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Yahua Wang Ph. D. Center for China Studies School of Public policy and Management

Water Markets as Countermeasures to China’s Water Shortage Crisis A Study Proposal Cased by the Yellow River. Yahua Wang Ph. D. Center for China Studies School of Public policy and Management Tsinghua University, China. China’s Multiple Water Issues. Water Shortage Water Pollution

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Yahua Wang Ph. D. Center for China Studies School of Public policy and Management

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  1. Water Markets as Countermeasures to China’s Water Shortage Crisis A Study Proposal Cased by the Yellow River Yahua Wang Ph. D. Center for China Studies School of Public policy and Management Tsinghua University, China

  2. China’s Multiple Water Issues • Water Shortage • Water Pollution • Water Ecosystem Deterioration • Drought-flood Disasters

  3. China’s Water Shortage Crisis • With 7% of the world’s total freshwater , China has to support more than 21% of the world’s population. • The spatial and temporal distribution is extremely uneven. 42% farmland but only 8% runoff in Northern China. • The Yellow River did not reach the ocean (cutoffs) 226 days in 1997. • 2/3 of the nation’s cities suffer water shortage. • Water shortage results in more than 200 billion RMB economic losses in industrial production every year.

  4. Renewable fresh water per capita North China 728 cubic meters China 2183 Thailand 3380 Japan 3386 Vietnam 4513 U.S. 9621 Indonesia 13,233 Myanmar 17,848

  5. Low efficiency of water use in China

  6. N W E S T h e s u m o f g r o u n d w a t e r d e p l e t i o n a n d p o l l u t e d w a t e r s u p p l y ( i n 1 0 0 m i l l i o n c u b i c m e t e r s ) 0 - 1 0 1 0 - 2 0 2 0 - 3 0 3 0 - 5 0 > 5 0 Groundwater gets rapidly depleted and polluted

  7. The YellowRiver Upper Basin Lower Basin Middle Basin

  8. ! Irrigation Population Support City Water in YR YR Water allocation situation in China

  9. Water Shortage in the YR

  10. Latest water resources assessment for the river（100 million cubic meters） Source: IWHR.

  11. A drying river

  12. The divergence of water use and irrigation efficiency along the YR

  13. We propose water rights reform and quasi-market introduction (Hu and Wang, 2000) • The paper has drawn strong attentions of policy-makers • Several policy suggestions has been adopted by the MWR • A proposed term of ‘Quasi-market’ has entered into official document • Promote the practice of water right and water market in the YRB

  14. Water market has become a new approach accepted by the Government Wang Shucheng (2002): transition from engineering-based to resources management • Philosophy: harmonize human and nature • Regime: integrated water management • Instruments: water rights and water market

  15. Water rights reform in the YRB • Draw more detailed water allocation scheme • Implement total amount control strictly • Carry out Integrated water diversion by the YRCC (Development of Digital Water Diversion System) • Stimulate riparian provinces water saving activity As one of the results, water market as one instrument to promote water efficiency has transformed from theory to practice. In Ningxia and Inner Mongolia, water right transfer from irrigation to industry happened in the past several years.

  16. Changes of water uses after institutional reform (1999-2003)

  17. Percentage of water overused by Yellow River riparian provinces (1988-2003)

  18. Contrast between Runoff and Cut-off of Yellow River (1991-2003)

  19. Estimations of the reform benefits based on “Marco Hydro-Eco Model of YRB”

  20. The situation has stimulated the government a policy passion to promote water market! China USA

  21. But very limited research existing upon water market in China hitherto

  22. According to the international experiences, the operation of water right market is very complex, while big gap between policy demand and scientific understanding upon water market in China The practice of water right market is underway, but the research in this domain still seldom. Many questions should be answered in theory, such as: • What potential does the water market have, like scale , quantity and welfare gains? • How to price the trading water rights? • How to design the regulations on water market?

  23. Increasing academic interests on China’s water market issues in academia • Anna Heaney et. al. (2006) estimate the benefits of water reallocation between irrigation districts in the Yellow River Basin.

  24. A proposal of simulation on Water Right Market in YRB. The objectives are following: Develop mathematical model and computer numerical modeling to simulate water market based on existing hydro models as analysis instruments to understand water market in the real world subject to Transaction Costs, Risk and Uncertainty, Withdrawal and Third-party Impact, and Market Power. In order to evaluate the real potential of water market in YRB, develop pricing method of water rights, and raise institutional designs and policy suggestions to policymakers.

  25. A tentative roadmap for the proposed research

  26. Some other hot topics of water governance for China today • Guaranteeing Drinking Water Safety • Building a Water-Saving Society • Promoting Healthy Life of Rivers • Regarding Ecological Issues with Water Projects

  27. Thanks！

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