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[East Asia Forum] Quenching China’s Thirst for Economic Growth

January 23rd, 2013

Authors: Hong Yang, EAWAG, Zhuoying Zhang, CASS, and Minjun Shi, CAS
Resource: http://www.eastasiaforum.org/2013/01/23/quenching-chinas-thirst-for-economic-growth/The astonishing speed of China’s economic growth during the past four decades has seen it make unprecedented progress in national development and improvements in the living standards of its people.

But alongside this achievement is a continued intensification of water shortages and deterioration in water quality.

Between 1980 and 2010, total water use increased by 35.8 per cent, from 443.7 billion cubic metres  to 602.2 billion cubic metres. Total industry and household wastewater discharge doubled during the same period.

China’s water endowments are unfavourable. Average water resources per capita are a mere one-quarter of the world average. The uneven spatial and temporal distribution of water resources exacerbates the quantity problem.

Since the late 1980s water shortages have emerged in many areas in China, particularly in the north. In some northern cities the current water supply can barely meet 70 per cent of demand during the dry season. Of 600 medium- to large-sized cities, more than half have insufficient water supplies, and more than 100 are experiencing severe water shortages.

In many northern cities, water scarcity has become a bottleneck to continuing economic growth. Competition for limited water resources has led to a reallocation of agricultural water to urban sectors, putting irrigation under great pressure in many areas in the north. Food production is facing the challenge of having to produce more food with less water. The water that is needed for maintaining healthy environmental and ecosystem functions has been held back to give priority to meeting the demands of the economic sector.

Along with intensified water shortages, water pollution and environmental degradation are serious problems across the country. Currently, many rivers and lakes in the eastern part of the country have water quality below grade five, meaning that the water is too polluted to be suitable for any use. Sources of water pollution are mainly wastewater discharge from industrial and household sectors and non-point source pollutants from agriculture.

The impact of China’s international trade in goods and services on its water resources warrants scrutiny. The intensity of water use by China’s manufacturing-dominated economy means that the country is a net exporter of virtual water, or water embodied in goods. The annual net virtual water export was estimated at 39.04 billion m3 in 2002 and 68.18 billion m3 in 2007. This is a 74 per cent increase over five years. The improvement in water-use efficiency in individual sectors has not been able to offset the additional virtual water exported due to the expansion of international trade during this period.

In addition to the impact on the quantity of water resources, China’s international trade also affects its water quality. The wastewater discharge from food and tobacco processing, textiles, clothing, paper production and metal smelting accounts for a large percentage of the total industrial wastewater discharge.

The water-quality issue has drawn much attention in China and the country has invested extensively in wastewater treatment facilities since the 1990s. Yet there has been little improvement so far. In many areas water quality is deteriorating.

China is making efforts to improve institutional systems that regulate water withdrawal and uses. River basin conservation commissions under the Ministry of Water Resources have been entrusted with more power over the administration and management of the water defined by basin boundaries and consistent with thehydrological cycle of water resources. Issuing water withdrawal permits has been gradually implemented in some river basins.

An ‘investment for water saving and water rights transfer measure’ is being trialled in the Yellow River Basin. It concerns water reallocation from agriculture to industry. As obtaining additional water in the water-scarce basins is difficult the increase in industrial water demand must be met by transfers of water from the agricultural sector. Given the widespread low efficiency in irrigation the potential for water saving is high. Industries are encouraged to invest in water-saving projects in the existing irrigation schemes in exchange for the rights for the use of part of the saved water. The measure is regarded as a ‘win-win’ solution for low water-use efficiency and water shortages in water-scarce regions.

Unfortunately, all the water rights transfers to date have been conducted within individual provinces. No cross-provincial water rights transfers have taken place. Provinces are generally unwilling to give up their water share entitlements. This is mainly because of the administrative complexity of water-rights transfer across provincial boundaries. But it is also because individual provinces recognise that water scarcity is a long-term trend in many parts of China and want to hold their shares of water for their own economic development.

China is now using economic incentive-based approaches such as water pricing and wastewater to allow the market to adjust water demand and supply. Yet the price mechanism alone is proving inadequate for capping total water use, which is rising in many areas. Integrated approaches using economic and non-economic measures are necessary to tackle the water shortage and pollution problems.

Environmental water use and ecosystem water requirements have received increasing attention since the late ‘90s. Thirty per cent of the average river flow is commonly used as a rule-of-thumb percentage for the amount of water required to maintain healthy aquatic ecosystems. Yet the ratios of water withdrawal to water resources in the major northern rivers all exceeded 70 per cent. In the Hai River Basin the ratio exceeded 100 per cent.

Facing the enormous challenges of water shortages and pollution the Chinese government is implementing more stringent controls over water use and wastewater discharges. In January 2011 the State Council released a ‘Red Head’ document (No. 1) in which several ambitious controlling Red Lines were set. For the year 2030, total water use will be capped at 700 billion cubic metres compared with approximately 600 billion cubic metres in 2010. Water intensity will be reduced to 40 cubic metres. Agricultural irrigation water-use efficiency will be lifted to above 0.6 compared with the current 0.5. Water quality will be ‘good’ in 95 per cent of water bodies.

There are many challenges to surmount before these targets can be reached. Positive results require the establishment of accountable water resource management and evaluation systems, monitoring systems, investment mechanisms, regulations and laws and enforcement agencies. How successful China will be in achieving these goals remains an open question.

Hong Yang is Professor at the Swiss Federal Institute of Aquatic Science and Technology.

Zhuoying Zhang is a Researcher at the Chinese Academy of Social Sciences.

Minjun Shi is Professor of Economics at the Chinese Academy of Sciences.

This article appeared in the most recent edition of the East Asia Forum Quarterly,‘Energy, Resources and Food’.

Resource: http://www.eastasiaforum.org/2013/01/23/quenching-chinas-thirst-for-economic-growth/

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