rainfall.

Additionally, agriculture is hurting. Some 4.1 million head of livestock are also short water, and crops on 22 million acres have been damaged. This will further exacerbate the problems for the area.

Chinese officials are calling for greater efforts to combat the drought, but are struggling to make headway. As of now the drought is mainly focused in north and northeast China, but there are warning signs that it's spreading to central and southern China.

This drought is only exacerbating China's problem with supplying clean, potable water to its citizens. It, coupled with the country's water pollution, is drastically limiting China's water supplies.

All this emphasizes why we're investing in the water treatment industry in China. With the help of its $586 billion stimulus package, I expect the Chinese government to continue its heavy infrastructure investments. Essentially, they have to -- the Chinese water treatment market must grow greatly and quickly in order to deal with the severe water shortages and worsening water pollution in China.

Very literally, this company will save lives, as well as offer us a profitable opportunity while it does so. Since I recommended the company just four weeks ago, my China Strategy readers have already seen gains of 10%.

For more information and my most recent buy limit, join China Strategy.

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