Japanese financial services company Orix will set up a joint venture with Toray Industries and a Chinese partner in March to make and sell equipment aimed at making China's low-quality tap water drinkable.
Orix will own a 20% stake in the company, which will be capitalized at 50 million yuan ($7.44 million). China Water Affairs Group, a Hong Kong-based water supplier partly owned by Orix, will provide 65% of the capital, with the remaining 15% coming from Toray.
The new company will aim for about 600 million yen ($5.42 million) in sales in its first year of operation and 30% annual sales growth.
In China, people generally drink tap water only after boiling it because of health concerns due mainly to aging pipes. Demand for clean tap water is growing, and there is a large market for products such as water dispensers.
In recent years, new condominiums with sophisticated water treatment systems have popped up in China as living standards rise. Orix is betting that demand for water purification equipment will keep growing. Annual sales of such products will reach $1.8 billion within five years, according to one estimate.
The new company, to be based in China's southeastern Jiangxi Province, will make water purification equipment using Toray's membrane filtration technology. The membranes are attached to water pipes connecting water treatment plants to condominiums and public facilities, such as hospitals. The equipment will supply potable tap water directly to consumers.
China Water Affairs is a Hong Kong-listed company operating water supply or sewage facilities in more than 60 cities. It also manufactures water treatment equipment. Orix has an 18% stake in the Chinese business.