Journal of Environmental Management

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1 Journal of Environmental Management 9 (29) Contents lists available at ScienceDirect Journal of Environmental Management journal homepage: Review China s water scarcity Yong Jiang * Department of Agricultural, Food, and Resource Economics, Michigan State University, 85 Agriculture Hall, East Lansing, MI 48824, USA article info abstract Article history: Received 6 May 28 Received in revised form 9 March 29 Accepted 6 April 29 Available online 7 June 29 Keywords: Water resources Scarcity Pollution China Management China has been facing increasingly severe water scarcity, especially in the northern part of the country. China s water scarcity is characterized by insufficient local water resources as well as reduced water quality due to increasing pollution, both of which have caused serious impacts on society and the environment. Three factors contribute to China s water scarcity: uneven spatial distribution of water resources; rapid economic development and urbanization with a large and growing population; and poor water resource management. While it is nearly impossible to adjust the first two factors, improving water resource management represents a cost-effective option that can alleviate China s vulnerability to the issue. Improving water resource management is a long-term task requiring a holistic approach with constant effort. Water right institutions, market-based approaches, and capacity building should be the government s top priority to address the water scarcity issue. Ó 29 Elsevier Ltd. All rights reserved.. Introduction China has been facing increasingly severe water scarcity. With insufficient water resources to meet rising water consumption, over-withdrawal of both surface water and groundwater has occurred in many areas of northern and eastern China. Overexploiting water resources has led to serious environmental consequences, such as ground subsidence, salinity intrusion, and ecosystem deterioration (Liu and Yu, 2; Han, 23; Foster et al., 24; Liu and Xia, 24; Fan et al., 26; Cai and Ringler, 27; Xia et al., 27). Meanwhile, poor water quality caused by pollution further exacerbates the lack of water availability in water-scarce areas (SEPA, 99 27; Zhu et al., 2; Liu and Diamond, 25; Li, 26; CAS, 27; WB, 27a). Water shortages and poor water quality are interacting with each other and threatening China s food security, economic development, and quality of life. The Chinese government is aware of the water scarcity problem and started reforming its water resource management in the late 99s. Yet the problems of water shortages and degraded water quality are still severe. The complexity of China s water scarcity issue and its emerging serious effects on society and the environment raise many important questions. Is the water * Tel.: þ ; fax: þ address: jyong@anr.msu.edu problem well understood? What has caused China s water scarcity? How could the Chinese government target its efforts to more effectively improve water resource management and to better address water resource issues? China is motivated to address the water problem as part of its policy initiative to promote scientific development consistent with a healthy environment (SC, 26; MWR, 27b). Water resource management is a top priority in the government s policy agenda (SC, 26). As China struggles to develop effective approaches to alleviate water shortages, a clear understanding of the water scarcity issue is critically important. China s water resource issues have attracted extensive worldwide attention and have been covered by major media outlets such as the New York Times and the Economist (Wong, 27; Yardley, 27; Economist, 29). China s water shortage is of global concern because China and the rest of the world are increasingly connected, both economically and environmentally (Liu and Diamond, 25). The water shortage could have a worldwide impact if China s ability to produce sufficient food to feed a large and growing population is restricted (Brown and Halweil, 998; Tso, 24; Cai and Ringler, 27). Addressing the issue will benefit global sustainable development, especially since water scarcity is threatening China s economic development and its sustainability. This paper is intended to provide an overview and synthesis of China s water scarcity by assembling updated, publically available data. It attempts to develop an understanding of existing water resource issues that are critical to China s sustainable development /$ see front matter Ó 29 Elsevier Ltd. All rights reserved. doi:.6/j.jenvman

2 386 Y. Jiang / Journal of Environmental Management 9 (29) Fig.. Map of major rivers and watersheds in China. The increasing darkness indicates a decreasing annual per capita water availability. In section 2, the paper introduces and describes China s water scarcity in terms of water quantity and quality. The first part of Section 2 summarizes the natural characteristics of China s water resources and their insufficient quantity indicated by water shortages, overexploitation of water resources, and the emerging environmental consequences due to water resource overexploitation. The second part of Section 2 focuses on the reduced quality of available water, which has intensified the shortage of available water. Section 3 analyzes the causes of the water scarcity, including water resource management issues that need to be addressed to promote sustainable use of water resources. Section 4 summarizes current policy initiatives and outlines challenges for future water resource management. The paper concludes with policy suggestions in section China s water resources and scarcity China s water resources are spatially distributed with temporal dynamics. While facing increasing water shortages, China also is experiencing water resource overexploitation and degraded water quality, resulting in serious environmental and socio-economic impacts. 2.. Water resources and spatio-temporal characteristics China s water resources are geographically divided into nine major river basins, including Yangtze, Yellow (Huang), Hai-Luan, Huai, Song-Liao, Pearl, Southeast, Southwest, and Northwest (Fig. ). Accounting for inter-year variation, the average volume of internal renewable water resources in China is estimated to be approximately 282 billion m 3 per year, which includes both surface water and groundwater. This volume ranks fifth in the world behind Brazil, Russia, Canada, and Indonesia. The temporal dynamics of China s water resources are determined by precipitation. Approximately 98% of China s surface water is recharged by precipitation (MWR, 24a). While creating the spatially uneven distribution of water resources, the spatiotemporal pattern of precipitation further reinforces the spatial distribution of water resources by introducing a spatially heterogeneous temporal variation. Affected by a strong monsoon climate, the annual average precipitation gradually decreases in a spatial gradient from more than 2 mm at the southeastern coastline to usually less than 2 mm at the northwestern hinterlands (MWR, 24a). The ratio of maximum to minimum annual precipitation recorded possibly exceeds 8 in northwestern China, but only ranges between 2 and 3 or less than 2 in southern and southwestern part (MWR, 24a). In most areas of the country, precipitation within four consecutive months at maximum approximately accounts for 7% of annual precipitation (MWR, 27b). This spatio-temporal pattern of precipitation leads to a serious risk of flooding as well as drought, especially in northern China. Runoffs of the Hai and Huai rivers fall to 7% of their averages every four years and to 5% every 2 years (Berkoff, 23) Quantity-related water scarcity Quantity-related water scarcity is attributed to the shortfall in water resource volume to meet water needs. This relative The total volume of water resources is the amount of a th frequency dry year over multiple years. The data are from the Food and Agricultural Organization (FAO) AQUASTAT database, retrieved in November 27.

3 Y. Jiang / Journal of Environmental Management 9 (29) quantitative insufficiency of water resources is indicated by water shortages, water resource overexploitation, and the effect of water resource overexploitation on the environment Water shortages Since the 98s, China has been facing water shortages of increasing magnitude and frequency for urban industry, domestic consumption, and irrigated agriculture (WB, 22). In normal water years, among 662 cities, 3 will have insufficient water supplies and will experience severe water shortages; 3 out of 32 metropolitan areas with populations of more than million people struggle to meet water demands (Li, 26). At current water supply levels, the total water shortage is estimated to be 3 4 billion m 3 per year and is even larger in dry years (MWR, 27b). By 25, China s total water deficit could reach 4 billion m 3 (roughly 8% of the current annual capacity of approximately 5 billion m 3 )(Tso, 24). During 2 25, water shortages caused industrial losses of.62% of China s annual GDP (MWR, 27b). Unless measures are taken to reduce demand and augment supply, the total water shortage for the Yellow-Hai-Huai area in northern China was projected to be 56.5 billion m 3 by 25 (WB, 22) Water resource use and overexploitation North China has experienced heavy demand for water, and groundwater is an important source for water supply in this area. As demonstrated by Table, in 26, North China got 63.3% of its water supply from surface water and 36.3% from groundwater. This accounted for 36.9% of surface water resources and 36.3% of groundwater resources. The average rate of water resource use ranged from 3.% to 9.7% for basins in the north compared to rates of.7 9.5% in the south. In particular, the use rate of water resources in the Hai River basin reached to 9.7%. Although the scientific standard is case-specific on the percentage of water resources that should be reserved for environmental purposes, some studies indicate that 3 4% of stream flows is a reasonable rate to maintain a healthy aquatic ecosystem (See Smakhtin et al., 24; Tso, 24). The up to 9% rate of water resource use in North China could increase the risk of negative environmental effects Reduced instream flow and degraded aquatic ecosystems Excessive water resource division reduces instream flows in many rivers and has caused negative impacts on aquatic Table China s water supply in 26 and renewable water resources. a Region Water supply (%), 9 m 3 Water resource use rate,% Surface Aquifer Total b Surface Aquifer Total North 66.4 (63.3) 92.6 (35.7) 259. () Song-Liao 32.7 (54.6) 27.2 (45.4) 59.8 () Hai 3.4 (34.7) 25.2 (65.3) 38.6 () Huang 25.6 (65.2) 3.7 (34.8) 39.3 () Huai 42. (7.) 7. (28.9) 59. () Northwest 52.7 (84.9) 9.4 (5.) 62. () South 34.3 (95.6) 4. (4.4) 38.3 () Yangtz 79.7 (95.6) 8.3 (4.4) 87.9 () Pearl 83.2 (95.) 4.3 (4.9) 87.5 () Southeast 3.5 (96.6). (3.4) 32.6 () Southwest 9.9 (96.5).4 (3.5).2 () National 47.7 (8.5) 6.6 (8.5) () a Water supply data are from MWR (27a) for year 26. Data on average annual renewable water resources are from UNESCAP (997). b Total water supply does not include supply from other sources. Surface water and groundwater are interrelated, and therefore, the total amount of water resources may be smaller than the sum of surface water and groundwater. ecosystems. In the Hai River basin, 4%dabout 4 kmdof water courses dried up and 94 natural lakes and depressions with a total area of 6.67 km 2 disappeared (Wang et al., 2). The discharge from the river to the ocean dwindled from an annual average of 24 billion m 3 in the 95s to billion m 3 in 2 (Xia et al., 27). The aquatic ecosystem has deteriorated and many estuarine species are now extinct (Xia et al., 24). In the Yellow River, global ENSO events have caused a 5% decrease in river discharge to the sea since the 95s and diverting water for human use further reduces stream flows and sediment discharge with more frequent flow cutoffs downstream for longer durations (Wang et al., 26a; Fan et al., 26). In particular, the lower reach of the Yellow River had no flow for 226 consecutive days from February 7 to December 23, 997; the length of the main channel with no flow was 7 km from the downstream, a distance accounting for 9% of the river course in the lower reach (Liu and Xia, 24; Fan et al., 26; Wang and Jin, 26). The Yellow River Delta is becoming more fragile and susceptible to natural hazards (Deng and Jin, 2; Lin et al., 2; Huang and Fan, 24; Fan et al., 26; Wang et al., 26a) Groundwater depletion A large volume of literature has recorded increasing groundwater depletion in North China over the last two decades (e.g., Chen, 985; Liu and Wei, 989; Lou, 998; Wu et al., 998; Chen and Xia, 999; Liu and Yu, 2; Xia and Chen, 2). Since the beginning of the 98s, regions that overexploit groundwater have increased from 56 to 64 and the total area subject to groundwater overexploitation has increased from 87, km 2 to 8, km 2 (MWR, 27b). Seventy percent (or 9, km 2 ) of the North China Plain has been affected by groundwater overextraction (Liu and Yu, 2). In the western part of the 3-H basin, the groundwater table has been declining at an accelerating rate, increasing from 3 4 m in the 95s to more than 2 m in the 98s and to about 3 m in the 99s (Liu and Xia, 24). In the Hai River basin, groundwater withdrawal has exceeded the recharge rate, causing an average recharge deficit of 4 9 mm per year, which is equivalent to a continuous water table decline of.5 m per year (Foster et al., 24). Most rural areas on the piedmont plain stretching onto the alluvial flood plain on the North China Plain have experienced water table declines of more than 2 m for shallow groundwater and more than 4 m for deep aquifers since 96 (Foster et al., 24). Greater declines have also been observed in many urban centers. In Beijing, groundwater tables have dropped by 3 m (WB, 2) Seawater intrusion and ground subsidence Seawater intrusion and ground subsidence are common in many areas where groundwater is overexploited (Han, 23). In coastal regions, falling groundwater tables can break the balance at the interface between freshwater and seawater and induce subsurface migration of seawater toward land. Seawater intrusion has occurred in 72 locations in Hebei, Shandong, and Liaoning provinces, covering a total area of 42 km 2 in 992 (WB, 2). Falling groundwater tables also have caused ground subsidences in northern and eastern China. Cities such as Beijing, Tianjin, and Shanghai have been subject to ground subsidences of up to several meters (Shalizi, 26). In addition, groundwater overexploitation has led to aquifer salinization, which is even more significant than seawater intrusion in some areas (Foster et al., 24) Quality-related water scarcity Quality-related water scarcity is caused by poor water quality that does not support any economic use of water rather than insufficient quantity. China has been experiencing water quality

4 388 Y. Jiang / Journal of Environmental Management 9 (29) Fig. 2. Trend of proportion of monitored water sections with poor water quality in China. Data source: SEPA (99 27). degradation due to wastewater discharge coupled with insufficient treatment (Wu et al., 999). Degraded water quality further intensifies the quantitative insufficiency of the naturally available freshwater, affecting China s socio-economic development Degrading water quality In China, water quality is broken into five categories that can be described as good (Grades I, II, and III) or poor (Grades IV and V or V þ, which cannot support drinking and swimming). As shown by Fig. 2, China s general water quality trend is characterized by extended water sections of poor quality. Fig. 3 demonstrates the spatial difference in water quality trend across major river basins. In South China, 2% of the monitored water sections in the Yangtze and Pearl River basins have poor water quality (Fig. 3). In North China, all major river basins experience water quality degradation, and the percentage of monitored water sections ranked poor ranges from 5% in the Yellow River basin to 78% in the Hai River basin (Fig. 3). The spatial characteristics of water quality status reveal a challenging water resource management situation in North China where water shortages and degraded quality interact and reinforce the negative effects of each other The Yangtze River Basin The Pearl River Basin The Yellow River Basin The Hai River Basin The Huai River Basin The Song-Liao River Basin Fig. 3. Trends of proportions of monitored water sections with poor water quality for major river basins in China. Data source: SEPA (99 27).

5 Y. Jiang / Journal of Environmental Management 9 (29) China has a large number of lakes and reservoirs with a total freshwater capacity of about 863 billion m 3 (Jin et al., 25). The water quality of lakes and reservoirs traditionally is measured by trophic status and can be classified into oligotrophic, mesotrophic, eutrophic, and hypertrophic based on increasing levels of nutrients in the water. A moving from oligotrophic to hypertrophic indicates a transition from relatively unpolluted to highly polluted water. China s lakes and reservoirs are experiencing accelerated eutrophication and degraded water quality. Jin et al. (995) found that most of the 34 lakes studied were of mesotrophic status in the 97s; the percentage of eutrophic lakes increased from 5% to 55% between 978 and 987. Currently, 57.5% of the 4 main freshwater lakes in China have become eutrophic and hypertrophic (Table 2). According to the 26 China Environment Bulletin (SEPA, 27), of the 27 lakes of national priority for pollution control, only 8 (or 29%) met the standards for good water quality and 9 (or 7%) were ranked poor. The three major lakes including Tai, Chao, and Dianchi are the most polluted with water quality below Grade V Socio-economic impact Water scarcity due to poor water quality has occurred in northern and eastern China. Shanghai, located at the downstream of the Yangtze River and the Lake Tai basin, has its water polluted from both upstream and the local area. Zhejiang faces the same problem: water scarcity not because of a lack of water to use, but because poor quality renders water unusable. In May 27, a sudden large algae bloom in Lake Tai polluted 7% of the local water supply in Wuxi in eastern China, affecting 2 million people. Poor water quality threatens water availability even in southern China where water resources are abundant. Zhu et al. (22) estimated that in the Pearl River basin, pollution degraded water resources would reach 352 million m 3 in 2 and 537 million m 3 in 22. This amount of water could otherwise support 2.54 million and 3.68 million people in the basin each year, respectively. Table 2 Current trophic level of lakes and reservoirs in China. a Lakes Water quality parameter Trophic state TP, mg/l TN, mg/l Five major lakes Poyang Mesotrophic eutrophic Dongting Eutrophic Tai Eutrophic Hongze Eutrophic Chao Eutrophic Urban lakes Cibi (Dali) Mesotrophic Xi (Hangzhou) Eutrophic Dong (Wuhan) Eutrophic Xuanwu (Nanjing) Eutrophic Gantang (Jiujiang) Eutrophic Nan (Changchun) Eutrophic Lu (Guangzhou) Eutrophic Xi (Huizhou) Eutrophic Haixihai (Dali) Mesotrophic Reservoir Miyun Mesotrophic Dahuofang Mesotrophic eutrophic Yuqiao Eutrophic Guanting Eutrophic Shanzai Mesotrophic eutrophic a Adapted from Jin et al. (995), Jin (23), and Jin et al. (25). With a lack of clean, usable water, households, industries, and agriculture were forced to cut back their water use. At the same time, the limited available water resources were threatened by pollution. From 2 to 23, as much as 25 billion m 3 of water was not used because of pollution (WB, 27a). About 47 billion m 3 of the water that was used came from degraded supplies that did not meet the before-treatment quality standard (WB, 27a), which was almost % of China s total water supply of billion m 3 in 25 (NBSC, 26). Degraded water quality has caused serious impacts on society. In 23, economic losses attributed to poor water quality were at least 58 billion yuan or.6% of China s annual GDP (WB, 27a). Fig. 4 shows the cancer mortality rates associated with poor water quality. The rates of stomach, liver, and bladder cancers are highest in rural areas and the mortality rates of liver and stomach cancers in China are well above the world averages (WB, 27a). 3. Causes of water scarcity Many factors contribute to China s water scarcity. Naturally, the spatio-temporal distribution of water resources is inconsistent with socio-economic needs for water. This inconsistency could cause a conflict between water supply and demand, and this conflict is intensifies by economic development, population growth, and urbanization. To make the situation worse, water resource management has been poor, increasing China s vulnerability with serious social and environmental consequences. 3.. Natural characteristics of water resources inconsistent with water needs The spatial distribution of China s water resources is inconsistent with the local socio-economic needs for water. The majority of China s water resources are located in the southern part of the country, whereas the greatest need for water comes from northern and eastern China. As demonstrated by Table 3, the northern China accounts for 45.2% of the country s total population but only has 9.% of the country s water resources. This spatially uneven distribution creates extremely low water availability on a per capita basis in many local areas to the north of the Yellow River. The Yellow (Huang)-Huai-Hai river basins (called the 3-H area) features major cities, including Beijing and Tianjin, and the volume of renewable water resources ranges from 34 m 3 per capita per year (86 L per capita per day) in the Hai River basin to 672 m 3 per capita per year (84 L per capita per day) in the Yellow River basin Mortanity Rate, / Oesophagus cancer Stomach cancer Cancer Liver cancer Major cities Medium/small cities Rural World average Bladder cancer Fig. 4. Mortality rates for diseases associated with water pollution in China. The world average mortality rates are for year 2 and the China mortality rates are for year 23. Source: WB (27a).

6 39 Y. Jiang / Journal of Environmental Management 9 (29) Table 3 Spatial distribution of China s water resources and other social variables. a Region Average annual renewable water resources, billion m 3 (%) Surface water Ground water Total b Population c, million (%) (Table 3). Using common water scarcity measurements (Table 4), the 3-H area is facing severe or even absolute water shortages. The low availability of water resources at the local level sets the stage for conflict between finite water resources and water demand that can increase without limits. In recent years, climate change has underscored the problems that come from the uneven distribution of water resources as areas where water is scarce become drier. In the Yellow River basin, average temperatures have increased while precipitation and river runoff have decreased in the past 5 years (Fu et al., 24; Liu and Xia, 24; Yang et al., 24). In the past 2 years, climate change has decreased water resources in northern China, with the annual flows of the Hai, Yellow, and Huai Rivers reduced 4%, 5%, and 5%, respectively (MWR, 27b). In addition, the loss of glaciers and wetlands upstream from the Qinghai-Tibetan Plateau has decreased river runoffs by 97 billion m 3 over the past 5 years and will lead to an annual loss of 43 billion m 3 in the future (Wang et al., 26b) Rapid industrialization and urbanization associated with a large population Per capita water resources, m 3 North 45.7 (6.6) 255. (3.8) (9.) (45.2) 94. Song-Liao 65.3 (6.) 62.5 (7.5) 92.8 (6.9) 9.6 (9.) 62. Hai-Luan 28.8 (.) 26.5 (3.2) 42. (.5) 33.9 (.2) 34.4 Huai 74. (2.7) 39.3 (4.7) 96. (3.4) 98.8 (5.2) Huang 66. (2.4) 4.6 (4.9) 74.4 (2.6).6 (8.4) Northwest 6.4 (4.3) 86.2 (.4) 3.4 (4.6) 29.5 (2.3) South (83.4) 59.7 (69.3) (8.9) (53.) Yangtze 95.3 (35.) (29.7) 96.3 (34.2) (32.7) Pearl (7.3).6 (3.5) 47.8 (6.7) 7. (3.) Southeastern (9.4) 6.3 (7.4) (9.2) 74.5 (5.7) Southwestern (2.6) 54.4 (8.6) (2.8) 2.9 (.6) National 27.5 () () () 3. () 245. a Water resource data are from UNESCAP (997); population data are from MWR (27a). b The sum of water resources from surface and aquifer may exceed the total water resources by the amount of overlap between them, since surface water interacts with groundwater with the river base flow formed by groundwater and part of groundwater recharge coming from percolation of surface water. c The derived population data for watersheds may not sum up to the total population due to estimation error. While spatial distribution may cause water shortages in certain areas, rapid industrialization and urbanization coupled with a growing, large population further increases the risk of water scarcity by creating an ever-increasing demand for water. With its annual GDP growing at an average rate of 9.7% since 99, China has one of the fastest growing economies in the world (NBSC, 26). China s economic growth, however, is largely driven by industrialization with extensive but inefficient use of natural resources. In 24, China contributed barely 4% of the global GDP, yet its world natural resource consumption was 5% for water, 28% for steel, 25% for aluminum, and 5% for cement (D Aquino, 25). Rapid industrialization has dramatically affected China s environment and natural resources, including water. At the same time, China s population is large and continues to grow. In 25, China s population was estimated at approximately Table 4 Standards measuring water scarcity. a Water availability, m 3 per Consequences capita per year <7 Disruptive water shortage can frequently occur < Severe water shortage can occur threatening food production and economic development <5 Absolute water scarcity would result a Adopted from Wang and Jin (26)..3 billion (NBSC, 26), which accounted for 2% of the world s total population (UNPD, 26). Yet China only possesses 6.5% of the world s total renewable freshwater resources. With its large population, China s water availability was estimated at 25 m 3 per capita per year (5893 L per capita per day), which was approximately 25% of the 8,484 m 3 per capita per year (23248 L per capita per day) world average. 2 Moreover, China also has undergone accelerated urbanization. China s urban population is more than doubled in less than 25 years and accounted for 43% of the total population in 25 (NBSC, 26). A large population and rapid urbanization apply great pressure on infrastructure development and public services such as drinking water supply and sewage treatment Poor water resource management As water resources become limited or scarce relative to dramatically growing human needs, effective management of the limited available water resources becomes critical. Yet, China s water resource management has been poor, which increases the country s vulnerability to increasingly severe water shortages. Economically, water resources are a common-pool resource. This means that people have no incentive to save or use water efficiently, so effective management to deal with the externality of water use and market failure is needed. Over the past decades, China s water resource management, unfortunately, has been dominated by engineering projects to satisfy water demands rather than improving water use efficiency. The institutional system of water resource management is fragmented and ineffective. Water policies largely fail to account for the economic nature of water resources in relation to their natural characteristics Fragmented institutional system of water resource management China s institutional system of water resource management involves multiple government agencies at different levels. Lack of effective coordination and cooperation among government agencies has led to fragmented water resource institutions which impede effective management of water resources. Take water quality management as an example. Ideally, water pollution control levels are determined by water quality standards for designated water uses. Socially-efficient water quality standards depend on the costs of water pollution control, including pollution treatment costs and the social costs of residue pollution, for designated water uses. So socially-efficient, cost-effective water resource management requires water pollution control integrated with water resource planning that designates the uses of water bodies. China s water 2 World water resource data are from EarthTrends Environmental Information, Water Resources and Freshwater Ecosystems (Freshwater Resources 25, prelive.earthtrends.org/pdf_library/data_tables/wat2_25.pdf, published by World Resources Institute, which is from FAO AQUASTAT 24. World population data estimated for 25 is from World Population Prospects: The 26 Revision (UN Population Division, 26).

7 Y. Jiang / Journal of Environmental Management 9 (29) resource administration, however, is divided between these two sectors and each has separate administrative authorities. The State Environmental Protection Administration (SEPAP) 3 mainly is responsible for controlling water pollution, while the Ministry of Water Resources (MWR) oversees water resources planning, including designating water functional zones for different uses and establishing corresponding water quality standards. With no coordination mechanism, this institutional separation not only impedes efficient water resource management but also increases the administrative transaction costs. China s river basin management, which involves government agencies at different administrative levels and across political boundaries, is a second example of fragmented water resource institutions. Integrated river basin management has been commonly accepted as an effective approach for managing water resources (Spulber and Sabbaghi, 998). Although China has established basin commissions for major rivers and lakes to promote integrated management, these basin commissions have limited power to allocate water resources, coordinate water resource exploitation and conservation, and enforce water resource planning at the basin level. On the other hand, obscure delineation of authority and responsibilities among those government agencies involved in water resource management at different levels undermines the ability of basin commissions to regulate water resource exploitation within a sustainable framework. This fragmented river basin management has led directly to a water resource administration largely based on political boundaries rather than on watersheds, which amplifies the issue of water resources as a common-pool resource by creating incentives for local myopic decision-makings on water resource exploitation. Fig. 5 details a case in the Yellow River basin where water withdrawals went beyond allocated water quotas. This water management failure eventually can be attributed to fragmented water resource institutions at the basin level. The river basin commissions under the MWR are responsible for watershed-wide water allocation among provinces. Yet, issuing permits for water withdrawal is left to local governments and their water resources bureaus that have no representation in the basin commissions. With weak basin commissions, there is no guarantee that water withdrawals are regulated within the framework of basin-level allocation of water resources Supply-driven water resources management and inefficient water use China s water resource management traditionally has been dominated by engineering projects to meet socio-economic needs for water. This supply-driven water resource management style ignores the economic nature of water resources and the potential conflict between locally limited water availability and water demand that can dramatically increase. With economic expansion and population growth, this passive management with no restrictions on demand has led to inefficient industrial structure and water use, intensifying the conflict between water supply and demand. China has developed an industrial structure that requires a large amount of water; a different industrial structure with lower water needs would have developed if measures had been taken to restrict demand. With no restrictions on demand, it is not surprising that China s water use efficiency is low as compared to other industrialized countries. Indicators measuring water use efficiency include marginal water consumption per one more unit of economic return, average economic return per unit of water consumption, or the 3 The SEPA was changed to the Ministry of Environmental Protection (MEP) in 28. Volume, 8 m 3 /year Provinces water quota allocation water abstraction Fig. 5. Water quota allocation and water abstraction in year 997 for the Yellow River basin, China. Source: He and Chen (2). ratio of actual water consumption to diverted amount. In 23, China s water use per, GDP and per, industry-added value were 4.5 and 5 times the levels in developed countries, respectively; China s average recycling rate of industrial water use was estimated to be 4 5%, compared to 8% in developed countries (CAS, 27). In agriculture, while allocating a large volume of limited water resources to low value-added agriculture is economically inefficient, low efficiency in agricultural water use also has occurred. As indicated by CAS (27) and Zhang et al. (27), the ratio of actual irrigation water consumption to the amount diverted in China is only.45, far below the level of.7.8 in developed countries. Other studies reported that only 5% of water from canals was delivered to the field (Xu, 2) and only about 4% of water withdrawal for agriculture was actually used on crops (Wang et al., 25). The supply-driven water resource management also is responsible for the over-withdrawal of water resources. In recent years, northern China has seen an increasing exploitation of groundwater that may be attributed to the failure to regulate groundwater and to restrict demands (Wang et al., 27). According to extensive surveys on rural groundwater use in northern China, Wang et al. (27) found that less than % of the well owners surveyed obtained permits before drilling a well and only 5% of the villages believed their drilling decisions needed to consider spacing decisions. Water extraction was not charged in any village and there were no physical limits imposed on well owners (Wang et al., 27). From 2 to 23, the average annual amount of groundwater withdrawn was estimated to be 24 billion m 3, with 74% of that for agricultural use (WB, 27a) Underdeveloped water rights system A water rights system is the foundation of effective water resource management. Clearly defined, legally enforceable water rights can provide incentives to improve water use efficiency. Unfortunately, China s institutional system of water rights has not been well developed and is not strictly enforced. Managing water resources based on water rights has not been successful. Much of the water use inefficiency and the current water scarcity in China can be attributed to an underdeveloped system of water rights. In China, the State owns water resources except where water in local ponds is owned by the local collectives that constructed the ponds. On behalf of the State, the MWR manages water resource exploitation by delegating management to river basin commissions and local government bureaus. In 988, China enacted its first water law and established a permit system to regulate water withdrawal. Regarded as defining the right to use water, the permit system is

8 392 Y. Jiang / Journal of Environmental Management 9 (29) mainly for surface water and is far from being complete. Lack of clear delineation of jurisdictional control over water impedes the development of a water rights system and its effective administration. Agriculture is the largest water use sector, accounting for about 7% of China s annual water consumption. Well defined farmers water rights could facilitate government efforts to improve water use efficiency and mitigate water scarcity. Yet, farmers water rights are largely unclear. For example, an important component of water rights is the amount of water that one is entitled to use. Lack of volumetric metering of water use at the farm level makes the water rights of individual farmers unclear. Moreover, during water shortages, farmers irrigation demands are often forced to yield to domestic or industrial use without compensation. This implies unclearly defined water rights, if any water rights at all. In addition, decisions about irrigation water delivery, including volume and timing, are largely made by irrigation districts rather than farmers. With an irrigation water charge tied to the acreage of irrigated land rather than actual water consumption, farmers have no incentives to save water and use it efficiently. Since 2, China has been moving toward strengthening water rights development and administration, including revising the water law and issuing policy guidance. Water rights, however, are still incomplete by modern standards (FAO, 2). Systems have not been established to manage the three components of water rights: the amounts that can be withdrawn, transferred, and must be returned with certain quality. Legal delineation is unclear on the rights and responsibilities associated with a water withdrawal permit. Rules and methods on water allocation are still incomplete. Allocating water to establish initial water rights has not been completed. Not all water uses are measured and managed by permits. No coordination mechanism exists within basins to ensure that water withdrawal permits are consistent with water allocation. Although water rights trading has been proposed to promote efficient water resources allocation, the actual management still largely depends on administrative command and control. With underdeveloped water rights, it is difficult to regulate water use within a sustainable framework. China recently launched pilot projects in local areas to explore water rights management. A good example is a MWR project in Zhangye, Gansu to examine building a water-saving society with tradable water quotas. This project has exposed barriers to water rights trading, largely due to insufficient market institutions and policies (Zhang, 27). All the pilot projects show that farmers do respond to incentives, implying that much of the inefficient use of water can be attributed to the current water resource institutions and policies failure to consider farmers incentives Inadequate water pricing Water pricing is an important policy instrument that can provide incentives for water saving and enhancing water use efficiency, although it alone may not resolve water resource issues (Molle and Berkoff, 28). Theoretically, market-determined prices can balance water demand and supply by reflecting the value of scarce water. The balancing process is based on a premise that prices cover the full cost of water supply. China s water prices, however, historically have been set through a political top-down administration instead of through the market. Prices are purposely set low and are insufficient to cover the full cost of water supply, so they do not allow the market to balance demand and supply. It is estimated that current household expenditures for water only account for about.2% of disposable income. This percentage is lower than the 2% level that stimulates water-saving behavior and is much lower than the 4% in developed countries (Zhang et al., 27). These low water prices provide little or no incentives to save water. The 22 Water Law introduced a cost recovery policy for water resource use. In the past few years, progress has been made in reforming water tariffs in many cities. Nonetheless, raising water prices has been slow because of concerns that access to water is a human right. The user charges for urban water supplies and wastewater treatment still do not fully cover all operating and investment costs. In Xi an, for instance, households pay.6 yuan/m 3 for water, while the full cost is 5 yuan/m 3 (OECD, 27). Charges for sewage treatment either have not been implemented, or are very low. Insufficient water tariffs have led to slow infrastructure development and poor services and maintenance. In urban areas, the number of water leaks is among the highest in the world. In agriculture, volumetric pricing of irrigation water use is underdeveloped although it is China s policy that water use charges should be based on the actual amount of water consumption. Since China s farms are characterized by small size and fragmentation, accurately measuring water use at the farm level to implement volumetric pricing is difficult (Huang et al., 29). While there may be areas where irrigation charges reflect actual water consumption at the village level, irrigation charges for individual farms in many rural areas still are based on the number of acres irrigated rather than the actual amount of water used for irrigation (Lohmar et al., 27). With the irrigation charges being sunk costs, farmers have no incentive to save water and improve irrigation efficiency. This may explain the low adaption rate (<2%) of water-saving technologies such as plastic sheeting, sprinkler system, drip irrigation, and other efficient, less capital- and energy-intensive techniques in water strapped northern China (Yang et al., 23; Deng et al., 26; Blanke et al., 27; Huang et al., 29). On one hand, it is economically inefficient to allocate a large amount of scarce water to low value-added agriculture; on the other hand, irrigation water use is not sufficiently constrained by water prices to improve efficiency. In addition, since water prices rarely reflect the full cost of supplying water, including operation and maintenance costs plus overhaul and replacement costs for water delivery systems, lack of maintenance is common for irrigation infrastructure, further increasing insufficient water use Insufficient investment in environmental protection and weak pollution control Water shortages due to poor water quality can be attributed to insufficient investment in environmental protection and weak pollution control. In the past three decades, investments in environmental protection accounted for only.68%,.8%, and.9% of China s GDP, respectively, which are insufficient to achieve planned levels (WB, 27b). In the next five years (26 2), investment in environmental protection is slated to increase by 85% compared to previous levels but that is still lower than investments in flood control, soil conservation, and water resource allocation (Ma et al., 26). With insufficient funding, the development of urban sewage treatment facilities, including sewer networks, has been slow, especially in small cities and established towns. According to a 25 survey by the Ministry of Urban Construction, 278 out of 66 major cities did not build sewage treatment plants (CAS, 27). In 23, sewage treatment rates ranged from 43% for cities with more than 2 million people to 6% for cities with populations of less than 2, (NBSC, 24). Lagging sewage system development has led to large amounts of untreated wastewater being dumped directly into the environment, which may explain why pollution control targets, such as reducing COD discharge by % by 25, have not been met. Due to a lack of funding and weak regulation, water pollution in China is increasing and pollution sources are becoming more diverse. As demonstrated by Fig. 6, after declining form 995 to 2, industrial wastewater discharge has been increasing since

9 Y. Jiang / Journal of Environmental Management 9 (29) Although the proportion of wastewater that meets discharge regulation standard increased from 66.7% in 999 to 9.2% in 25 (SEPA, ), untreated wastewater from town or village plants still may be dumped directly into the water system. 4 After a steady decline since 2, the industrial COD discharge increased again in 25 despite wastewater treatment rates that increased from 85.2% in 2 to 9.2% in 25 (NBSC, 26). A 26 report by the World Bank provides a detailed analysis of the characteristics of industrial wastewater pollution (WB, 26). Domestic sewage discharge is increasing more rapidly than industrial wastewater discharge. As demonstrated by Fig. 6, domestic sewage discharge has surpassed industrial discharge in terms of volume since 999. In contrast to the decrease in industrial COD discharge, domestic COD discharge has been increasing (Fig. 6). While NH 3 -N contributions from both industrial and domestic sources have increased, domestic sources contribute almost twice as much as industry (Fig. 6). Agricultural non-point source pollution is considered another major pollution source that lacks control in China (Ongley, 24; Wang, 26). Increased fertilizer application and livestock waste have contributed large amounts of nutrients to downstream water bodies (Liu and Qiu, 27). Combined with industrial and domestic wastewater, nutrient loads from agricultural runoffs are a major reason for the accelerated eutrophication of major lakes in China. Total nitrogen non-point source contributions for Lake Tai, Dianchi, and Lake Chao were estimated at 59%, 33%, and 63%, respectively; and total phosphate non-point source contributions were 3%, 4%, and 73%, respectively (Li et al., 2) Other policy failures In addition to the issues mentioned above, policies are not well integrated with each other and may exacerbate water resource issues. Many policies, including urban planning, industrial development policy, agricultural policy, etc., can have indirect effects on water resources. If these potential effects are not accounted for, policy outcomes will likely be inconsistent with the carrying capacities of local water systems. The present discrepancy in the distribution of socio-economic development and water resources is a typical example of policy failure to consider water resources. 4. Government actions and challenges in the future Wastewater Discharge (billion m 3 ) Chemical Oxygen Demand (COD) Discharge (million ton) NH 3 -N Discharge (million ton) The Chinese government recognizes the water resource issues and has been taking steps to promote sustainable water use (see Yang and Pang, 26). China has set up a series of policy goals and priorities for water resource management in its th Five- Plan (26 2) for Social and Economic Development (FYPWRD) that determines scientific development and harmonious society as the general goals and guiding principles (SC, 26). The State Council of the Chinese Government has established policy objectives for water resource management, including strengthening river basin management, protecting drinking water sources, combating transboundary water pollution, enhancing water saving in agriculture, and increasing the treatment rate of urban sewage by 2 (SC, 26). The th Five- Plan for Water Resources Development (FYPWRD) includes action plans and methods for implementation 4 China Environmental Statistics books (SEPA, ) indicate an increasing rate of industrial wastewater discharge that meets the discharge standard for industrial enterprises at the county level or above for the period of Since 2, China Environment Statistical books no longer list industrial wastewater discharges by industrial ownership type, and consequently, the range of wastewater discharge statistics is unclear Total Industrial Industrial (County and Above Industrial Enterprise) Industrial (Township and Village Industrial Enterprise) Domestic Fig. 6. Trend of wastewater, chemical oxygen demand (COD), NH 3 -N discharges in China. Data source: SEPA (99 27) and SEPA (995 26). (MWR, 27b) and reflects a strategic shift toward sustainable water resource development, including expediting water allocation, developing water rights systems, implementing quota and demandside management, and improving water use efficiency and benefits. As it reforms traditional water resource administration, China also is actively investing in projects to augment the water supply (MWR, 27c). The most prominent example is the $62 billion South-to-North Water Transfer Project. Intended to provide water mainly for domestic and industrial uses in the arid north, this project will divert up to 45 billion m 3 of water per yeardan amount

10 394 Y. Jiang / Journal of Environmental Management 9 (29) Fig. 7. Sketch map of the South-to-North Water Transfer Project of China. Source: Berkoff (23) adapted from MWR (995). roughly equivalent to the annual volume of the Yellow River in a normal yeardfrom the lower (eastern route), middle (middle route), and upper reaches (western route) of the Yangtze River in southern China by 25 (Berkoff, 23; Zhu, 26) (Fig. 7). Both the eastern and middle routes are under construction and are expected to be completed by 28 and 24, respectively. Nonetheless, many management issues still exist. As acknowledged by the th NFYPWRD, these issues include: () lagging water resource management reforms; (2) lack of an integrated, efficient, and effective institutional system; (3) weak water resource management, including planning, policy design, monitoring, and regulation enforcement; (4) underdeveloped water rights system; (5) slow establishment of water markets; (6) overemphasis on engineering projects compared to management approaches, and (7) the lack of a stable financing mechanism for environmental investment (MWR, 27b). Rapid economic development with a large, growing population and urbanization represents a more serious challenge in the future. By 22, China s population will pass.4 billion (UNPD, 26), which will reduce available water to less than 28 m 3 per capita per year (or 55 L per capita per day). Although still greater than the upper Table 5 Current and projected water use by sectors and spatial scales. a Water use by sectors, billion m 3 (%) Total, billion m 3 Domestic Industry Agriculture Country level (4) 28.6 (23) (63) () (5) 59.3 (24) (6) () Percentage increase 29% 24% % 6% North (2) 33.4 (3) 85.7 (75) 249. () (3) 5. (7) 2.5 (7) 3.2 () Percentage increase 35% 5% 3% 2% South (5) 95.2 (3) 72. (55) 34.2 () (7) 9.2 (3) 84.7 (52) () Percentage increase 25% 5% 7% 2% a Data are from CAS (27). bound of water stress at 7 m 3 per capita per year (or 4658 L per capita per day) (Johnson et al., 2), available water levels can be extremely low at local areas such as the 3-H basin. Meanwhile, urbanization will increase urban water use and sewage discharge, which will create challenges because of reduced water resources. China also will need to balance expanding agricultural water use (to support food security and self-sufficiency) with increasing demands for water in both domestic and industrial sectors, especially in the water-scarce north. As demonstrated by Table 5, northern China will see a higher increase in total water use than the south. In northern China, industrial and domestic water use will increase by 5% and 35%, respectively, compared to a 3% increase in agriculture. Given that agriculture consumes the largest amount of water, the projected increase in the agricultural sector is still remarkable although not as high as in the domestic and industrial sectors. While northern China will face more serious challenges in managing water resources, the projection implies that: ) demandside management is essential to mitigate China s vulnerability to water scarcity; 2) improving water use efficiency in agriculture may reduce water use and offset increasing demands for water in domestic and industrial sectors; 3) strengthening and enhancing industrial and domestic wastewater treatment with increasing water use is critically important to protect scarce clean water. 5. Conclusion and suggestions China has been facing increasingly severe water scarcity, especially in the arid northern part of the country. China s water scarcity is characterized by insufficient quantities of water as well as poor water quality, both of which have dramatic effects on society and the environment. While rapid economic development combined with population growth and urbanization triggers the potential conflict between water supply and demand, poor water resource management increases China s vulnerability and further intensifies the problem. Even more serious water use challenges will arise in the future. Effective water resource management is a promising approach that can help alleviate China s vulnerability, especially when water scarcity tends to be more severe in the future. The natural condition of water resources represents the physical limit to which China