China’s Impending Thirst

by Samuel Kim
Although the People’s Republic of China has grown exponentially over the past 30 years to become the second largest economy in the world today, it has not developed without a cost. Despite stellar indicators of growth such as an annual average GDP growth of 9.9 percent that has lifted 500 million people out of poverty, China still has a plethora of obstacles to overcome. In particular, environmental concerns are becoming more and more recognized to the point where they are now the fourth most important household concern. Within environmental concerns, the water crisis in China will be an imperative issue to address should the Chinese government want to continue in its march towards sustained prosperity. If no measures are taken to combat the water crisis in China, then by 2030, when China’s population reaches 1.6 billion, per capita water resources will drop to 1,760 cubic meters. This is perilously close to 1,700 cubic meters, the internationally recognized benchmark for water shortages.

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Even today, water is already very scarce - only 0.007 percent of Earth’s water is available to fuel and feed its 6.8 billion people. Given the scarcity of water, China must use this precious resource prudently to produce goods, produce energy, and aid transportation. However, while using water produces great benefits, it also brings with it immense challenges. For example, in the context of industrialization, one specific challenge is limiting the ongoing shift from low-profit yielding agricultural output to high-profit yielding industrial output. China should limit this industrial shift because although industrial output is increasingly much more profitable than agricultural output (1,000 tons of water can produce one ton of wheat worth $200, whereas the same amount of water used in industry yields an estimated $14,000 of output,) greater water resources will need to be transferred to industrial needs. Should this shift continue, and as water becomes an increasingly scarcer and more expensive resource, the agricultural sector will lose out to the industrial sector because industry is simply much more profitable. As agriculture loses out to industry, China will be forced to become a net importer of food, rather than a net exporter, which is a serious departure from its current position. Such a dramatic change will have dangerous implications for world grain prices. Furthermore, as more water is being used for industry, which is responsible for a great deal of pollution, China’s dwindling water sources will become more heavily polluted.

To deter a mass agricultural to industrial shift, China should improve upon the profitability of agriculture, water replenishment, and the allocation of water resources to ensure that the overall benefits of water use in agriculture will outweigh the benefits of water use in industry. To improve the profitability of agriculture, China should strive towards organic agriculture since this would not only provide higher price premiums for rural communities, but also provide an increase in food safety and export opportunities. Moreover, assuming good flood control systems, the water from regular floods in the rainy season should be used to replenish the ground water manually.  In order to improve its distribution of water resources and given its large and diverse land area, China should reorganize its cropping distribution to ensure that water-intensive crops are planted only in areas that can support them in a sustainable way, while less water-intensive crops are planted in drier areas.

When it comes to industrialization and pollution, China also faces the seemingly insurmountable task of recovering from years of damage to the environment. In particular, the issue of wastewater is one of China’s biggest problems. For example, industrial and biological pollution has contaminated almost 90 percent of the underground water in Chinese cities. Furthermore, China’s environmental regulators have designated 48 of China’s major lakes as seriously polluted. One-fourth of the water sampled along China’s two largest rivers - the Yangtze and Yellow - was designated as too polluted for farm irrigation. Hence, it is abundantly clear that wastewater is a prominent issue that the country has to address in the near future.

Given that the wastewater discharged by industrial functions made up 44.7 percent of the national total in 2006 and pollutant discharge per unit of industrial added value was one of the highest, China should focus on reforming its industry structure to lower the proportion of industrial added value in GDP. Also, in dealing with wastewater treatment and recycling, new regulation on water resource utilization will limit the annual consumption of water to 635 billion cubic meters by 2015, further increasing the need for water recycling facilities. For this reason, China expects to spend $69 billion on industrial wastewater treatment. Since per capita water resource in China is only a quarter of the world’s average, and industrial water consumption constitutes a quarter of the country’s total water consumption, the recycling of deeply treated industrial waste water is imperative and should be expedited in the near future. As long as China exerts effort to clean up and mitigate the harmful effects of the water crisis, the World Bank projects that China’s wastewater emissions will decrease in the years to come.

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Besides wastewater, another significant foreseeable problem is the water shortages that will arise if new coal power bases are built in China. At least some 10 billion cubic meters of water—equivalent to about one sixth of the annual total water volume of the Yellow River—will be consumed by 16 new coal power bases in China in 2015, triggering severe water crises in the country’s arid Northwest. As a result, arid Northwestern provinces such as Inner Mongolia, Shaanxi, and Ningxia, where 11 of these coal bases are situated, will see their water supply capacity being severely challenged in two years’ time.

To discourage the building of too many coal plants, China should levy taxes on pollution through taxes on carbon and sulfur emissions. The purpose of these taxes would be to internalize the external cost of dirty energy such as coal, and to force coal and power enterprises to use cleaner technologies that would cut down on their water usage.

Industrialization and the pollution it has left behind have brought about irate citizens and a fury of riots, given that environmental concerns are a significant cause of mass protests in China. Endemic corruption and a weak legal infrastructure contribute to devastating pollution accidents, as well as to long-term degradation and pollution. Without effective legal redress for environmental wrongdoing, victims of environmental pollution often resort to demonstrations to draw attention to their plight (including 180,000 demonstrations in 2010 alone.) In the summer of 2010, for example, thousands of villagers in Guangxi province protested against the heavy pollution caused by an aluminum company, which had contaminated the villagers’ drinking water and caused their crops to suffer. In the end, three protestors were killed and a number of villagers were wounded. The intensity of these protests demand compensation for those affected by water pollution.

To address its pollution problems, China already has a fairly complete set of environmental laws and regulations. For example, the Water Pollution Prevention and Control Law provides stipulation that water pollution victims can seek class action lawsuits to directly obtain civil compensation from polluters. On paper, such laws appear to be very effective. But in actual practice, justice does not always happen—China lacks the necessary personnel, standards, and mechanisms to uphold the rule of law effectively. To address this, China should increase the number of dedicated law enforcers and encourage enforcers to take more initiative. Also, clearer standards must be set and more efficient mechanisms should be set in place to monitor and curb industrial malpractice.

One such mechanism would be to enforce harsher punishments for breaking environmental regulations. As it stands today, it is cheaper to break the law and pay a small fine than to obey the law and spend substantial amounts of money on eco-friendly functions. This is precisely why some penny-pinching Chinese companies only run pollution-reducing equipment in the day time, or only when inspectors are here to check up on them; when the inspectors leave, the pollution-reducing equipment gets switched off immediately. Simply put, the current system naturally spawns a game of cat and mouse. To prevent this, polluters will have to pay higher fines or even go so far as to undergo criminal proceedings in order to strongly discourage these Chinese companies from breaking environmental laws.

Although reforms will be difficult to implement, they can be carried out. Persistent conservation of water, the regular recycling of water, and a wise allocation of this precious resource will ensure stability and prosperity for the future. Better accountability in terms of water malpractice will also bring about a culture of water conservation. The arduous journey ahead requires China to unite as a country to overcome the water crisis.

Samuel Kim is a sophomore in Silliman College, Yale University, majoring in Economics. He is interested in China’s environmental economics and will study abroad in China this summer. Contact him at samuel.kim@yale.edu.

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