The Central Committee of the Communist Party of China and the State Council have issued opinions on accelerating the comprehensive green transformation of economic and social development.

It is mentioned that we will deepen the electricity price reform, improve the price mechanism that encourages flexible power sources to participate in system regulation, implement the coal-electricity capacity price mechanism, study and establish a sound new energy storage price formation mechanism, improve the tiered electricity pricing system and time-of-use electricity pricing policy, and improve the tiered electricity pricing system for high energy-consuming industries.

Improve the progressive water pricing policy for residents, exceed the quota and cumulative pricing policy for non-residential and special water, and promote comprehensive reform of agricultural water prices.

Five departments, including the National Development and Reform Commission, recently issued "Guiding Opinions on Accelerating the Development of the Water-Saving Industry", requiring the water-saving industry to reach trillions in scale by 2027 and cultivate a group of specialized and innovative "small giants" enterprises.

By 2035, cultivate a group of billion-level leading enterprises, and the water-saving technology, equipment manufacturing, and management services reach the world's advanced level, and the water-saving production and lifestyle are fully formed.

In addition, Zheshang Securities pointed out that water assets are high-quality operation assets with abundant operational cash flow.

Zhongtai International released a research report stating that the cycle of raising tap water prices is expected to be launched nationwide in 2024, and there are investment highlights in the water supply industry. Under the new rules, the permitted income of water supply operators will change from being calculated based on the net asset profit rate to the investment capital return rate, and the expected income amount will be higher. Water pricing will also take into account operating costs and efficiency.

Minsheng Securities released a research report stating that since the water supply industry is closely related to life and industrial production, it has obvious rigidity and most of the water supply projects have been put into operation. Therefore, the overall operation of water companies is stable, with cash flow advantages and strong high dividend attributes. At the same time, compared with developed countries, China's water prices are low, and the upward trend of water prices is expected to ensure that water companies maintain high dividends with the rise of quantity and price.

Leading water companies include:

China Water (00855), Beijing Enterprises Water Group Limited (00371), China Everbright Water Limited (01857), Guangdong Investment Limited (00270), DCWT (03768), Taizhou Water (01542), and Xinglu Water (02281), etc.