FALLS CHURCH, Va.–When the majority of market commentators talk about China’s thirst, they’re usually referring to the country’s huge appetite for oil and gas. But there’s another, potentially more important shortage for China: water.

China is one of 13 water-deficient countries in the world, with per-capita water availability of 2,100 cubic meters in 2005. By comparison, the US has 10,000 cubic meters per capita available. China’s problem is even more complex because of its population distribution; 45 percent of Chinese live in the northeastern part of the country, where only 15 percent of available water is located.

Contamination and inefficient use of the country’s water resources have further exacerbated the problem. Short-term economic growth has been hampered, and the long-term risk of a real crisis in the future–leading to social unrest and disturbing China’s precious social stability framework–has also increased.

As China’s minister of water resources has noted, “China’s per-capita water holdings are one-third of the world’s average, and this is combined with low efficiency in terms of its usage rate. For example, the amount of water used to produce a ton of steel in China ranges from 23 to 56 cubic meters, whereas in highly industrialized countries, such as the US and Japan, the average is less than 6 cubic meters.”

China’s national leadership is well aware of the problem, but local officials have made it difficult for it to enforce its will. Things have been improving as tougher regulation and harsh punishment for officials who continue to ignore the problem have been helpful. As a result, cities around China are more likely to follow the government’s requirement for the construction of wastewater treatment facilities.

Wastewater treatment is becoming extremely important to China’s plan for better water, and analysts expect for wastewater treatment plants to increase dramatically during the next five years. Efforts are also underway to use wastewater treatment not only for preventing pollution, but also recycling it for other purposes.

Bio-Treat Technology (OTC: BOTRF) is one of China’s leading wastewater treatment companies. Bio-Treat specializes in the use of biotechnology to treat polluted water to a level whereby it can be released into the environment. A relatively young company, Bio-Treat was established in 1993 and was listed in Singapore in early 2004.

The company has a unique proprietary technology, has been a long-time operator in China and has built a strong track record. It’s concentrated in the wastewater treatment market, and because of its relative size Bio-Treat doesn’t compete head-to-head with the big multinationals that do control the biggest part of China’s water supply and water treatment market.

Bio-Treat concentrates on medium-scale projects and has been quite successful bidding on such, winning enough to build a strong order backlog. The company is working to improve existing technology and to create new ones, in order to offer new products and gain access to new growth segments of the market.

This is a high-risk, high-return play on a theme I expect will evolve over the course of several years. I’ll be making more recommendations based on the water story in due course. Buy Bio-Treat Technology, a new addition to the Alternative Holdings Portfolio, under USD0.90.

Fresh Money Buys

If you’d like to add to your positions in Portfolio recommendations or allocate new funds, focus on the following markets, in order (for both countries and sectors): South Korea, Hong Kong (real estate, publishing, infrastructure), India (pharmaceutical, banking), Malaysia, Russia (telecommunications, energy), Singapore (telecommunications, banking, industrial), Europe (pharmaceuticals, oil, industrials, communications equipment, media), Japan (industrials, banking), China (consumer, power, oil, water), Taiwan (telecommunications, technology) and Macau.

Brokers

Many readers have requested information on brokers that can better execute orders for SRI recommendations.

Interactive Brokers provides an excellent service and can easily execute a trade for you overseas, as can Delta Global Advisors.

E*Trade is a mainstream broker that can now handle some international trading online. Commissions are slightly higher, but the Web site is particularly easy to use and includes solid news and quote feeds for most foreign markets.

The company became the first US discount brokerage to let customers’ trade foreign-listed stocks online when it rolled out a pilot test for 1,000 account holders of its global trading platform. Those customers are now able to buy, hold and sell stocks listed in major international markets. The rollout is expected to take two months before all customers have access.

Others will probably have to follow suit, and soon. Interest for direct access to Europe and Asia has prompted the change. Customers will also be able to buy and sell euros, pounds, yen and Hong Kong dollars. The platform could eventually support access to 42 more countries and related currencies.

According to a recent Wall Street Journal article, Fidelity has seen a fourfold increase in customer requests for international stock purchases. As a result, it’s beefed up its customer service staff to handle the transactions. You can buy foreign stocks through Fidelity by calling the broker directly.

A reader recently pointed out that he’s been using International Assets Advisory and has been very happy with its service. I haven’t done the research to confirm its quality, but it’s a good piece of information.