Is the Marketization of Sanitation Moving Toward "De-marketization"?
Article Guide
The so-called "de-marketization" does not mean that sanitation services have completely returned to the decades-old model of government institutions taking full responsibility. Instead, it means:
Projects that were previously outsourced to private enterprises, professional sanitation companies, or social capital are now, upon contract expiration, being taken back by government platforms, state-owned enterprises (SOEs), urban investment companies (Chengtou), or local sanitation groups.
In some places, projects that were once awarded through open bidding—where multiple companies competed on proposals, pricing, and service capability—are no longer put out for tender when contracts expire. Instead, they are assigned directly to local state-owned platforms, or a newly established/integrated state-owned sanitation company takes over.
On the surface, this appears to be a change in project ownership. But looking deeper, it signals a new phase in the marketization of the sanitation industry.
Over the past decade or more, sanitation marketization has advanced rapidly, with many believing it to be an irreversible trend. The model was: the government purchases services, enterprises operate professionally, fiscal funds pay according to contracts, and urban environmental quality is ensured through performance assessments. This model drove rapid development in the sanitation sector and gave rise to numerous sanitation enterprises.
But now, the situation has changed.
Fiscal pressure has increased. Project profit margins have thinned. Low-price competition has become rampant. Enterprise performance risks have grown. Local governments are beginning to reconsider: Should basic urban services like sanitation be left to the market, or kept under government control?
Thus, "marketization" hasn't disappeared, but its logic is changing.
1. How Did Sanitation Marketization Rise in the First Place?
To understand today's "de-marketization," we must first look back at why sanitation marketization emerged.
For a long time, sanitation was primarily handled by government departments, public institutions, sanitation offices, and sanitation stations. Personnel were managed within or quasi-within the system, vehicles and equipment were funded by fiscal budgets, and operations were centrally dispatched by the government.
This model had the advantage of stability. Cities need daily street sweeping, waste collection and transportation, and public toilet maintenance. Regardless of market fluctuations, these services cannot stop. Direct government management meant clear accountability and strong guarantees.
However, the problems were also evident:
- Low efficiency: Overstaffing, outdated mechanisms, weak performance evaluation—working more or less made no difference, and service quality improved slowly.
- Heavy fiscal burden: Personnel salaries, vehicle procurement, equipment maintenance, and management costs all fell on the government budget.
- Insufficient specialization: As cities expanded, sanitation services became increasingly complex, and traditional management methods could not keep up.
- Reform needs: Government function transformation, institutional reform, and public service outsourcing pushed sanitation from "government doing it directly" to "government purchasing services."
Against this backdrop, sanitation marketization accelerated.
Governments packaged services such as street cleaning, garbage collection and transport, public toilet operation, waste sorting, and transfer station management, awarding them to enterprises through tendering. Enterprises were responsible for personnel, vehicles, management, and operations, while the government paid fees and conducted performance evaluations.
At the time, this model seemed reasonable: the government reduced hands-on involvement, enterprises improved operational efficiency, and fiscal expenditures could be controlled through competitive bidding. With profit margins, enterprises had incentives to improve management, upgrade equipment, and expand scale.
Thus, sanitation marketization entered a period of rapid expansion.
2. What Changes Did Marketization Bring?
Objectively speaking, sanitation marketization did contribute to the industry. It indeed transformed the sector.
First, it improved the professionalism of sanitation services. In the past, sanitation operations in many areas were relatively crude. After marketization, enterprises introduced standardized management, mechanized operations, and refined performance assessment. Street cleaning, garbage collection, public toilet maintenance, and emergency response all had clearer operational procedures.
Second, it promoted mechanization and equipment upgrades. To improve efficiency, enterprises invested in washing and sweeping trucks, sprinklers, compactors, transport vehicles, and new energy sanitation vehicles. Some leading enterprises even built smart sanitation platforms using GPS, video surveillance, and data systems to manage personnel and vehicles.
Third, it reduced direct government management pressure. The government shifted from being the "direct doer" to the "purchaser and supervisor of services." Theoretically, the government could focus more on standard-setting, quality supervision, and public policy.
Fourth, it fostered the growth of sanitation enterprises. Sanitation marketization allowed the industry to emerge from the traditional public institution system, forming specialized companies, listed enterprises, and regional leading players. Many enterprises expanded nationally through project acquisition.
So, we cannot simply dismiss sanitation marketization. It did drive industry development.
However, every model has its cycle. As marketization developed to a certain stage, problems began to surface.
3. Why Is "De-marketization" Happening Now?
"De-marketization" is not sudden; it results from multiple overlapping factors.
1. Governments are short on money, and fiscal discipline tightens
This is the most practical reason.
Previously, when governments purchased sanitation services, contracts were signed and annual payments made. As long as local fiscal pressure wasn't severe, projects could remain marketized. But now, many local governments face significant fiscal strain. Land-based revenues have weakened, rigid expenditures are high, and public service projects are being recalculated.
Sanitation is a non-negotiable necessity that cannot stop. But how money is spent must be reconsidered.
If a marketized project requires tens of millions in annual service fees, and the government believes that establishing its own state-owned platform—or having a local SOE integrate resources—could better control costs and arrange funding, then there is incentive to take it back.
In other words, the core logic of past marketization was "spend money to buy efficiency." Now, in some places, the core logic has become "spend less to maintain operations."
When the logic changes, the model naturally follows.
2. Some marketized projects failed to meet expectations
In some places, marketization was introduced hoping for improved service quality and optimized fiscal expenditure. But actual implementation didn't always deliver.
Some projects, won with low bids, forced enterprises to cut personnel, equipment, and management to protect profits. The result was unstable service quality, increased public complaints, and greater government performance pressure.
Other enterprises bid aggressively but found profit margins too thin during actual operations, leading to service degradation, staff turnover, wage arrears, and equipment shortages.
Governments observed: marketization didn't reduce burdens; instead, it increased coordination and supervision costs.
If the government still has to monitor enterprise work daily, handle complaints, push for improvements, and even resolve workers' wage and stability issues, then the meaning of marketization is undermined.
3. Sanitation services have strong public attributes; governments are reluctant to fully hand them over
Sanitation is not an ordinary commercial service.
It happens every day on city roads, in residential areas, public toilets, waste stations, transfer stations, and treatment facilities. It affects urban operations, people's daily experience, public health, and government image.
If sanitation fails, the public doesn't blame the enterprise first; they blame the government.
Dirty streets = poor government management.
Uncollected garbage = inadequate government service.
Smelly public toilets = government inaction.
Sanitation workers demanding wages = government must step in.
Therefore, from a responsibility perspective, the ultimate accountability for sanitation always rests with the government.
Since the government bears final responsibility, some localities think: why not entrust key services to controllable state-owned platforms rather than external enterprises? At least for major events, emergency response, employment stability, and fiscal arrangements, government direction is smoother.
4. State-owned platforms need new business and cash flow
In recent years, local Chengtou platforms and state-owned companies have been undergoing transformation.
Many previously relied on land development, infrastructure construction, and engineering projects. But now, traditional business growth has slowed, and platforms need stable cash-flow businesses.
Urban operation services—sanitation, municipal maintenance, landscaping, property-city management, parking, advertising, and resource recycling—have become important directions for state-owned platform transformation.
Although sanitation projects have thin profit margins, they have one characteristic: stability, longevity, and relatively predictable cash flow.
For state-owned platforms, taking on sanitation projects is not just business expansion; it's a step toward participating in urban operations and integrating public resources.
Consequently, some local SOEs have established environmental services companies, urban operation companies, or sanitation groups to gradually take back marketized projects.
5. Private sanitation enterprises face growth bottlenecks
During the rapid expansion of sanitation marketization, some private enterprises grew quickly by winning projects nationwide and scaling up. But as competition intensified, problems emerged:
- Project prices kept falling;
- Labor costs kept rising;
- Vehicle and equipment investments grew larger;
- Performance assessments became stricter;
- Payment cycles lengthened;
- Local protectionism and state-owned competition became more pronounced.
Many private enterprises find that the old strategy of "win more projects, increase revenue, expand coverage" is increasingly unsustainable.
If project profits are thin, payments slow, and risks high, enterprises themselves become cautious. When contracts expire, private firms may be unwilling to renew at low prices, and governments may prefer not to re-outsource to them.
This creates space for state-owned capital to enter.
4. Is "De-marketization" a Step Backward?
This question cannot be answered simply.
If it meant returning entirely to the old model of crude management, bloated staffing, and low efficiency, then yes, it would be regression.
But much of today's "de-marketization" is not a complete return to the old ways. Instead, it represents a different model: state-owned platform leadership with market mechanism participation.
Specifically:
- Projects may be undertaken by state-owned companies, but specific operations, equipment maintenance, smart platforms, and specialized services may still involve social enterprises.
- For example: state-owned platforms win general contracts, private enterprises serve as subcontractors; state-owned sanitation groups coordinate overall operations, professional companies handle specific districts; local platforms control project resources, social enterprises provide technology, vehicles, and management services.
- Governments no longer deal directly with multiple small enterprises but coordinate through local platforms.
Whether this model works depends on execution.
If SOEs merely take resources and subcontract without improving management capabilities, problems will multiply.
If SOEs can establish standardized systems, introduce professional teams, reasonably procure services, and ensure frontline worker welfare, they may form a more stable public service system.
Therefore, "de-marketization" itself is not the issue. The key is whether it brings better efficiency, more stable services, and more reasonable costs.
5. Sanitation Marketization: From "Outsourcing Era" to "Restructuring Era"
I prefer to understand the current changes as: sanitation marketization is not ending; it is entering a restructuring phase.
Past marketization was mainly "government outsourcing." The government put projects out for tender, enterprises operated independently after winning, and the government assessed performance and paid fees. This was a typical public service outsourcing model.
Now, sanitation projects are becoming intertwined with urban operations, state-owned enterprise reform, fiscal pressures, and grassroots governance.
It is no longer just a street-cleaning project; it is part of the city's public service resource portfolio.
Therefore, several models may coexist in the future:
- Traditional market-based tendering continues – especially in fiscally stable cities with mature market mechanisms and strong regulatory capacity.
- State-owned platforms directly undertake projects – some localities consolidate sanitation, municipal, and landscaping services under local SOEs or Chengtou platforms.
- State-owned control, private enterprise support – SOEs handle general contracting and resource integration; private enterprises provide professional operations, equipment services, IT platforms, and niche services.
- Mixed-ownership or joint ventures – local state-owned capital partners with professional sanitation enterprises to form joint ventures combining local resources with professional expertise.
- Small projects return to local jurisdiction – township or sub-district projects with small budgets and high supervision costs may revert to local organizations, SOEs, or community-based teams.
These changes indicate that the sanitation industry is shifting from pure bidding competition to competition in resource integration, operational capability, and long-term stability.
6. Do Private Sanitation Enterprises Still Have Opportunities?
Yes, and significant ones. But the opportunities have changed.
In the past, the biggest opportunity for private enterprises was directly winning government projects. Going forward, such opportunities may decrease or become more competitive.
However, private enterprises still have several types of opportunities:
1. Professional operations
State-owned platforms may lack sanitation expertise and mature teams. They have resources, credit, and government connections, but not necessarily refined operational capability.
If private enterprises can make road cleaning, public toilet maintenance, waste sorting, transfer station management, and smart dispatch sufficiently professional, they can become operating partners for state-owned platforms.
2. Niche services
The sanitation industry will become increasingly segmented.
Examples include kitchen waste collection and transport, low-value recyclable material systems, bulky waste pickup, campus/industrial park cleaning, autonomous sanitation vehicle operation, smart toilet management, and waste sorting training. These require specialized capabilities.
Large, comprehensive projects may go to state-owned entities, but niche areas still need market players.
3. Technology and equipment services
Smart sanitation platforms, new-energy sanitation vehicles, unmanned cleaning equipment, data monitoring systems, and vehicle dispatch systems are not inherently available to local SOEs.
Technology companies, equipment manufacturers, and operations specialists still have room to grow.
4. Cost-reduction and efficiency solutions
The tighter the fiscal situation, the greater the demand for cost reduction and efficiency improvement. Those who can help projects spend less, avoid penalties, reduce complaints, and improve operational efficiency will create value.
In the past, enterprises made money by "winning projects." In the future, they may earn more by "helping others run projects well."
7. How Will Frontline Sanitation Workers Be Affected?
Whether it's marketization or de-marketization, frontline workers are ultimately affected.
For years, many sanitation workers have moved between different companies. When contractors change, workers change uniforms, managers, and payroll entities—but they still clean the same streets.
If projects revert to state ownership, some changes may occur.
Positively, state-owned enterprises may offer more stable wage payments, better social insurance compliance, and greater job security.
But optimism should be tempered. Fiscal pressure remains, and cost control persists. If only the operator changes without increasing total funding, frontline conditions may not significantly improve.
What the sanitation industry truly needs to address is not just the nature of the enterprise, but workers' wages, workload, occupational safety, and social respect.
If nationalization is only about cutting costs, workers may not benefit.
If marketization is only about offloading responsibility, workers will not benefit either.
A truly good model should provide frontline sanitation workers with stable income, reasonable rest, safety guarantees, and basic dignity.
8. How Should Governments Reconsider Sanitation Marketization?
For governments, the choice is not simply between "marketization" and "nationalization." It requires rethinking the governance logic of sanitation services.
First, marketization cannot be treated as a way to shirk responsibility. Even after outsourcing, the government remains ultimately accountable. Signing a contract does not mean the job is done. Governments must set standards, supervise processes, secure funding, and coordinate problem resolution.
Second, low price cannot be the only criterion. Winning with the lowest bid may save money on paper but can lead to service decline, lower worker wages, increased complaints, and project failure. Public services need reasonable pricing; they cannot be turned into endless price wars.
Third, state-owned entry must also prioritize efficiency. SOEs taking over sanitation projects does not automatically guarantee good performance. They must adopt market-oriented hiring, cost control, and performance evaluation mechanisms; otherwise, they risk returning to inefficiency.
Fourth, fair competition must be protected. If local SOEs act as both players and referees with special privileges, private enterprises cannot compete fairly. Long-term, this harms industry innovation and service improvement.
Fifth, long-term thinking is essential. Sanitation projects are not one- or two-year transactions. Vehicles, personnel, waste-sorting habits, and urban environmental quality require sustained, stable investment. Policies should not swing frequently, and projects should not be evaluated solely on short-term costs.
9. The Next Step for Sanitation Marketization: Not Regression, but Re-division of Labor
I believe sanitation marketization will not disappear entirely. Urban environmental services are becoming too complex for governments or SOEs alone to handle perfectly.
However, the past model of purely relying on tenders and outsourcing to enterprises will indeed change.
A new division of labor is likely to emerge:
- Government: sets standards, supervises, ensures fiscal guarantees, and bears public accountability;
- State-owned platforms: integrate resources, coordinate regions, and provide basic guarantees;
- Private enterprises: deliver professional operations, technical services, and efficiency improvements;
- Frontline workers: receive more stable labor protections;
- Public: participates in service improvement through complaints, oversight, and evaluation.
This may be the next phase of sanitation marketization.
Simply put, the sanitation industry is not moving from marketization back to central planning. It is moving from crude marketization to hybrid governance.
"Who does it" is not the only question.
"How to do it better, more stably, more efficiently, and more fairly" is the real issue.
Final Thoughts
Sanitation marketization has reached a point where reassessment is necessary.
In the past, we believed markets could bring efficiency. Facts show that marketization indeed drove industry development.
Now, we also see that excessive low-price competition, fiscal pressure, service quality fluctuations, shrinking corporate profits, and insufficient worker protections have challenged the marketization model.
As a result, some localities are taking sanitation projects back, assigning them to state-owned platforms or SOEs. This looks like "de-marketization," but essentially, it is local governments seeking a new balance between fiscal constraints and public service responsibilities.
This phenomenon cannot be simply judged as good or bad.
If taking projects back is only about reducing expenditures and lowering costs, frontline workers and service quality will ultimately pay the price.
If state-owned entry stabilizes the workforce, secures investment, improves coordination, and continues to involve professional enterprises, it could become a new governance model for the sanitation industry.
The sanitation industry fears two extremes:
One extreme is blind faith in marketization—believing that as long as you tender and outsource, everything will be fine.
The other extreme is blind faith in nationalization—believing that as long as you take things back, everything will be better.
Truly good sanitation services depend not on labels, but on mechanisms:
- Is there reasonable pricing?
- Is there stable investment?
- Is there professional operation?
- Is there fair performance evaluation?
- Are frontline workers protected?
- Is the city genuinely cleaner?
These questions matter more than whether a project is "marketized" or "nationalized."
Therefore, today's discussion about sanitation marketization should not just ask: Who owns the project?
It should also ask: At a time when governments are increasingly cash-strapped, enterprises are finding it harder to profit, and frontline workers are growing more exhausted, can the sanitation industry still find a healthier, more sustainable way to operate?
That is the real question sanitation marketization needs to answer.