July 1 (Bloomberg) -- Sojitz Corp., a Japanese trading company, plans to start sewage treatment operations in China as demand for recycled water increases in the world’s fastest- growing major economy.

The company may start building a 3 billion yen ($31 million) plant in Tangshan, in China’s northeast as early as next year and will explore a wider expansion that could include as many as 10 plants in five years, Atsushi Kato, a project manager at Tokyo-based Sojitz, said in an interview yesterday

Japanese companies are seeking opportunities in China as urbanization and climate change pressures increase demand for improved water supplies. Marubeni Corp. and JGC Corp. agreed last year with a Chinese partner to tackle pollution at dams in the country and ease water shortages, according to a document released in November from Japan’s trade ministry and China’s National Development and Reform Commission.

“Tangshan is expected to be China’s largest industrial city, and there’s a huge business opportunity in water,” Kato said. “The market for sewage treatment in China will expand.”

Sojitz, which will also operate the proposed Tangshan plant, plans to treat sewage and industrial waste water from homes and businesses and sell purified water to power stations, steel mills, and chemical plants. The company will also supply products such as water treatment membranes.

The company’s shares closed unchanged at 212 yen on the Tokyo Stock Exchange. The benchmark Nikkei 225 Stock Average fell 0.2 percent.

Tangshan Expansion

Companies including Shougang Corp. and China Petroleum & Chemical Corp. are expanding in the Tangshan area as the government moves to transform the city into an industrial hub.

The Tangshan water treatment plant may process 20,000 metric tons to 50,000 tons of water a day and could start operating in 2011, Kato said. Sojitz will jointly conduct the study for the plant with a Japanese maker of water filter membranes, he said, declining to name the company.

Over the next five years Sojitz may also operate plants in coastal cities such as Dalian, Tianjin, and Shanghai, as well as inland areas including Sichuan, Kato said.

A water supply shortage in China is forecast to reach 100 billion tons in 2010 and rise to 450 billion tons in 2030, Sojitz said, citing data from the Chinese government.

China’s shortage of water poses a “serious challenge” to its plan to expand agricultural output, the country’s Ministry of Water Resources said last year.

Industrialization and climate change have worsened the imbalance in China’s distribution of water resources amid increasing demand from irrigation, Vice Minister Hu Siyi said at an Aug. 13 media briefing in Beijing.

Water resources in the major tributaries of northern China, including the Yellow River, declined by 12 percent in recent years, according to a statement given to reporters at the briefing. Insufficient waste treatment of both industrial and urban water had worsened pollution, it said.

To contact the reporter on this story: Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net

Last Updated: July 1, 2009 03:40 EDT