Issues and Challenges for Water Resources in North China － Case of the Yellow River Basin －

JBICI Research Paper No. 28

March 2004

JBIC Institute Japan Bank for International Cooperation

JBICI Research Paper No.28

Issues and Challenges for Water Resources in North China － Case of the Yellow River Basin －

March 2004

JBIC Institute Japan Bank for International Cooperation

This Research Paper is based on the findings and discussions of the JBIC. The views expressed in this paper are those of the authors and do not necessarily represent the official position of the JBIC. No part of this Research Paper may be reproduced in any form without the express permission of the publisher. For further information please contact the Planning and Coordination Division of our Institute.

Foreword

In the People's Republic of China (PRC), various water resource issues have been major concerns, in addition to energy and food shortage as well as environmental degradation. While southern China is abundant in water resources, northern China, including the Yellow River Basin, is a dry area and already suffers from water shortage. Moreover, it is concerned that the problem in the northern area would be aggravated by the increase of water consumption which may be caused by such factors as the growth of agricultural and industrial production, the increase of urban population, the improvement of living standards, and water supply fluctuations due to deforestation and climate change. In order to address the issues, it is necessary to examine possibilities of more efficient use of water resources and increase of water supply in the northern area. This study, with focus on the Yellow River Basin, aims to quantitatively analyze current water resources through a water supply and demand model, and to explore possible solutions. It is hoped that this research paper would contribute to further research on various water resource issues in northern China, and discussion on Japanese assistance strategies in the fields of water resources and environment in China. Finally, during the conduct of the study, much support and cooperation was received from the staff of relevant organizations, both in Japan and China. I would like to express my sincere gratitude to these people.

March 2004 Shozo Kitta Executive Director JBIC Institute

Ayumi Fujii Economist, Development Policy Research Division, JBIC Institute Hidefumi Imura Professor, Graduate School of Environmental Studies, Nagoya University

A part of the results of this study was placed on exhibition in the 3rd World Water Forum, held March 2003, in Kyoto (Japan).

i Table of Contents

Foreword ·····································································································i Table of Contents························································································· ii List of Appendices······················································································· iii List of Tables ···························································································· iv List of Figures ···························································································· iv

Executive Summary ······················································································ S-1

Chapter I. Introduction ············································································· 1

Chapter II. Framework of Water Resource Supply and Demand Analysis··········· 3

2.1 Aims and Contents of Analysis ························································ 3 2.2 Determinants of Water Resource Supply and Demand ························ 5 2.3 Considerations in the Design of a Water Supply and Demand Model ····· 7 2.4 Potential Water Resources, and Potential Supply ······························· 7 2.4.1 Water Resource Volume ························································ 8 2.4.2 Water Balance of the Yellow River ········································ 10 2.5 Controlling Factors of Water Resource Supply and Demand················11 2.5.1 Socio-economic Context························································11 2.5.2 Determinants of Demand for Agricultural Water ···················· 12 2.5.3 Water for Industrial Use ····················································· 14 2.5.4 Domestic Water ································································· 15 2.5.5 Water Diversion from Other River Systems ··························· 18 2.5.6 Water Pricing···································································· 19 2.5.7 Supply and Demand Balance··············································· 19

Chapter III. Prediction of Water Demand in the Yellow River Basin················ 21

3.1 Analytical Framework and Methodology ········································· 21 3.1.1 Definition of Target Region·················································· 21 3.1.2 Long-term Trend of Population and Economy························· 23 3.2 Estimation of Water Supply (precipitation) and Potential Evapotranspiration······································································ 26 3.2.1 Databases········································································· 26 3.2.2 Calculation of Potential Evapotranspiration ·························· 27 3.2.3 Calculation of Water Resource Volume ·································· 28

ii 3.3 Water for Agriculture··································································· 29 3.3.1 Basic Data········································································ 29 3.3.2 Water-conservation Agriculture Scenarios ····························· 31 3.3.3 Business-as-usual-scenarios ················································ 33 3.4 Water for Industry······································································· 34 3.4.1 Usable Data······································································ 34 3.4.2 Estimation Method for Industrial Water Volume ···················· 34 3.4.3 Forecasts of Industrial Water Volumes in Each Province ········· 36 3.4.4 Estimation Results····························································· 37 3.5 Domestic Water··········································································· 38 3.5.1 Determinants of Domestic Water Use and Method of Analysis ·· 38 3.5.2 Summary of Future Domestic Water Consumption ················· 39 3.6 Summary ··················································································· 43

Chapter IV. Policy Issues and Future Research Direction ······························ 45

4.1 Water Resource Issues of the Yellow River······································· 45 4.2 Improving Prediction Models························································· 47 4.2.1 Activity Levels and Unit Consumption·································· 47 4.2.2 Technological Progress························································ 47 4.2.3 Water for Agricultural Use·················································· 48 4.2.4 Water for Industrial Use ····················································· 49 4.2.5 Urban Domestic Water ······················································· 50 4.3 Policies to Control Demand for Water Resources ······························ 51 4.3.1 Water Conservation Targets ················································ 51 4.3.2 Water Pricing Policies························································· 51 4.3.3 Water Allocation Policies—Efficiency and Equity···················· 52

Chapter V. Concluding Remarks ······························································· 53

References ····························································································· 55

List of Appendices

Appendix 1 Results of Monthly Evapotranspiration ·································· A-1 Appendix 2 Method for Setting a Macro-frame for Economic Growth ············ A-7

iii List of Tables

Table II-1 Determinants of Water Demand ················································· 6 Table II-2 Basin-by-basin Comparison of Water Resources (2000) ·················· 9 Table II-3 Future Scenario of Irrigation Area and Irrigation Constant in the Yellow River Basin·································································· 13 Table II-4 Future Scenario of Unit Productivity and Demand for Industrial Water ·················································································· 15 Table II-5 Future Scenario of Unit Consumption and Domestic Water Demand······ 16 Table II-6 Urbanization and Municipal Water Supply and Sewerage Systems in China ··· 17 Table III-1 Area of the Yellow River Basin·················································· 22 Table III-2 Long-term Future Trend of China's Population and Economy········ 23 Table III-3 Future Population and Economic Scenario ································· 24 Table III-4 Effective Irrigation Areas in the Yellow River Basin····················· 30 Table III-5 Irrigation Constants of Provinces in the Yellow River Basin·········· 30 Table III-6 Future Scenarios of Agricultural Water (water-conservation scenarios) ·················································································· 33 Table III-7 Future Scenarios of Agricultural Water (business-as-usual scenarios) ·············································································· 33 Table III-8 Future Trend of Industrial Output ············································ 36 Table III-9 Industrial Water Use Scenario·················································· 37 Table III-10 Unit Industrial Water Consumption Scenario ····························· 38 Table III-11 Rate of Urban Population with Service of Urban Water Supply System ····40 Table III-12 Unit Domestic Water Consumption Scenario ······························ 40 Table III-13 Non-agricultural Population in Cities········································ 40 Table III-14 Agricultural Population in Cities ·············································· 41 Table III-15 Population with Service of Water Supply System ························ 41 Table III-16 Population without Service of Water Supply System···················· 42 Table III-17 Domestic Water Consumption ·················································· 42 Table III-18 Total Domestic Water Consumption··············································43 Table III-19 Summary of Future Scenarios ·················································· 44

List of Figures

Figure II-1 Framework of Water Resource Supply and Demand Analysis·········· 4 Figure III-1 Geographical Extent of Yellow River Basin vs. Jurisdictional Boundaries of Cities and Counties Associated with the Basin ······· 22 Figure III-2 160 Observation Points (Post-conversion Projection)···················· 27 Figure III-3 Results of the Estimation of Evapotranspiration Volume·············· 28 Figure III-4 Estimated Results of Water Resources Volume ······························29

Executive Summary

This study intends to investigate the current issues regarding water resources in the northern China region. Of the areas in northern China suffering from water shortages, focus will be placed particularly on the Yellow (Huanghe) River Basin. This study will attempt to conduct a quantitative analysis of the current and future balance of supply and demand, which is expected to become very tight, and will discuss political and technical issues to solve these problems. Particular emphasis will be placed on the Yellow River Basin because of its importance in China’s existence. The Yellow River Basin is the cradle of the ancient Chinese civilization and it is one of China’s two major rivers (the other is Changjiang). The temporary stoppage of the Yellow River in 1997 shocked the Chinese central government, after which the government resolved to undertake general policies regarding the management of water resources. Despite this measure, however, it is feared that if the present economic and population growth continues, the severity of the water shortage will escalate.

Every type of China’s production activity and livelihood in the Yellow River Basin depends heavily on this river. Water resources differ from other types of natural resources due to the reason why they are contained within a localized region and are difficult to import from distant locations. The total annual amount of water resources that can be extracted from the entire Yellow River Basin, or in other words the total amount of river and ground water combined, depends on the amount of rainfall in a given year, but the annual average is about only 58 billion tons. While this limited amount of water must be allocated efficiently among the upstream, midstream and downstream regions of the Basin for agricultural, industrial and domestic purposes, the increase of production activities and improvement of living standards should take place within the volume. For this purpose, the efficient use of water must be greatly improved in all agricultural, industrial and domestic sectors. In other words, the water consumption per unit of activity must be greatly reduced if the production activities increase and the living standards are improved within a given volume of water. A reduction in each unit of consumption can be attained through water-conservation irrigation methods, water-conservation production processes and water-conservation lifestyles, but the likelihood and difficulty of realizing each is greatly influenced by technological constraints, governmental policies and market conditions. In view of the above, the main objectives of this study is to set several scenarios that consider synergy effects of production increases and unit consumption reductions in the various sectors, and examine how a balance in economic development and water resource usage can be accomplished; and to examine policy issues for overcoming these problems from the results. To this end, it is necessary to construct models for water

S-1

demand projection in the agricultural, industrial and domestic sectors, which is major works of this study.

In consideration of the above aims, this study is divided into the following four chapters.

Chapter I briefly discusses the basic outline of the issues relating to the water crisis in China as well as the aims of this study. Demand for water resources can be calculated through the net value of certain variables that indicate activities in each sector (e.g., irrigation area, crop production amount, industrial production and urban population) and the necessary water demand for per unit activity that is “unit consumption” (e.g., the amount of water necessary per irrigation area referred to as “irrigation constant”, the amount of water required to produce one ton of crops and the amount of water required per person in an urban area). Water demand projection depends on the type of future scenario set on the improvement of unit consumption and the increase in activity in each sector. These scenarios were created in this report by using past data and extrapolating from past trends.

Chapter II presents the framework of the supply and demand in water resource analysis. In this chapter, for each of the agricultural, industrial and domestic water usages, the factors that determine water demand are extracted and the interrelation among these factors are examined. Regarding the activity amount and unit consumption that determine the overall water demand, past trends and results from the Chinese Academy of Engineering Report are utilized to calculate the basic situation of problems. Moreover, estimates are made on the amount of water resources for each region based on rainfall and evapotranspiration. As for estimating evapotranspiration, although various types of analytical models are under study, there has of yet been no development of a distinguished model for reconstructing the actual conditions of the Yellow River.

Chapter III attempts to predict the supply and demand of the Yellow River’s water resources within the framework set in Chapter II. The year 2050 was selected as the target for projections, following the example of previous studies. For the predictions, establishing economic and population macro-frames is a necessary prerequisite. In this report, these macro-frames are established by referring to pre-existing reports concerning the economic growth of China and future predictions of population increase, emphasizing the past trends in each province along the river.

Regarding agricultural water usage, it is possible to consider future demand by creating various scenarios in terms of an increase in the irrigation area for the entire

S-2

basin, and reduction in the irrigation constant. Regarding industrial water usage, data concerning industrial production and the volume of industrial water usage is collected from nine riparian provinces and autonomous regions as well as 306 cities and counties, and future predictions are extrapolated from these past trends. Regarding domestic water usage, in order to establish a future scenario for the water volume required per person living in both urban and rural areas, values in other countries were referred to, and the predicted value of urban population was used as a basis for the calculation.

Although the predicted value of the future demand for water is greatly dependent upon the scenario, the result will be serious water shortages in the future without a large decrease in the unit consumption value. If the available water resource volume (“water resource volume” minus “environmental water”) is constant in the whole basin, the current serious water shortage scenario will further escalate. If comparisons are made between the present volume and those of 2050, industrial water usage would increase from 8.4 billion m3 to 14.8 billion m3, and domestic water use would increase from 2.9 billion m3 to 7.5 billion m3. Such increases in industrial and domestic water use are inevitable due to the expansion of industrial production, increase in urban population and improvement in urban living standards. Regarding agricultural water, differences would emerge concerning increases in irrigation areas, and the amount by which the “irrigation constant” (water consumption volume per unit of agricultural land) falls. However, in the case of large areas of irrigation and a limited reduction in the irrigation constant, water demands would increase from 32.8 billion m3 to 36.7 billion m3. As a result, the sum of the water shortage volume for all three sectors would be an increase from 6 billion m3 to 20.9 billion m3. In contrast, if the area of irrigation is small and the reduction ratio of the irrigation constant is large, the agricultural water usage would fall from 32.8 billion m3 to 27.5 billion m3, and the overall water shortage would be maintained at 11.7 billion m3.

Finally Chapter IV summarizes issues for future research. Water related policies for the Yellow River, which until now have focused on flood prevention and dam construction, are in the process of shifting toward policies that promote comprehensive management of water resources. To this end, reforms are underway to strengthen the authority of the Yellow River Conservancy Commission (YRCC) to enable inter-provincial coordination of water resource allocation. Each province has no choice but to promote more efficient water use in each sector—agriculture, industry and domestic—under severe constraints of the available volume of water for allocation. For this purpose, discussions are now underway about issues such as methods to control water demand through market mechanisms like water prices, and the transaction of water usage rights between regions. The data that is the basis for the

S-3

discussions, however, is insufficient and so future investigations are required. In this chapter, issues concerning the improvement of the water supply and demand model that can simulate the effects of such policies, tentative frameworks for more detailed analyses based on the improved model, and the data collection required for constructing the model, are carefully considered.

S-4

Chapter I. Introduction

The future of China, whose population amounts to that of one-fifth of the global population, with a huge land area (26 times that of Japan), and which is currently sustaining economic growth, is crucial to the direction of not only East Asia, but also for the global economy and environment. It is difficult to make a simple prediction whether China can sustain the current pace of economic growth, because the international political and economic conditions are intertwined in a complex way. Seen overall, however, it is predicted that the population of China would continue to grow, although the rate of growth would gradually slow. Also, it is likely that economic growth would be sustained even though there may be some exceptions along the way, and by about the year 2050 China would probably emerge from the status as a “developing country” and join the ranks of “medium-developed countries” in terms of economy. This refers to the country as a whole, but it is predicted that the eastern region will continue to achieve high economic growth. Cities such as Shanghai have already achieved the per capita gross domestic product (GDP) of U.S.$4,000. It is likely that the standard of living (of citizens) in coastal cities would approach the levels of developed countries earlier than in other parts of China.

In practical terms, the view that such predictions of population and economy would be realized is based on the assumption that a number of critical constraints relating to resources and the environment can be overcome. In particular, the issue of energy constraints has been a topic of debate attracting international interest recently. As a result of economic growth, China’s energy consumption and green house gas emissions, such as carbon dioxide are on the rise. If China’s economic growth continues at the present pace with its current structure of energy consumption that heavily relies on coal, its carbon dioxide emissions would surpass those of the United States and become the highest in the world. The need to limit China’s fossil fuel consumption is one major constraint that arises from the country’s economic growth.

Another major constraint comes from concern about whether it will be possible for China to be self-sufficient in food to sustain its huge population (Lester Brown (1995)). If self-sufficiency is not possible, the issues then are whether China can secure the economic power to procure food from international markets, and what the impacts of China’s food demand will bring on global agricultural markets. Water resources involve issues that are closely related to these food issues. China’s agricultural productivity has continued to rise. During the 1990s, not the feared food shortages but a tendency for overproduction emerged. Considering the long-term future, however, one cannot conclude that the future is secure. In particular, the three river basins in

northern China, along the Haihe, Huaihe and Huanghe rivers (3H rivers), have already experienced serious water shortages. Besides the fact that precipitation is low in this region, which is an important agricultural zone for China, drying and desertification are occurring in Inner Mongolia in the north of the country, stemming from climate change, although there has not been any clear scientific conclusion about this question (IPCC(2001)). Meanwhile, water demand for industrial and urban domestic use is accelerating along with industrialization and urbanization. As the water resources available for the agricultural sector are increasingly strained, a shift towards water-efficient agriculture practice is becoming an issue of the highest priority. The South-to-North Water Transfer Project to bring water from the Changjiang River in the south is about to be implemented as one way to resolve the shortage of water. Since water is a natural resource that exists on a watershed-by-watershed basis, however, it’s an inevitable challenge to establish comprehensive management methodologies to efficiently allocate the limited water resources among various sectors and uses within each watershed. Other crucial issues are the construction of waterworks to supply water for households that seek higher standards of living, and improvements in effective sewerage and wastewater treatment facilities to prevent water pollution and to re-use treated wastewater.

This report focuses on the Yellow River Basin, which has the greatest east-west length among the three great rivers of northern China. Its scope includes western China, where economic development will be given a high priority in the coming years. The aims of this report are to review the current status and future challenges of water resource issues in this region, and then to develop an analytical model that can serve as a basis for quantitative discussions about water resource supply and demand. It must be stated, however, that work on the analysis of supply and demand of water resources in the Yellow River Basin is still at an early stage, and that improved analyses will be needed in the future.

Chapter II. Framework of Water Resource Supply and Demand Analysis

2.1 Aims and Contents of Analysis

The research topics relating to water resource issues of the Yellow River are diverse. They include, for example, the assessment of current conditions, future projections, and policies needed to solve the problems being faced. In addition, strategies must include consideration of the full spectrum of agriculture and industry, as well as urban lifestyles, from a variety of perspectives including technology, economics, legislation and regulations. This report is a first step towards the more exhaustive research that will be required in the future. Its aims include determining quantitatively the current and future state of water resources in the Yellow River Basin, from the perspectives of both supply and demand; clarifying topics that require more detailed research and analysis; and also considering methods to approach analysis.

Research projects have been conducted on water resource issues of the Yellow River not only by the government itself, but also by a variety of research institutes and international aid agencies. Of particular note, one report was published recently by the Chinese Academy of Engineering (Chinese Academy of Engineering (2001)), and a joint research project report entitled China Agenda for Water Sector Strategy for North China was published by China’s Ministry of Water Resources, the World Bank and the Australian Agency for International Development (World Bank (2001)). These reports come from comprehensive analysis based on extensive data and present future projections of water resource supply and demand for each sector. However, almost no primary data used for analysis is provided, and this makes third-party reviews or verification difficult. In addition, because the range of issues subjected to analysis is extremely broad, it is difficult to focus on specific issues.

This study aims to construct a water resource supply and demand model using data that is currently available from statistical reports released by the central government, provinces and cities, and to make future projections based on this model. The outcome provides basic material for further consideration, for example, whether water resource constraints will become bottlenecks that hinder China’s achievement of sustainable economic growth. If they do become bottlenecks, it would be necessary to examine the types of measures China can take on its own and the types of assistance required from the international community.

Prior to development of the model, this chapter conducts a preliminary

examination of topics such as the current state of water resource supply and demand, as well as issues to be analyzed. In this section, the current situation of water resource shortages in the Yellow River Basin are summarized, and issues from the perspectives of both demand and supply are reviewed, based on previously published studies and the results of data analysis. These help to clarify policy priorities needed to realize comprehensive water resource policies. In addition, this paper identifies the most important themes in terms of future water resource management policies, and presents future topics and methodologies for investigation, in consideration of the feasibility of specific projects.

The framework of analysis described above is shown in Figure II-1. This report puts particular emphasis on the development of the demand side of the supply and demand model, and on the issues that are important for conducting economic and policy analysis.

Figure II-1 Framework of Water Resource Supply and Demand Analysis

z World Bank Report World Bank Report Review of Existing Studies z ChinaChina Academy Academy of ofEngineering Engineering’s Report z OtherOther Research Research Reports Reports

Precipitation, Evapotranspiration, Supply Model Temperature, Humidity, Surface Water Flow Volume, Ground Water Level, Etc. Demand and Supply of Water Resources Case Study Demand Model Whole River Basin of Cities

Domestic Agric ulture Industry (urban and Rural)

Institutions (Laws, National, Provincial and Administration, Etc.) Local Impact Policy Implications Economic Analysis Water Price EconomicEconomic Evaluation Impact

Cost and Benefit

Source: Graduate School of Environmental Studies, Nagoya University

2.2 Determinants of Water Resource Supply and Demand

Water resource issues could be described as matters of unbalances in supply and demand arising from uneven distribution of water resources both spatially and temporally. In order to understand the issues, it is essential to analyze the supply capacity and the demand structure on a regional basis. The factors that affect the supply capacity side include local natural factors such as the weather and climate (amount of precipitation, temperature, humidity, amount of solar radiation, etc.) and man-made infrastructure factors including dams, waterworks, sewerage systems, irrigation system, etc. Local weather and climate factors can be represented by average conditions over the short term, but in the long term, they are affected by climate variations on a global scale, such as the impacts of global warming and desertification.

In addition, the volume of demand is determined by three sectors (agriculture, industry, and domestic), but the demand for water in each sector is determined by a variety of factors. These relationships are summarized in Table II-1. Besides the three sectors listed above, there is one more important factor that is the water needed to sustain ecosystems. Because the downstream areas of the Yellow River were cleared by humans and have been under continuous use for the past few thousand years, little remains today of the original natural ecosystems. These conditions are in stark contrast to Asian monsoon countries such as Japan, with its mountainous land and abundant rainfall, where natural ecosystems have been maintained to a certain extent. In arid regions such as in north China where humans have dominated the land, if humans continue to monopolize the water, the natural ecosystems of rivers, forests, plants and animals will lose the ability to sustain themselves. In urban areas, large amounts of water are also needed to maintain greenery in parks and trees along roadsides (often called “environmental water”). In addition, because desertification is occurring in the upper reaches of the river, securing the supply of water is becoming a major issue.

Table II-1 Determinants of Water Demand

Agricultural Water Industrial Water Domestic Water Water for Ecosystem

Factors • Food production • Industrial production • Population (urban • Natural ecosystem

influencing • Cultivated area by • Production by and rural population) (wooded area,

water demand crop (rice, flour, corn, product (iron, paper, • Population by rivers, lakes, forests

etc.) fiber, etc.) income level and animals, etc.)

• Urban ecosystem

(parks, trees, etc.)

Technological • Farming methods • Industrial production • Lifestyles (flush • Forestation

factors (irrigation farming, process toilets, showers, etc.) • Greening

rain-fed farming, • Productivity (water • Diffusion rate of

water conservation consumption per unit water supply and

farming) production) sewerage systems

• Productivity (water • Recycling water

demand and grain system

production per unit • Diffusion rate of

area) equipment and

efficiency of water

use (washing

machine,

water-conservation

toilet system, etc.)

Economic • Water resource price • Price of industrial • Water supply price

factors • Investment and water • User charge of

maintenance cost of • Price of industrial sewerage system

irrigation system products • Income per

• Price of household

agro-products

Institutional • Administration and institutions for water resource allocation

factors Source: Graduate School of Environmental Studies, Nagoya University

2.3 Considerations in the Design of a Water Supply and Demand Model

In order to quantitatively assess and analyze the water shortage issues in northern China, this study compiled the necessary data and construct a basic water supply and demand model targeting the Yellow River Basin. For this analysis, approaches from both the supply side and the demand side are necessary.

For the supply side, a hydrological model is needed, which includes such details as weather and climate (rainfall patterns, evaporation from the ground surface, transpiration from vegetation, etc.) and surface and groundwater flows for the entire basin, but the construction of such a model would be an enormous undertaking. Accordingly, in principle, this study settles for estimates of potential stocks of water resources, estimated from precipitation patterns for each area.

In contrast, the demand side is determined by the level of human activities in each sector (e.g., irrigation area and industrial production), and water demand per unit of activity (e.g., water used per unit of area of irrigated land, water used per unit of industrial production). A major portion of the data required for this analysis is available from various statistical reports at the national, provincial or county level, although many categories of data are not available in statistical reports. Many analytical results are provided in existing reports, but because in many cases the primary data that formed the basis for analysis is not provided, these reports are often like “black boxes” for external researchers. Thus, in order to conduct new analysis, it is necessary to compile and analyze data anew, and attempt to compare the new findings with the results of those previous studies. For this purpose, the present study pays particular attention to clarifying how far one can go in analysis using data from existing statistical reports, what data items are needed in order to advance the analysis further, and how that data might be obtained.

Below, as the first step in that work, the report summarizes the water resource supply and demand of the Yellow River Basin, based on existing statistical documents and reports. In the next chapter, it explains the development and results of the supply and demand model based on more detailed data, by province and city.

2.4 Potential Water Resources, and Potential Supply

It is essential to consider the potential water supply from two angles: constraints of water resource availability imposed by the natural world, and human technologies and policies to conquer those constraints. Because the supply of water from the natural world is temporally and spatially uneven, projects for such as water storage and water

diversion become necessary. In addition, increasing the amount of water recycled and re-used after it has been used once is another issue.

2.4.1 Water Resource Volume

Documentation from China uses the term “water resource volume” to indicate the amount of water that humans can actually use in the form of surface water (rivers, lakes, etc.) and groundwater.

The water resource volume that can be used in an entire catchment area is determined by the amount of precipitation, but clearly, not all precipitation can be utilized. Some evaporates from the ground surface and some is released through leaf respiration by plants (evapotranspiration). Particularly important, on arid or semi-arid land such as that found in the Yellow River Basin, the proportion lost by evapotranspiration is extremely large, amounting to more than half of the total. On arid and semi-arid land, some measures are also needed to prevent evaporation from agricultural irrigation canals, for example, by building them underground.

Of the water obtained from rainfall, the amount that can be used as water resources is comprised of surface water (rivers, lakes, etc.) and groundwater. However, because there is some movement between surface water and groundwater, if these are calculated separately, a certain amount of double-counting will occur. For this reason, that portion must be subtracted. The following formula results:

Water resource volume = surface water + groundwater – double-counting [1]

If only a part of a watershed is the subject of analysis, the amount of water resources actually utilizable in that area will include the water that flows in from upstream. If a large amount of water is used upstream, the amount flowing downstream will be less. However, the water resource volume in Formula [1] is determined only by the amount of precipitation and natural conditions in that area. Here, the amount that flows in from outside the area (for example, from other provinces or watersheds) is not included.

Table II-2 shows the basin-by-basin precipitation and water resource volume in 2000. If the water resource volume is compared to the Changjiang River, the precipitation of the Yellow River is only one-sixth, and the utilizable total water volume is only one-eighteenth.

Table II-2 Basin-by-basin Comparison of Water Resources (2000)

(Unit: 100 Mtons) Water Resource River Basin Precipitation Surface Water Ground Water Double-count Volume Sonhua and Liao Rivers 5,415.68 1,122.74 577.78 305.47 1,395.05 Haihe 1,559.36 125.18 221.95 77.57 269.56 Huaihe 3,062.29 877.09 498.77 142.99 1,232.87 Yellow River 3,043.46 456.07 351.56 241.78 565.85 Changjiang 19,561.45 9,924.09 2,516.30 2,407.97 10,032.42 Pearl River 8,548.94 4,401.16 1,110.60 1,082.37 4,429.40 Southeast rivers 3,723.67 2,117.04 546.8 534.92 2,128.92 Southwest rivers 9,517.54 6,122.46 1,690.54 1,689.75 6,123.25 Inner rivers 5,659.95 1,416.11 987.56 880.17 1,523.50 Total 60,092.34 26,561.94 8,501.86 7,362.99 27,700.81

Source: China Water Resource Gazette, 2000

The water resource volume defined in Formula [1] can be calculated using actual measurements of river flow and groundwater levels. The main point of interest here is the degree of sufficiency (or insufficiency) in various regions along the Yellow River Basin, but in order to learn that, the water resource volume data for each region are needed. In this regard, since 1997, China’s Ministry of Water Resources has published the Water Resource Gazette, and for the Yellow River, the Yellow River Conservancy Commission has published the Yellow River Water Resource Gazette. In these publications, water resource volumes (surface water volume, groundwater volume, and double-counted volume) are reported on a national, basin-by-basin, or province-by-province basis. The water resource volumes are not provided on the individual city or county level within the provinces, however.

Actually, based on Formula [1], in order to calculate the water resource volume accurately at the city or county level, it is necessary to determine the water balance of the entire catchment area, including rivers and groundwater. For this purpose, it is necessary to have flow volumes, flow velocities, groundwater levels and other data from a large number of observation sites, for the entire system, including the main river course and tributaries, groundwater systems and dams.

The Ministry of Water Resources of China and the Yellow River Conservancy Commission may possess such databases, but they are not available to outside users. When such data is not available, one method of estimating water resource volumes would be as shown in the following formula:

Water resource volume = rainfall – evapotranspiration [2]

This report calculates potential water resources on a region-by-region basis using Formula [2], and uses the results as an indicator of how much water is available or lacking in each region. More specifically, the spatial distribution of rainfall is estimated using precipitation data. In addition, the amount of evapotranspiration is estimated using the Thornthwaite method and the potential water resources are calculated by subtracting this figure from the amount of precipitation. For precipitation and temperature data, observational data for the past thirty years in China are used. For spatial distribution, the resolution is provided by 20 kilometer meshes. Evapotranspiration depends on such factors as temperature, soil moisture, and ground cover. The required parameter values for calculation in this report were determined by referring to other literature.

Theoretically, Formula [1] and Formula [2] should consist with each other on the total amount of water resources. However, in an expansive watershed such as the Yellow River Basin, it is extremely difficult to conduct coherent calculations. Thus, the water resource volume calculated in Formula [2] could be meaningful if considered as an indicator showing the potential water resources or supply potential on a region-by-region basis.

2.4.2 Water Balance of the Yellow River

If a large amount of water is used upstream, the water resources available for use downstream are reduced by that amount. For the increase of the potential supply downstream, it is necessary to implement usage restrictions and water conserving measures upstream. To analyze how much water can be conserved upstream and how much can be added to the potential supply downstream, an approach from the demand side is necessary.

In a given region, once water is used, a portion of it is ultimately lost by evaporation, and the remaining amount either returns to the river or permeates into the ground returning to the groundwater. Part of the groundwater also flows to rivers. To clarify these volume relationships, the Yellow River Water Resource Gazette provides separate values for intake water volume and “lost” water volume. Lost water volume is the portion lost through evapotranspiration after being drawn in and used for various purposes. The difference between “intake” and “lost” water volumes is the amount remaining after use, which returns to the river or groundwater and moves from upstream to downstream. The Yellow River Basin is divided into eight sections from upstream to the river mouth, and the balance between intake and lost water

volume in each section is shown in the Yellow River Water Resource Gazette. According to these data, one can see where, for what purpose, and what amount of water is taken in and lost as one progresses from upstream to downstream along the Yellow River.

According to data from the year 2000, of the 303.4 billion tons of rainfall in the entire Yellow River Basin, the total water resource usable as surface or ground water amounts to 56.6 billion tons (figures from the China Water Resource Gazette). From that a cumulative 48.1 billion tons is taken in and 36.6 billion tons is lost. Thus, 65 percent of total usable water resources, and 76 percent of total intake water volume, is being fully used.

2.5 Controlling Factors of Water Resource Supply and Demand

2.5.1 Socio-economic Context

As northern China is a land of extremely low rainfall, it is impossible to significantly increase water supply without implementing water diversion projects such as the South-to-North Water Transfer Project. Within the watershed itself, it is possible to increase the water supplied downstream by measures such as conserving water upstream, or by preparing for dry seasons by storing water in dams. Accordingly, in the absence of diversion projects to bring in water from other catchment areas, the overwhelming focus of attention shall be put on the analysis of the demand-side.

A variety of factors determine demand for water resources, and these factors are interrelated. In order to correctly analyze them, a model must be developed that systematically includes mutual feedback of these factors. Below, among these factors, we consider particularly the items that can be analyzed at the macro-level using statistical data. Next, based on these considerations, this study established a set of scenarios of the various determining factors, and conducted a future projection of water demand and supply. For each use of water, within the agricultural, industrial, and domestic sectors, this study collected the available data for the smallest administrative unit possible, in other words, 306 cities and counties associated with the basin, and calculated for each province and the entire basin. Many prior studies used the period until 2030 or 2050 for long-term projections. If water supply and demand issues will truly become bottlenecks to economic growth, those impacts are likely to come out in such a long time frame. For this reason, this study also uses the year 2050 for projections.

Here the two macro-level factors that will largely determine future demand for water resources are as follows:

・ Economic growth—national and regional GDP, GDP per capita. ・ Population—national and regional population, urban and rural population, agricultural and non-agricultural population.

Many studies have dealt with China's future economic and population growth, but none of them could be considered to be conclusive. In particular, regional economic and population forecasts are difficult challenges. These are closely related to the outcomes of China’s Western Region Development Plan, which the Chinese government has identified as a priority, and changes in international economic conditions, both of which are areas that do not offer easy answers. Thus, in this work for the foreseeable future, the study will set scenarios in consideration of other research reports and findings, and used what is generally considered the most appropriate.

2.5.2 Determinants of Demand for Agricultural Water

At present, agricultural use accounts for more than 70 percent of the total water demand in China. For sustained economic growth under the constraint of available water resources, it is essential to give priority to water allocated for industrial and urban domestic uses. Thus, the Chinese Academy of Engineering and World Bank are predicting either no change or a slight decrease in the total volume of agricultural water use.

Under the constraints of not allowing any increases in cultivated land area and irrigation water volume, answers must be found as to how the country will respond to growing food demand, particularly grain demand for uses including livestock feed. The issue here will be the question of how to develop and disseminate the necessary technologies, such as water-conservation agriculture, to help achieve high agricultural productivity.

The amount of water for agriculture Wa is calculated as follows:

Wa = ρA where ρ is the irrigation constant and A is effective irrigation area. In other words, all agricultural water is counted as being for irrigation. Data on effective irrigation area for counties and towns, including those in the Yellow River Basin, can be obtained from sources such as the Summary of Economic Statistical Data for Agricultural Communities in China (for the past and most recent fiscal years). The amount of water needed for agriculture is calculated by multiplying effective irrigation area by the

average amount of water for irrigation per unit of effective irrigation area in the Yellow River Basin (the irrigation constant), obtained from the values for “China's water resource use” in that publication.

The resulting amount of agricultural water will be determined by future changes in effective irrigation area and the extent to which the irrigation constant can be reduced. At present, there are huge regional differences in the irrigation constant. This reflects the water resource volumes in each region. Table II-3 shows a scenario created by the Chinese Academy of Engineering, which does not include the “Yellow River drawing region.” This term refers to the region that is not part of the Yellow River Basin (catchment area), but that does draw water from the Yellow River. When considering the irrigation area of the Yellow River Basin it is important to remember this distinction. According to data for 1990, compared to the 66.20 million mu (mu is a Chinese measure equal to 100.833 square meters) of irrigation area in the basin (59 percent of total area of the basin), the “Yellow River drawing region” was 46.05 million mu (41 percent). The downstream area of the Yellow River has a smaller irrigated area because the basin forms a narrow belt here, but actually the agriculture of a much larger area outside that belt depends on water from the Yellow River.

Table II-3 Future Scenario of Irrigation Area and Irrigation Constant in the Yellow River Basin

Unit 1997 2000 2010 2030 2050 Irrigation constant tons／mu 436 412 401 379 365 Irrigation area 10 thousand mu 7,180 7,339 8,040 8,530 8,630 Irrigation water 100 million tons 313 302.35 322 323 315 Source: Chinese Academy of Engineering (2001)

The discussion above covers water per unit of effective irrigation area, but in the context of food supply and demand, the figures per unit of crop yield volume are critical. According to the data of crop yield per unit of cultivated area in the 20-year period from 1978 to 1998, the yield per hectare doubled or tripled in each province. Thus, water use per unit of crop harvest dropped considerably. On the other hand, food (grain) demand per capita is increasing along with per capita GDP. In the future, if economic and population growth continues, food demand will steadily increase, to the extent that the self-sufficient in food production will become difficult unless water use per unit of crop yield continues to decrease.

2.5.3 Water for Industrial Use

The amount of water used by industry is affected by a given industry's technology level. The status of water-conservation technologies also varies with differences in factors such as water prices and the severity of local water supply constraints. Even in the same industry, there are differences in technology between regions and between individual companies. Overall, the industrial water use rate is lower in the coastal areas of northern China, such as in Tianjin and Beijing. In general, technology advances along with economic development and one would expect the unit water consumption by industry to decline, but that tendency is not clearly evident. It is necessary to analyze, region by region, what kinds of industries are located there (industrial structure), how critical water shortages are, and what policies have been adopted to promote water conservation. For this analysis, data is required on regional industry, technologies and conditions of water consumption.

One other problem relating to industrial water is the way in which water is re-used. If water is scarce in a given region, the first task should be efforts to reduce water consumption without lowering the level of economic activity within that region. This is because one cannot expect immediate results from measures taken upstream, even if one hopes that they will eventually be effective. Thus, it is necessary to reduce the amount of water needed for a given amount of production (i.e., unit consumption) and reduce the net water volume brought into the system from other areas. In this respect, challenges are to reduce wasted water consumption and to avoid releasing water outside once it has entered the system, in other words, water recycling processes are necessary.

The China Environment Yearbook contains data on total industrial water use in 20 industrial sectors, and this is categorized as follows:

Total industrial water use = fresh water volume + recycled water volume

Northern Chinese cities such as Tianjin and Beijing, which have experienced severe water shortages, are aggressively using recycled wastewater that has been treated in sewerage systems. The conditions give cities such as Heibei Province's Tianjin no choice but to use urban wastewater for agricultural irrigation.

According to the volume of freshwater and recycled water in a number of industries and regions, the recycling ratio is generally higher in northern China. Table II-4 shows future scenarios for unit productivity and demand for industrial water from a report by the Chinese Academy of Engineering (Chinese Academy of Engineering

(2001)). Although the data is slightly old, it does show that the recycling rate in northern China is high, that the performance of township and village enterprises is poor, and that the 0.18 elasticity coefficient for industrial water in the Haihe River Basin is low (the national average is 0.36). It would be interesting at this point to compare the elasticity coefficients of water with those of energy. China's GDP elasticity coefficient of energy consumption is about 0.6. Compared to this, the figure for water is much lower. In other words, it is more likely that production can be increased while reducing water demand than energy demand, reflecting water’s characteristic as re-usable natural resource.

Table II-4 Future Scenario of Unit Productivity and Demand for Industrial Water

1997 2000 2010 2030 2050 Unit Productivity (B/A) tons/10,000Yuan 93.1 75 46.0 17.5 8.0 Industrial Product (A) Trillion Yuan 0.64 0.75 1.86 6.80 15.10 Industrial Water (B) 100Mton 59 56.49 86 119 121 Source: China Academy of Engineering (2001)

2.5.4 Domestic Water

The gap in the living standards between cities and rural villages in China is remarkably large. In the cities, municipal water supply systems are in place and the use of baths, showers and flush toilets is spreading. Most rural villages still depend on village wells and basic water supply facilities. A growing number of big cities have attained the developed-country level of over 200 liters per day in domestic water consumption per capita, while rural villages consume only 50 to 60 liters per capita per day. Modern cities cannot be built without municipal sewerage systems. In Beijing and other cities, water that are treated in the municipal sewerage systems is recycled and used as cooling water in power plants and factories, and for watering greenery along roads (environmental water).

According to the data on the relationship between disposable income and domestic water usage, there is a steadily increasing trend in domestic water usage with increases in income. This relationship is evident, particularly in large coastal cities. Table II-5 shows a future scenario for urban domestic water demand, from a report by the Chinese Academy of Engineering.

Table II-5 Future Scenario of Unit Consumption and Domestic Water Demand

1997 2010 2030 2050 Urban domestic water（liter/person/day） 130 145 160 175 Rural domestic water（liter/person/day） 54 65 80 100 Total Population（10,000 persons） 10,530 11,980 13,660 14,160 Urban population ratio (%) 30.5 39.9 50.9 58.2 Urban population（10,000 persons） 3,210 4,780 6,850 8,240 Rural population（10,000 persons） 7,320 7,200 6,810 5,920 Domestic water demand (100 Mtons) 30 42 60 74 Rural domestic water (100 Mtons) 14 17 20 22 Urban domestic water (100 Mtons) 15 25 41 53 Note: Domestic water demand refers to the water use in cities (or castle towns). Source: China Academy of Engineering, “Current Situation and Future Trend Analysis of China’s Water Resource Demand and Supply.”

In China, cities are referred to as “castle towns.” At the end of 2001, there were 664 “castle towns” in China. Compared to the number of towns in Japan, this number is relatively small. The Chinese concept of “castle town” and Japanese concept of “city” are quite different. Generally, the area of a Chinese castle town is fairly large, and it includes large rural village areas. In the case of large Japanese cities, the central area with a high population density is divided into wards, and outside rural villages are divided into counties. It should also be noted that in respect to the term “county,” some are independent and some are part of a city.

According to the 2001 China Castle Town Construction Statistics Gazette, 357.47 million people nationwide lived in castle towns at the end of 2001, of which the non-agricultural population was 215.43 million. Moreover, castle town water supplies reached 258.54 million people in China, resulting in a castle town water supply diffusion ratio of 72.33 percent. The daily domestic water volume used per capita is 216 liters. This is lower than the figure for the 2000 (220 liters) and represents a reduction nationwide of 3.8 billion tons. Table II-6 shows the national state of urbanization and municipal water supply in China.

Table II-6 Urbanization and Municipal Water Supply and Sewerage Systems in China

1985 1990 1995 1999 2000 Rate of urban population（％） 23.71 26.41 29.04 30.89 36.22 Built-up areas（km2） 9,386 12,856 19,264 21,525 22,439 Urban population density 262 279 322 462 441 （person／km2） Drinking water supply 128.0 382.3 496.6 467.5 469.0 （100 million tons） Domestic water use 51.9 100.1 158.1 189.6 200.0 （100 million tons） Domestic water use per person （ton） 55.1 67.9 71.3 94.1 95.5 Ratio of water supply （％） 81.0 89.2 93.0 96.3 96.7 141,75 Length of sewerage pipes（km） 31,556 57,787 110,293 134,486 8 Length of sewerage pipes per 10,000 2.7 3.9 6.0 6.7 6.8 persons（km）

Source: China Statistical Yearbook 2001.

Incidentally, the above figures for the water supply diffusion rate in 2001 are considerably lower than the values shown for 2000. This is due to a change starting in 2001 in the formula for calculating the water supply diffusion rate of castle towns. Until the end of 2000, the formula was as follows:

Water supply diffusion rate of castle towns = (non-agricultural castle town population served by water) / (non-agricultural castle town population)

Starting in 2001, however, the formula changed to the following new definition:

Water supply diffusion rate of castle towns = (castle town population served by water) / (castle town population)

Under the old water supply diffusion rate, excluding the agricultural population outside the built-up areas, one obtains a high figure of 96.7 percent. When the agricultural population is included, however, the new diffusion rate is only 72.3 percent. In addition, this figure represents only castle towns, and if the total population is counted, the actual diffusion rate is only about 20 percent.

Future urban water consumption will be affected by the following factors: (a) increases in water consumption per capita as incomes rise, (b) reductions in unit water consumption due to rising water-conservation awareness and the spread of water-conservation devices, (c) increases in the population served by water supplies (increase in the population and water supply diffusion rate), and (d) other factors, such as changes in number of persons per household (e.g., a shift toward nuclear families). It is difficult here to predict how factors (a) and (b) will affect each other. Experiences in other countries, including Japan, is that water consumption per capita increases along with incomes, then stabilizes, and then declines slightly due to (b) mentioned above. In the case of China, because initiatives to conserve water have already started, it is possible that authorities can suppress early any increase in consumption per capita. On the other hand, because the size of the rural population without water services in China is huge, the increase in consumption due to (c) may be large. The spread of water supply networks to rural villages will probably start with the most populated communities that are nearest to urban areas. As a result, while in one sense the people living in these areas and communities will have achieved a rise in relative income levels, this will also mean that the supply of water to poor farmers in remote areas may very well be delayed.

2.5.5 Water Diversion from Other River Systems

Because the usable water resources in a given basin are determined by natural factors such as the amount of precipitation, there are limits to what can be accomplished by water conservation. Water diversion from another river system that has abundant water resources is one method of solving problems of water scarcity. Even within the Yellow River Basin, there are regional imbalances in water availability, which has led to the Wanjiazhai Project. This project diverts water from the water-abundant upstream area of the Yellow River to northern Shanxi Province via tunnels. An even bigger water diversion project is the South-to-North Water Transfer Project, which is a plan in the Weihe River basin of Shannxi Province to divert water over the Qinling Mountains from the Changjiang River tributary system in the south. This is a plan to deliver water from the Changjiang River to northern China, particularly to the Haihe River Basin. If such water diversion projects are implemented, it is possible that the water scarcity problems of the past will be solved all at once. The same could be said for urban domestic water consumption. For example, Xian City is not blessed with good quality water sources, and during droughts frequently encounters water supply restrictions. After a new municipal water supply system was completed in 1996, these water restrictions no longer occurred, and the per capita water consumption of citizens increased. However, the act of increasing the amount of water supplied to mitigate the water scarcity problems, ironically

resulted in water consumption to increase.

2.5.6 Water Pricing

Water, similar to other resources, is a commodity, and price is a major factor in determining supply and demand. However, because water is a key commodity for daily life, the prices of water have been set far below the actual cost of providing the water. According to the data in some cities midstream and upstream of the Yellow River, the prices of domestic water are in the range of 1-5 yuan per ton, depending upon the facilities that use water. Each irrigation district pays fees for agricultural water, but the price level is low, at about 0.1 yuan per ton.

The setting of proper water prices is important for two reasons: in order to secure revenues from users to recover the costs necessary for constructing, operating and maintaining water supply facilities; and to limit over-consumption that could result from low pricing.

Actual analysis relating to the demand-limiting effects of raising water prices is difficult, however, because time-series data has not yet been collected that could help estimate the price elasticity of water demand.

2.5.7 Supply and Demand Balance

Water is a local resource, and transporting it long distances is not easy. If the distance is a few tens of kilometers, however, water diversion using canals is relatively easy. When building a city water supply system, a critical issue is whether there is an adequate water source nearby. Thus, to achieve balance in supply and demand, it is essential to accurately investigate the relationship between the location of the cities and factories that represent the demand, and the location of rivers, wells, and groundwater sources that represent the water supply. This requires a cautious study of the micro-level conditions of each city and county. This study’s aim is to consider supply and demand balance at the macro and semi-macro level of the entire basin, however, so it will not enter into an in-depth analysis of the micro-level relationships between the locations of water sources and demand.

The actual balance between supply and demand is largely affected by the natural climate. In this context, the “runoff probability” is used as an indicator to show the severity of drought. In a year of severe drought, the amount of usable water is extremely small; in other words, there is a high likelihood that at least that amount of water can be used every year. For example, a runoff probability of 95 percent signifies

extreme drought conditions. This is expressed as “P95” or P = 95%. In contrast, the probability of having a year with heavy rain is small, so for such years the probability of flow is lower. Thus, as one moves from P75, to P50, to P25, the severity of drought lessens (amount of rain increases, and amount of useable water increases). P50 is the average water resource volume over the long term. P25 denotes a year with heavy rains.

Chapter III. Prediction of Water Demand in the Yellow River Basin

3.1 Analytical Framework and Methodology

3.1.1 Definition of Target Region

One technical issue that must be addressed when analyzing water demand and supply is the “overlay analysis” of two different types of data: (i) physical and geographical data relating to the river basin, and (ii) statistical data relating to socio-economic activity for each administrative district. In the case of China, the smallest geographical units for socio-economic data that can be used over large areas are “city” and “county.” The Yellow River Basin is described by overlaying maps indicating the geographical extent of the water catchment area with maps showing the administrative boundaries of cities and counties. Discrepancies between the two are inevitable. In addition, in some cases, a county or city can straddle two or more river basins. For this analysis, a given county or city is treated as being part of the Yellow River Basin if it is associated with the basin of the main stream or a tributary of the Yellow River.

Figure III-1 shows the comparison of area for each province, determined by district and county boundaries, with basin area determined by physical geographic boundaries of the Yellow River Basin. Table III-1 shows the number of administrative units (cities and counties) included in this territory. In total, this includes 306 units (251 counties and 55 cities, including 7 provincial capitals). A few provinces, such as Sichuan, are small, and many are large, such as Shaanxi and Gansu.

Downstream of Huayuankou the Yellow River has a shallow riverbed, and there are no tributaries. For this reason, the downstream portions of the basin are defined in a narrow belt. Besides this definition of the basin, however, another possible definition would cover the extensive area that relies on the Yellow River for irrigation water (i.e., the Yellow River irrigation district). In addition, another definition could include the river mouth in Shandong Province, which forms a delta region.

Figure III-1 Geographical Extent of Yellow River Basin vs. Jurisdictional Boundaries of Cities and Counties Associated with the Basin

Inner Mongolia

Ningxia Shanxi Shaanxi Shandong

Gansu Qinghai Huayuankou Henan

Sichuan

Source：“1: 1000,000 GIS dataset,” Institute of Geographical Science, Chinese Academy of Science

Table III-1 Area of the Yellow River Basin

Natural geographic Area of cities and counties Number of Province area of the Yellow River Basin associated with the Yellow River cities and （10,000km2） Basin（10,000km2） counties Qinghai 15.10 13.28 23 Sichuan 1.60 2.88 3 Gansu 14.40 14.78 50 Ningxia 5.18 5.05 20 Inner Mongolia 15.20 15.77 25

Shanxi 9.60 9.47 68 Shaanxi 13.33 13.61 69 Henan 3.50 3.71 29 Shandong 1.30 2.57 19 Total 79.21 81.11 306 Source: Same as Figure lll-1

3.1.2 Long-term Trend of Population and Economy

A variety of research has been done regarding future population and economic growth in China, but in reality it is impossible to make accurate long-term predictions up to the year 2050. Thus, much research sets high-growth and low-growth scenarios based on macro-level assumptions about population and economy, with reference to past trends. Table lll-2 shows examples of the macro trend developed in existing research.

Table III-2 Long-term Future Trend of China's Population and Economy

(i) Population

Annual growth rate (%) Population (100 million people)

Source 2000-2010 2010-2030 2030-2050 2000 2010 2030 2050

UN Population Statistics (a) 0.72 0.43 －0.06 12.78 13.73 14.96 14.78

National Committee on Birth

Statistics (b) 0.81 0.49% 0.03 12.73 13.8 15.21 15.3

Information Research Center of

China (c) 0.82 0.51 －0.01 12.69 13.77 15.25 15.22

U.S Bureau of the Census 0.74 0.44 －0.04 12.62 13.59 14.83 14.7

China Academy Low growth 0.88 0.11 NA 12.73 13.9 14.2 NA

of Engineering High growth 1.72 0.32 NA 12.73 15.1 16.1 NA

(ii) Economic growth

Annual Growth Rate (%) GDP (Trillion Yuan)

Source 2000-2010 2010-2030 2030-2050 2000 2010 2030 2050

Chinese Statistical Bureau 7.5 6.0 4.0 10.8 22.3 71.4 156.3

China Macroeconomic Report，Vol.8, 2001 8.1 5.9 4.6 NA 19.8 62.2 153.0

China Academy of Engineering 7.1 5.4 3.1 NA 18.7 53.8 100.0

China Tenth Five Year Plan 7.2 NA NA NA NA NA NA

Source: (a) http://www.cpirc.org.cn (b) http://www.bized.ac.uk/dataser/udbsum.htm Source: (c) http://www.stats.gov.cn

The numbers shown in Table lll-2 are predictions for overall China. However, the target of this study is the Yellow River Basin, so future population and economic trends differ from that of overall China. The situation in each province differs from each other as well as each country differs within the basin. Besides the difficulties involved in considering each separate micro-level condition region by region, in the long-run, there is a high risk of diverging from reality. For these reasons, in this study, after first

considering actual past figures (1990–2000), the future growth rates are set using the formula shown below, based on national population and GDP growth assumptions.

Growth rate in province P over time period T = (national growth rate over time T ) ×(past actual growth rate in province P ) / (past actual national growth rate)

This is obviously a very rough assumption, for example it does not consider the migration of people, making it necessary to consider more appropriate scenarios in the future. As growth scenarios are made for the regions in terms of population and economy, there are many possible outcomes, due to the various combinations. However, it is certain that in every scenario, food and industrial production, income per capita, and demand for agriculture, industrial and domestic water will all increase, although there will be differences in the extent of the rise for each factor. To address the extent of these differences according to each scenario, it is necessary to accurately analyze the mutual feedback between multiple factors. For that, it is necessary to identify the relationships between each factor, and collect data that will help to develop models. As the first step for analysis, this study considers these matters using a simple model, with (a) an increase in industrial water consumption in proportion to the increase in industrial production, and (b) an increase in domestic water consumption that depends on the increase in per capita income. Agricultural water consumption will be considered using a water-conservation agriculture scenario, and a business-as-usual scenario.

Table III-3 Future Population and Economic Scenario

(i) Population (10,000 persons) 1990 (actual) 2000 (actual) 2010 2030 2050 China 112,956 126,583 140,500 156,000 155,688 YRB 9,950 11,579 12,427 13,921 14,709 Shanxi 1,713 2,012 2,167 2,408 2,382 Inner Mongolia 678 762 836 946 954 Shandong 1,407 1,552 1,679 1,879 1,873 Henan 1,467 1,702 1,816 2,021 2,003 Sichuan 13 16 16 18 20 Shaanxi 2,341 2,710 2,895 3,252 3,654 Gansu 1,539 1,817 1,967 2,208 2,480 Qinghai 339 454 467 506 548 Ninxia 453 554 584 681 795

(ii) Population growth rate (% per year) 1990-2000 (actual) 2001-2010 2011-2030 2031-2050 China 1.15 1.05 0.52 -0.01 YRB 1.53 0.71 0.57 0.28 Shanxi 1.63 0.74 0.53 -0.05 Inner Mongolia 1.18 0.93 0.62 0.04 Shandong 0.98 0.79 0.57 -0.02 Henan 1.50 0.65 0.54 -0.04 Sichuan 1.79 0.07 0.60 0.60 Shaanxi 1.47 0.66 0.58 0.58 Gansu 1.67 0.80 0.58 0.58 Qinghai 2.98 0.28 0.40 0.40 Ninxia 2.03 0.52 0.77 0.77 Note: The values used in China Academy of Engineering Report (Vol.4) are used for growth rate for 2000-2030. Growth rate for 2030-2050 is estimated by the method described in the text.

(iii) GDP and economic growth rate GDP（100 million yuan） GDP Growth Rate (%)

2000 (actual) 2010 2030 2050 2000-2010 2011-2030 2031-2050

China 89,404 186,800537,800 1,000,000 7.65 5.43 3.15

YRB 7,107 13,466 40,043 82,813 6.60 5.60 3.70

Shanxi 1,024 1,775 4,444 8,067 5.66 4.69 3.03

Inner Mongolia 700 1,250 3,284 6,153 5.97 4.95 3.19

Shandong 1,963 4,301 15,922 37,389 8.16 6.76 4.36

Henan 813 1,599 4,941 10,302 7.00 5.80 3.74

Sichuan 5 10 26 49 6.03 5.00 3.22

Shaanxi 1,553 2,725 6,952 12,781 5.78 4.79 3.09

Gansu 634 1,106 2,794 5,105 5.72 4.74 3.06

Qinghai 155 253 569 964 4.99 4.14 2.67

Ninxia 260 448 1,110 2,002 5.60 4.64 2.99

(iv) GDP per capita and its growth rate Per Capita GDP（Yuan） Per Capita GDP Growth Rate (%)

2000 (actual) 2010 2030 2050 2000-2010 2011-2030 2031-2050

China 7,063 13,295 34,474 64,231 6.53 4.88 3.16

YRB 6,121 10,837 28,764 56,302 5.88 5.00 3.41

Shanxi 5,007 8,192 18,454 33,866 5.05 4.14 3.08

Inner Mongolia 9,192 14,960 34,705 64,515 4.99 4.30 3.15

Shandong 12,601 25,618 84,724 199,627 7.35 6.16 4.38

Henan 4,778 8,804 24,444 51,427 6.30 5.24 3.79

Sichuan 3,404 6,071 14,285 23,900 5.96 4.37 2.61

Shaanxi 5,592 9,412 21,378 34,983 5.34 4.19 2.49

Gansu 3,480 5,622 12,653 20,588 4.91 4.14 2.46

Qinghai 4,064 5,413 11,244 17,575 2.91 3.72 2.26

Ninxia 4,732 7,668 16,291 25,191 4.94 3.84 2.20 Source: Graduate School of Environmental Studies, Nagoya University

3.2 Estimation of Water Supply (precipitation) and Potential Evapotranspiration

3.2.1 Databases

This study uses a dataset including monthly precipitation and temperatures from 1951 to 2000 (50 years) from 160 observation stations of the China State Meteorological Administration（Figure lll-2）. The dataset also includes the latitude and longitude of each observation station, useful when conducting calculations using geographical information systems (GIS). The location of each observation site can be projected onto a map using its respective latitude and longitude. The monthly precipitation data for each observation site (point data) is transformed into 20 km x 20 km mesh data using Kriging interpolation.

If the total precipitation in the Yellow River Basin is calculated from the amount of precipitation in each mesh, the result is 306.8 billion tons.

Figure III-2 160 Observation Points (Post-conversion Projection)

Source: Beijing Normal University Institute of Environmental Sciences

3.2.2 Calculation of Potential Evapotranspiration

Observational results for potential evapotranspiration are available for a limited area, but no data exists for the entire Yellow River Basin. A large body of research has been done on estimation methods for potential evapotranspiration, but none is yet available that can be applied with precision to the Yellow River Basin. Thus, this study makes the calculations using the Thornthwaite method, which only uses monthly average temperatures. China's monthly average temperatures were calculated by the same interpolation method used for precipitation. In addition, using predetermined correction coefficients, the daytime length is adjusted for latitude. The total potential evapotranspiration obtained through this method amounts to 141.2 billion tons. The monthly and annual potential evapotranspiration amounts were prepared from the calculation results.

The Thornthwaite method defines potential evapotranspiration as the amount lost through evapotranspiration from a ground surface thickly covered by low green vegetation, in a situation where water is sufficiently supplied so that no lack of water will occur. This method was established empirically by actual measurements in the United States, and there is no guarantee that it can be applied to China's Yellow River Basin. Nevertheless, it is considered to be significant as a rough indicator of the

evapotranspiration potential at a given location. In other words, the larger the value at a given location, the greater will be the potential moisture loss through evapotranspiration. The actual amount of evapotranspiration is largely affected, however, by vegetation and meteorological conditions at each location.

Figure III-3 Results of the Estimation of Evapotranspiration Volume

0 mm 250 mm

Source: Graduate School of Environmental Studies, Nagoya University

3.2.3 Calculation of Water Resource Volume

Water resource volume W is obtained with the following formula:

W =(P －η・ETｐ)・A

Here, P is precipitation, η correction coefficient, ETｐ potential evapotranspiration per area, and A land area.

The water resource volume calculated using the above formula is 165.6 billion tons, which is considerably larger than the actual amount (58.0 billion tons) obtained for the Yellow River Basin. A correction coefficientηof 1.5 is needed to make the figures match. The values calculated here are estimated based only on local natural conditions, such as precipitation and temperature, and do not match with actual water resource volumes. They do provide one indicator, however, of potential water resources or water supply capacity based only on natural conditions of the given area.

Figure III-4 Estimated Results of Water Resources Volume

0 mm 250 mm

Source: Same as Figure lll-3

3.3 Water for Agriculture

3.3.1 Basic Data

To obtain the effective irrigation area (not the total area in an irrigation district, but the area in the district that is actually being irrigated), time-series data for each province is available from 1949 onward. Data is needed for each city and county in order to calculate effective irrigation area of the Yellow River Basin. This data for the period 1979–1991 has been published (China State Statistics Administration, 2001), but the data from 1992 onward has not been published. Thus, for this study the growth rate of effective irrigation area in 2000 is estimated for the provinces associated with each district and town, based on 1991 data. The result is shown in Table lll-4.

The Water Resource Gazette (China’s Ministry of Water Resources) reports the amount of available water per mu of effective irrigation area (the “irrigation constant”) for each province, as shown in Table lll-5. The coverage of this data is not limited to the areas connected with the Yellow River Basin, however. On the other hand, the Yellow River Water Resource Gazette (Yellow River Conservancy Commission) has released data on the amounts of consumption and loss for each water use, for both surface water

and groundwater. The irrigation constant estimated from these data is also shown in Table lll-5.

Table III-4 Effective Irrigation Areas in the Yellow River Basin

(Units: 10,000 mu) 1991（actual） 2000（estimate） Shanxi 1,177 1,132 Inner Mongolia 885 1,587 Shandong 1,046 1,040 Henan 990 1,272 Sichuan 0.50 0.55 Shaanxi 1,643 1,629 Gansu 501 545

Qinghai 148 172 Ninxia 397 580 YRB 6,787 7,958 Source: Same as Figure lll-3

Table III-5 Irrigation Constants of Provinces in the Yellow River Basin

(Units: tons per mu) Data in Water Resource Gazette Estimate Based on 1999 2000 Yellow River Water （Actual）（Actual） Resource Gazette (2000) Shanxi 209 210 210 Inner Mongolia 455 446 446 Shandong 275 261 462 Henan 234 197 505 Sichuan 402 395 650 Shaanxi 305 303 352 Gansu 628 619 478 Qinghai 647 644 549 Ninxia 1,352 1,213 309 Source: Department of Hydrology and Water Resources: “Water Resource Gazette, 1999 and 2000”. Yellow River Conservancy Committee: “Yellow River Water Resource Gazette, 2000.”

The amount of agricultural water is obtained by multiplying the irrigation constant by the effective irrigation area, but as one can see in Table lll-5, the irrigation constant can vary widely depending on the region and year. In addition, downstream agricultural water is also sent out of the Yellow River Basin, so the value also varies depending on the extent of irrigated areas under consideration.

3.3.2 Water-conservation Agriculture Scenarios

Future economic and population growth can have both positive and negative effects on agricultural water demand. To begin with, because industrialization is a prerequisite for achieving high economic growth, the demand for industrial water will increase. Domestic water demand also increases along with standards of living. Diets also change, and the per capita grain consumption increases, particularly grain demand for livestock feed. As a result, multi-cropping for food production becomes necessary and water demand increases. On the other hand, because investment into water-conservation agriculture and improving crop varieties becomes possible, agriculture modernizes and the irrigation constant drops. In addition, because food importation becomes possible, this leads to one possible scenario of only a limited increase in domestic agricultural production, and thus only a limited increase in water demand. In addition, these results could be affected by the population growth trends. For example, in the case of high economic growth combined with low population growth, the resultant increase in per capita income could lead to increases in food demand, which would be a factor that increases water demand. Conversely, if population growth is suppressed, this could be a factor that suppresses water demand.

In order to predict future demand for agricultural water, it is essential to create a model of the complex relationships between these factors, but that is not a simple task. Thus, for this discussion we limit ourselves to a simple analysis as described below. Stated concisely, it is assumed that the current policies will be maintained, giving higher priority to the allocation of water to industrial and domestic uses. Thus, because the total amount of usable water resources in each region (province) of the basin is constant, the following formula results:

Wa = Wt – (Wi + Wd) - We

Here, Wa is the amount of agricultural water, Wt total water resources, Wi industrial water, Wd domestic water, and We denotes environmental water.

Incidentally, because the total water resources of the entire Yellow River Basin amount to an average of 58 billion tons, if the environmental water needed for soil

transport and ecosystem maintenance of the Yellow River is taken to be 20 billion tons, the total amount of water resources that can be used for industrial and domestic water would be 38 billion tons. In the absence of recycling of industrial water, or re-use of treated wastewater, or water diversion from outside the basin, this would be the actual total available water resources. Here the order is reversed, but using the method described below to predict demand for industrial and domestic water, the amount of water that can be allocated to agriculture can be calculated. Having done that, by dividing the amount of agricultural water by irrigation area, one can obtain the irrigation constant. The results of these calculations are shown in Table lll-6. Here, for convenience of analysis, the irrigation area, irrigation constant, and amount of irrigation water are indicated as 100, using the year 2000 as the base year.

With regard to irrigation area, because physical constraints on land conducive to irrigation are large, two scenarios are attributed to all cases, with no connection with economic and population scenarios. As a result of effort being put into agricultural modernization to boost food production, the irrigation area nationally and in the Yellow River Basin have risen rapidly, with annual growth rates of 1.2% and 1.8%, respectively. During the 1990s in particular, the irrigation area was increased in order to raise productivity in the water-scarce Yellow River Basin, but it will be difficult to maintain high growth rates for a long period of time. To begin with, there are physical constraints on the area of land conducive to irrigation. In addition, it is likely that priorities for agricultural investments will shift away from creating new irrigation districts, towards renewal of existing facilities and modernization in old irrigation districts, as well as improvement of water-conservation facilities. Thus, regarding the increase of irrigation area, two scenarios are considered here: a “low irrigation area” scenario in which the high growth rate of the 1990s continues until 2005 and then the area grows slowly to 120 in 2050 compared to 100 in 2000; and a “high irrigation area” scenario in which the high growth rate of the 1990s continues until 2010 and then the area grows to 140 in 2050 compared to 100 in 2000. In both scenarios, after a period of continued high growth, the growth falls back to the lower rates of the pre-1990s.

The forecasts shown in Table lll-6 do not represent predictions, but are rather scenarios (water-conservation agriculture scenarios) that show water conservation in the agricultural sector must be implemented in order to address the rising water demand from industrialization and urbanization.

Table III-6 Future Scenarios of Agricultural Water (water-conservation scenarios)

Baseline Large Irrigated Area Small Irrigated Area Year 2000 2010 2030 2050 2010 2030 2050 Irrigated Land Area 100 132 136 140 114 117 120 Irrigation Constant 100 56 43 34 65 50 40 Total Agricultural Water 100 74 59 48 74 59 48 Note: The value for 2000 was put to be 100 for each item. Source: Graduate School of Environmental Studies, Nagoya University

3.3.3 Business-as-usual-scenarios

One other agricultural water scenario could be called the “business-as-usual” scenario. Here, the study uses the same value for irrigation area as in the water-conservation scenarios, and make the agricultural water demand volume dependent on changes in the irrigation constant. Because the investment into the agricultural sector increases with GDP, the irrigation constant decreases. The impacts of population are complex: if population increases, due to greater food demand land will be used more intensively through multi-cropping, for example, and water demand will increase. Table III-7 shows one projection based on selected GDP and population scenarios, but more discussion is needed regarding the significance and interpretation of the numbers.

Table III-7 Future Scenarios of Agricultural Water (business-as-usual scenarios)

(i) Case of small decrease in irrigation constant

Baseline Large Irrigated Area (Case 1) Small Irrigated Area (Case 2)

Year 2000 2010 2030 2050 2010 2030 2050

Irrigated Land Area 100 132 136 140 114 117 120

Irrigation Constant 100 92 85 80 92 85 80

Agricultural Water Demand 100 121 116 112 105 99 96

(ii) Case of large decrease in irrigation constant Baseline Large Irrigated Area (Case 3) Small Irrigated Area (Case 4)

year 2000 2010 2030 2050 2010 2030 2050

Irrigated Land Area 100 132 136 140 114 117 120

Irrigation Constant 100 81 75 70 81 75 70

Agricultural Water Demand 100 107 102 98 92 88 84

Source: Graduate School of Environmental Studies, Nagoya University

3.4 Water for Industry

3.4.1 Usable Data

The amount of water needed for industry is calculated by multiplying water demand per unit of industrial production (tons per 10,000 yuan) by a measure of industrial production (in units of 10,000 yuan). If unit demand were available for each region and industry, it would be possible to conduct more precise analyses, but in reality only limited data is available. The data currently available from statistical reports are as follows:

(a) Unit demand for industrial water for 20 industrial categories nationwide (China Environment Yearbook) (b) Gross industrial product and total water supplied (industrial water ＋ domestic water), for 666 cities nationwide (Statistical Yearbook of Cities in China) (c) Industrial water usage, for 147 cities nationwide (Statistical Yearbook of Cities in China) (d) Value of industrial production for 39 categories, for 666 cities nationwide (Statistical Yearbook of Cities in China)

The study considers what can be analyzed from the above data. First, from (a), on a national basis, industries can be identified as having either high or low relative unit water consumption. From (b) and (c), the unit water consumption of the entire industrial sector for each city can be obtained. Only 147 cities, however, have both data of gross industrial product and industrial water use. In addition, as for the industrial water, available data is only from the municipal water supply, so if a factory uses groundwater that it pumps independently, that water is not added to the figures. Using data from (d), one can determine the industrial structure of each city, but unfortunately, data released only goes as far as 1996, and has not been released after that year. Even within one industry, the unit demand for water can vary with the age of facilities and the degree of strain on local water demand and supply. One could expect the unit demand for the entire industrial sector in a given region to be affected by the relative weighting of industrial categories that use copious amounts of water in the area, but unfortunately, this information cannot be obtained from published statistics.

3.4.2 Estimation Method for Industrial Water Volume

Below is an explanation of the method used to predict industrial water use in α cities based on the above data. In this model, the amount of industrial water Wi ( ) (t)

for year t in city α is expressed as follows:

(α) (α) (α) Wi (t) = wi (t) I (t)

α where wi( ) (t) is the amount of water use per 10,000 yuan industrial production (below, “unit industrial water consumption”) in year t in city α, and I(α)(t) is the gross industrial product in year t in city α (unit: 10,000 yuan).

α Unit industrial water consumption wi( ) (t) is estimated as a function of per capita gross domestic product (y(α) (t)) and the industrial structure of city α. Here, α the industrial structure of a city is represented by the following indices: (i) ri( ): the weight of secondary industry in the domestic product of city α , and (ii) σ ｋ : specialization index of water-consuming industry k such as paper and pulp, iron and steel, chemicals, metal plating, etc. in the secondary industry sector of city α. More (α) specially, σｋ (t) is defined as the relative weight of industry k in city α to that in α the nation. Then, wi( )(t) is obtained by regression analysis assuming the following formula:

(α) (α) (α) (α) (α) (α) wi (t) = f (y (t), ri , σ1 (t) wi1(t), σ2 (t) wi２(t), …, σn (t) wiｎ(t))

Here, wik(t) (k=1, 2, …, n) is the unit water consumption of industry k on the national (α) level, and σn (t) wiｎ(t) is the assumed water consumption constant of industry n in city α. It is generally assumed that the unit water consumption in cityαincreases with the increase of the share of secondary industry in the domestic product in city α and the increase of the share of water-consuming industries in the secondary industry in city α. However, the data wik(t) was only available for the year of 1996 and only for 20 industry categories. Therefore, 39 industrial categories were regrouped into 20 categories. Then, multiple linear regression analysis for a single year (1996) was conducted to estimate unit industrial water consumption for each city, using the top seven water-consuming industrial sectors.

The unit industrial water consumption calculated as shown above is used to predict future unit industrial water consumption, using as variables the future gross domestic product Y(α) (t) value set in the macro-level context, and per capita gross domestic product y(α) (t) calculated from future population. Here, it was assumed that the specialization coefficient, the ratio of secondary (manufacturing) industry as part of each city's GDP, is the same for all. In this case, changes in unit consumption are attributed entirely to technological progress achieved as a consequence of GDP growth per capita in each city.

α For this approach, the predicted values for the gross industrial product Ii ( ) (t) of each city are needed. These are calculated by simple linear regression analysis using gross domestic product Y(α) (t) as the variable. More specifically, this study analyzed the relationship between GDP per capita and the share of secondary industry in all provinces in China, obtained a regression formula, and uniformly applied it to estimate the industrial product of each province or city.

Table III-8 Future Trend of Industrial Output

( 100 million yuan) 2000 2010 2030 2050 Shanxi 1,674 2,905 7,150 12,634 Inner Mongolia 1,154 1,993 5,022 9,054 Shandong 3,300 7,417 29,448 75,162 Henan 1,932 3,881 13,342 32,670 Sichuan 3 6 19 38 Shaanxi 2,459 4,545 12,414 24,407 Gansu 944 1,601 3,906 7,006 Qinghai 234 319 677 1,044 Ninxia 405 672 1,580 2,688 YRB 12,105 23,338 73,558 164,703 Source: Graduate School of Environmental Studies, Nagoya University

3.4.3 Forecasts of Industrial Water Volumes in Each Province

For cities, certain available data can be used as above, imperfect as it may be. In contrast, for counties the only available data is per capita GDP and gross industrial product. For this reason, the attributes of a given county are estimated on the assumption that they will be the same as in the cities associated with that particular county. In other words, when calculating the unit industrial water consumption for county j, which is associated with city i, the ratio of secondary industry and specialization coefficient for province j will be the same values as for city i. However, because the values of per capita GDP and gross industrial product in county j and city i are different, the county's unique features will be reflected in that difference. As one would expect, the values calculated in this way will contain a certain degree of error, and when compiled at the macro-level, the numbers will not add-up perfectly. For this reason, a correction coefficientγis calculated from Wi(real) (actual measurements of industrial water, by province in the year 2000) and estimated values Wi (cal), and separate corrections are made by multiplying the correction factor by each province's

unit industrial water consumption.

(real) (cal) γ = Wi / Wi

3.4.4 Estimation Results

The resultant future estimates for each province are shown in Table lll-9 and Table lll-10, for the amount of industrial water consumption and unit industrial water consumption. The result is a prediction showing an increase in industrial water consumption by 1.77from the year 2000 to 2050, whereas the unit industrial water consumption is predicted to decrease by 87 % during the same period.

Table III-9 Industrial Water Use Scenario

( 100 million tons )

2000 2010 2030 2050

Shanxi 9.04 10.95 15.05 17.82

Inner Mongolia 7.39 8.86 11.64 12.73

Shandong 11.22 13.65 18.22 19.49

Henan 12.75 15.91 23.52 29.42

Sichuan 0.03 0.04 0.05 0.07

Shaanxi 17.46 19.70 22.83 23.00

Gansu 14.07 16.87 22.40 27.04

Qinghai 4.21 3.92 3.35 2.98

Ninxia 7.38 8.60 11.82 15.04

Total of YRB 83.54 98.49 128.89 147.58 Source: Graduate School of Environmental Studies, Nagoya University

Table III-10 Unit Industrial Water Consumption Scenario

(tons / 10,000 yuan)

2000 2010 2030 2050

Shanxi 54 37.69 21.06 14.11

Inner Mongolia 64 44.48 23.18 14.06

Shandong 34 18.40 6.19 2.59

Henan 66 40.98 17.63 9.01

Sichuan 119 65.32 27.55 17.09

Shaanxi 71 43.35 18.39 9.42

Gansu 149 105.36 57.34 38.60

Qinghai 180 122.82 49.46 28.51

Ninxia 182 128.05 74.79 55.97

Total of YRB 69 42.20 17.52 8.96

Source: Graduate School of Environmental Studies, Nagoya University

3.5 Domestic Water

3.5.1 Determinants of Domestic Water Use and Method of Analysis

There are two major determinants of domestic water consumption: (i) GDP per capita, and (ii) the population who are served with water supply systems.

The affluence of citizen lifestyles is one of the major determinants of the amount of domestic water used per person. As affluence increases, high water-consuming lifestyles spread, for example, the use of flush toilets, baths and showers, washing machines, etc., resulting in the growth of water consumption. Also, as city finances become stronger, improvements are made to the water supply systems in order to meet citizen needs. With better water supply systems in place, consumers are spared the inconveniences of water shortages, and this also increases water consumption. Thus, broadly-speaking, it is possible to estimate future domestic water demand using a measure of affluence, for example, per capita GDP, as the explanatory variable. However, in reality, a variety of local circumstances are reflected in domestic water consumption, including water usage rates, local climate and weather, and completeness of waterworks and water supply systems, etc. Besides the day-to-day use of domestic water by citizens, the definition of domestic water includes the amount of water used in the tertiary-industries. In other words, the service industry, for example, eating and drinking establishments, inns and hotels, hospitals, barbershops and hair salons, bathhouses, pools, laundry cleaners, shops, stores and offices. Thus, if a city attains economic development, it is not only the household water consumption that

increases, but also the consumption by many service industries, such as travel, that become more active. Because these circumstances vary considerably from city to city, it is difficult to make accurate projections of domestic water demand without considering each city's unique situation. On the other hand, when considering matters on the larger scale of country or province, because these micro-factors average themselves out, it is possible to obtain a certain degree of precision in projections by using per capita GDP as the explanatory variable.

Another determinant of domestic water use is the population who are served with water supply systems. In China, there is a large gap in the domestic water use per person between cities and rural areas. Moreover, in the Chinese system of administration, population in cities does not only include the people living in urbanized areas but also a large number of people who live in rural areas. In general, people living in urbanized areas are of the non-agricultural population and most of them (97% according to 2000 data) are served with water supply systems. On the other hand, people living in rural areas are mostly the agricultural population and only a small portion of them (8 % in 2000) enjoy water supply systems. As a result, there is a large gap in domestic water use per capita (or “unit domestic water consumption”) between non-agricultural population in cities and agricultural population in cities and counties.

The projection of domestic water consumption comprises of two parts. This study makes separate estimates for the amounts of urban domestic water uses (amount of water provided by municipal water supply systems), and other domestic water uses by people living in areas that do not have municipal water supply systems. Then, for urban domestic water uses, it is necessary to estimate the non-agricultural population and the remaining agricultural population in cities. This estimate is conducted based on the regression formula between the urban non-agricultural population and the per capita income in provinces in different years, assuming that more people will live in urbanized areas with increasing per capita income.

3.5.2 Summary of Future Domestic Water Consumption

The data used for the projection and the result of domestic water consumption are shown below. Table lll-11 shows the scenario of the diffusion rate of urban water supply systems (or population ratio enjoying water supply system), while Table lll-12 shows the unit domestic water consumption. Table lll-13 and Table lll-14 show the estimate of agricultural and non-agricultural populations in each province. Table lll-15 and Table lll-16 show the population with and without municipal water supply systems. Then Table lll-17 and Table lll-18 show the results of total domestic water consumption.

Table III-11 Rate of Urban Population with Service of Urban Water Supply System

2000 (actual)2010 2020 2030 2040 2050

Non-agricultural population in cities 97% 100% 100% 100% 100% 100%

Agricultural population in cities 8% 26% 45% 63% 82% 100%

Source: Graduate School of Environmental Studies, Nagoya University

Table III-12 Unit Domestic Water Consumption Scenario

(Unit: liters/person/day)

2000 2010 2030 2050

Domestic water consumption (in urban areas with water supply system) 167 170 166 175

Domestic water consumption (in rural areas without water supply system) 53 65 80 100 Note: The data for 2000 were obtained from Water Resources Gazette 2000. Source: Graduate School of Environmental Studies, Nagoya University

Table III-13 Non-agricultural Population in Cities

(1000 people)

2000 (actual) 2010 2020 2030 2040 2050

Shanxi 3,521 4,956 6,390 7,708 8,338 8,780

Inner Mongolia 2,608 3,119 3,623 4,153 4,440 4,698

Shandong 4,089 6,735 8,754 10,115 10,607 10,998

Henan 2,193 4,682 5,804 6,959 7,827 8,790

Sichuan 0 0 0 0 0 0

Shaanxi 4,587 7,047 9,402 11,906 13,834 17,571

Gansu 2,381 3,021 3,747 4,544 5,022 6,019

Qinghai 1,250 1,814 2,496 3,151 3,497 4,144

Ninxia 997 1,173 1,432 1,675 1,793 2,114

Total of YRB 21,626 32,547 41,648 50,211 55,357 63,114 Note: There are no cities in YRB in Sichuan Province. Source: Graduate School of Environmental Studies, Nagoya University

Table III-14 Agricultural Population in Cities

(1000 persons)

2000 (actual) 2010 2020 2030 2040 2050

Shanxi 3,672 3,156 2,555 2,145 1,890 1,824

Inner Mongolia 904 945 931 940 924 939

Shandong 4,970 3,427 2,386 2,087 1,991 1,994

Henan 3,587 1,963 1,824 1,883 1,926 2,028

Sichuan 0 0 0 0 0 0

Shaanxi 4,126 3,506 3,257 3,213 3,090 3,521

Gansu 2,086 2,020 1,811 1,579 1,337 1,395

Qinghai 216 462 684 845 885 990

Ninxia 525 496 437 407 383 426

Total of YRB 20,085 15,975 13,885 13,100 12,428 13,116 Source: Graduate School of Environmental Studies, Nagoya University

Table III-15 Population with Service of Water Supply System

( 1000 persons)

2000 2010 2020 2030 2040 2050

Shanxi 3,709 5,789 7,535 9,063 9,880 10,604

Inner Mongolia 2,602 3,369 4,040 4,747 5,194 5,638

Shandong 4,364 7,640 9,823 11,434 12,232 12,992

Henan 2,414 5,200 6,621 8,149 9,399 10,818

Sichuan 0 0 0 0 0 0

Shaanxi 4,780 7,973 10,861 13,937 16,355 21,092

Gansu 2,477 3,554 4,559 5,542 6,113 7,414

Qinghai 1,230 1,936 2,803 3,685 4,219 5,134

Ninxia 1,009 1,304 1,628 1,932 2,106 2,539

Total of YRB 22,584 36,765 47,869 58,490 65,498 76,231 Source: Graduate School of Environmental Studies, Nagoya University

Table III-16 Population without Service of Water Supply System

(1000 persons)

2000 2010 2020 2030 2040 2050

Shanxi 16,415 15,884 15,310 15,017 14,071 13,217

Inner Mongolia 5,020 4,990 4,854 4,716 4,306 3,900

Shandong 11,153 9,149 7,940 7,359 6,530 5,737

Henan 14,608 12,958 12,537 12,064 10,724 9,216

Sichuan 160 161 171 182 182 205

Shaanxi 22,316 20,974 19,821 18,584 16,169 15,444

Gansu 15,689 16,114 16,282 16,542 15,967 17,382

Qinghai 3,312 2,736 2,060 1,376 752 349

Ninxia 4,534 4,534 4,678 4,879 4,836 5,407

Total of YRB 93,206 87,501 83,654 80,720 73,536 70,858 Source: Graduate School of Environmental Studies, Nagoya University

Table III-17 Domestic Water Consumption

(Unit: 100 Mtons)

Urban domestic water Rural domestic water

(with water supply system) (without water supply system)

2000 2010 2030 2050 2000 2010 2030 2050

Shanxi 2.26 3.59 5.50 6.77 3.18 3.77 4.38 4.82

Inner Mongolia 1.59 2.09 2.88 3.60 0.97 1.18 1.38 1.42

Shandong 2.66 4.74 6.94 8.30 2.16 2.17 2.15 2.09

Henan 1.47 3.33 5.03 6.91 2.83 3.04 3.48 3.36

Sichuan 0 0 0 0 0.03 0.04 0.05 0.07

Shaanxi 2.91 4.95 8.45 13.47 4.32 4.98 5.42 5.64

Gansu 1.51 2.21 3.36 4.74 3.03 3.82 4.83 6.34

Qinghai 0.75 1.20 2.23 3.28 0.64 0.65 0.40 0.13

Ninxia 0.62 0.81 1.17 1.62 0.88 1.08 1.42 1.97

Total of YRB 13.77 22.91 35.56 48.69 18.03 20.72 23.51 25.86

Source: Graduate School of Environmental Studies, Nagoya University

Table III-18 Total Domestic Water Consumption

(Unit: 100 Mtons)

2000 2010 2030 2050

Shanxi 5.44 7.36 9.88 11.60

Inner Mongolia 2.56 3.27 4.25 5.02

Shandong 4.82 6.91 9.08 10.39

Henan 4.30 6.36 8.51 10.27

Sichuan 0.03 0.04 0.05 0.07

Shaanxi 7.23 9.92 13.88 19.11

Gansu 4.54 6.03 8.19 11.08

Qinghai 1.39 1.85 2.64 3.41

Ninxia 1.49 1.88 2.60 3.60

Total of YRB 31.80 43.63 59.07 74.56

Source: Graduate School of Environmental Studies, Nagoya University

3.6 Summary

The results of water resource demand in each sector in Yellow River Basis are summarized in Table lll-19, using the “business-as-usual” scenario. Comparing water resource demand in 2050 with that in 2000, industrial water demand will increase from 8.4 billion tons to 14.8 billion tons while domestic water will also increase from 2.9 billion tons to 7.5 billion tons. The increasing demand of industrial and domestic water means the greater pressure on the agricultural sector as the total amount of water available in the basin is limited. Even in the case of small irrigated area and large decrease in irrigation constant, the available water for agriculture will decrease from 32.8 billion tons to 27.5 billion tons.

Table III-19 Summary of Future Scenarios

(Unit: Mtons)

Large Irrigated Area Small Irrigated Area Small Decrease in Irrigation Constant （Case 1） (Case 2)

Year 2000 2010 2030 2050 2010 2030 2050

Water Resource Volume 566 580 580

Available Water A 380 380 380

Agricultural Water W1 328 397 378 367 343 326 315

Industrial Water W2 84 98 129 148 98 129 148

Domestic Water W3 29 44 59 75 44 59 75

Total Water Demand B=W1+W2+W3 440 540 566 589 485 514 537

Shortage B－A 60 160 186 209 105 134 157

Large Irrigated Area Small Irrigated Area Large Decrease in Irrigation Constant （Case 3） (Case 4)

Year 2000 2010 2030 2050 2010 2030 2050

Water Resource Volume 566 580 580

Available Water A 380 380 380

Agricultural Water W1 328 350 334 321 302 287 275

Industrial Water W2 84 98 129 148 98 129 148

Domestic Water W3 29 44 59 75 44 59 75

Total Water Demand B=W1+W2+W3 440 492 522 543 444 475 497

Shortage B－A 60 112 142 163 64 95 117 Note: “Business As Usual” is assumed for agricultural water. Source: Graduate School of Environmental Studies, Nagoya University

Chapter IV. Policy Issues and Future Research Direction

4.1 Water Resource Issues of the Yellow River

Future water supply and demand in the Yellow River Basin will be determined by the balance between constraints on supply and the pressures of growing demand. In the absence of large-scale water diversion projects such as the South-to-North Water Transfer Project, it will be difficult to find fundamental solutions to supply constraints. Not only that, on a long-term scale of 30 to 50 years, the impacts of global climate change may also become apparent. Scientific research in this area is still inadequate, however, and even the Intergovernmental Panel on Climate Change reports (IPCC (2001)) does not provide clear predictions of whether the amount of rainfall will increase or decrease over this period. Nevertheless, in general predictions, with the recent trends in northern China toward aridification and desertification, there is a concern about further aridification and reductions in rainfall in the catchment area at the source of the upper Yellow River. It is feared that in the long-term the existing shortage of water resources in the Yellow River Basin will worsen. Additionally, in the South-to-North Water Transfer Project, priority is given to the Haihe River Basin, including Beijing and Tianjin, which is experiencing even more severe water shortages than the Yellow River Basin. For these reasons, there is little likelihood that constraints on water supply in the Yellow River Basin will be significantly relaxed. This means that the need for demand control will increase. It is required, therefore, to increase the efficiency of water consumption through water conservation and recycling, and there are concerns that water shortages could become bottlenecks for economic growth.

Fundamentally, the future of economic growth as well as water supply and demand relates to the question of how much water use efficiency can be improved, or more specifically, to what extent can water consumption per unit of production (unit consumption) be reduced in the agricultural and industrial sectors. The main three sectors that determine demand are the agricultural, industrial and urban domestic sectors. A shortage of water will obstruct agricultural and industrial production, and will also suppress urban population growth. In such a situation, the issue of which region and which sectors should be allocated the limited water resources becomes an important topic for national developmental policies. Until now, industry and urban lifestyles received a high priority in water allocation, while the agricultural sector was expected to accept severe water restrictions. These dynamics were possible because of the belief that industrial expansion was absolutely necessary for economic growth. It was also grounded in the presumption that the agricultural sector had not yet

rationalized and boosted its water-use efficiency to the greatest extent possible, and that if more thorough efforts were made to conserve water, so that it was only provided when absolutely needed for crop growth, there was still considerable potential to limit the use of water.

Besides the above, water is needed to maintain natural ecosystems, in terms of “environmental water.” If humans were to use every drop of rainwater, forests and grasslands could not be sustained. The source of 60 percent of the Yellow River's water comes from the upper reaches of the river, but 60 percent of its sediment comes from its middle reaches. A certain minimum volume of water flow is needed to prevent sedimentation. Dams also need a certain amount of water discharge to let sediment flow through. Soon after the Sanmenxia Dam was constructed, sediment began to collect in the reservoir, and now its remaining utility-life is said to be only ten years. The Xiaolangdi Dam, completed in 2001, is predicted to have a utility-life of about 30 years. In addition, dams and sections downstream of the Sanmenxia and Xiaolangdi dams require an estimated one billion tons of water flow per year to prevent sedimentation.

The lower reaches of the Yellow River have the severest water scarcity. Here, water shortages are chronic as a result of heavy water consumption upstream and midstream, but the same areas also face the threat of flooding during abnormally heavy rains. It should be noted, however, that this downstream region is a narrow belt of land, and thus its proportion of the total basin area is small. Upstream areas such as Quinghai Province and Inner Mongolia have relatively sparse populations and little industry. In contrast, the areas with the highest population density are in the chain of midstream provinces (Shanxi, Shannxi, and Gansu), which include tributaries such as the Weihe and Fenhe Rivers. Development is relatively delayed in this region, and its people look forward to the resulting industrialization and urbanization of the China West Development Strategy policies. Today, awareness about water scarcity in this region is not as high as that in the downstream area, but if industrialization and urbanization proceed as quickly as is hoped, water demand in this region will increase leading to strained agricultural water supplies. Clearly, growing water demand in the midstream region will worsen water scarcity downstream. In addition, sedimentary runoff is greatest in the midstream region. Thus, in the context of the Yellow River's water supply and demand issues, one could say that the midstream area is the most important region.

4.2 Improving Prediction Models

4.2.1 Activity Levels and Unit Consumption

It should be noted that the water demand figures in the preceding chapters are not actually predictions, but only future estimates or scenarios based on a number of assumptions. To improve prediction models, a number of topics need further consideration.

The first topic is the setting of the macro-level frame of reference. The demand for water resources is determined by factors in each part of the basin, such as the population, urbanization ratio (number of city-dwellers as a proportion of the total population), GDP, agricultural production and industrial production. In addition, it is national economic growth and population that determine these factors. Predictions of economic growth and population for China as a whole country, and for each region, are themselves a major topic of research. Because it is difficult to make those predictions within a water resource supply and demand model, there is no option here but to treat factors such as these externally. However, future consideration is needed to create more appropriate scenarios that take into account the conditions in each province.

The second topic is the ability to determine internally, within the model, the changes in activity levels and unit consumption, based on given assumptions about the macro-level frame of reference. For demand, future predictions are needed for both activity levels and unit consumption, but in reality both are in a mutual feedback relationship. For example, if industrial production increases, water demand increases; however, at the same time, the industrial sector also modernizes, so unit consumption declines due to technological progress. Also, due to growth in the industrial sector, investments to make agriculture more modernized become possible, and unit consumption in the agricultural sector thus declines. For future predictions of water demand, there is a need to model these mutual feedback effects, but to date they have not been adequately addressed in research. The present study shares this weakness.

4.2.2 Technological Progress

Besides water, energy is also a constraining factor on China's future economic development. China’s economic development, energy and environment have been subjects of active research in recent years. In this respect, there are a number of differences in the nature of water resources and energy as two factors of production. By considering these differences, a number of issues affecting water demand predictions come to the fore.

First, whereas energy is a commodity that is traded internationally and can thus be procured through importations, it is difficult to import a large amount of water from outside the country. In addition, even within the same country, it is not easy to transport water resources in large volumes from basin to basin. In other words, water resources are highly localized in nature, such as within the country, and particularly, within a given basin. In a sense, water resources face much greater supply constraints than energy, and in this respect it is similar in nature to land as a resource.

Second, according to the second law of thermodynamics, energy is a resource that is destroyed as it is used (in the end it becomes heat and is dissipated into the environment). In contrast, water can theoretically be re-used many times. However, as it is used, the amounts of pollutants and impurities increase in the water, and a considerable infusion of chemicals and energy is needed to remove them. If water becomes scarce despite efforts, it is possible to try to do without the input of new water from outside the system and to make more thorough efforts to re-use the water within the system. Under this scenario, however, the costs rise. In addition, quality declines in terms of drinking water “taste”. The question of whether water scarcity leads to bottlenecks in economic growth depends on the extent to which actual water prices increase to cover the costs of technology investment in order to reduce water usage and clean contaminated water.

To summarize, compared to energy, water could be described as a resource for which supply is highly constrained locally, but at the same time offers great potential for conservation and re-use. In reality, the elasticity coefficient of water consumption in response to increases in industrial and agricultural production is considerably lower than 1. In the future, there is considerable potential to reduce net water consumption (use of new water introduced from the outside) while increasing production. However, the extent to which this is possible, and the speed with which it will progress, are issues that depend on technology and costs. Comparisons with technology levels of developed countries and other regions in China that already have achieved progress in water conservation could provide one basis to answering these issues, but these are topics for future research.

4.2.3 Water for Agricultural Use

Predicting demand for agricultural water is an issue of how much water will be needed in the future for a growing population, and for increased food production in response to higher per capita grain production (including animal feed) associated with changes in people’s diets (increase in meat consumption). The total water resources within a basin are determined by natural factors such as rainfall and climate. There

may be annual variations due to heavy rain or drought, but in principle, the water resources within a given basin do not increase. Thus, to enable an increase in industrial and urban domestic water consumption, agricultural water consumption must decrease. For this reason, water conservation in agriculture is necessary. Research is being done on systematic methods to reduce the water provided to crops, through careful water management. The key to conserving water is the price of water for agriculture, which at present is set extremely low. For poor farmers, however, even now the burden of water costs is certainly not small. In one example, for the irrigation district on the central plain of China, against an agricultural crop yield of about 700 yuan per mu, the cost of water alone is between 30 and 50 yuan.

Agricultural water is closely connected with issues that affect the future of China's domestic agricultural sector, as well as food supply and demand. Because the area of cultivated land nationwide either remains steady or has a decreasing tendency, enormous increases in yield per hectare are needed if China hopes to increase agricultural production. Although this has been achieved until now by promoting mechanization, the use of chemical fertilizers and agricultural chemicals, and multi-cropping, there are limits to what these approaches can achieve. In particular, multi-cropping requires copious amounts of water. In addition, in contrast to the case of industrial water, recovering and re-using agricultural water is difficult because most of the water provided to crops is released through transpiration from the leaves of the crop plants.

4.2.4 Water for Industrial Use

With regard to industrial water, key issues are the extent to which the middle reaches of the Yellow River, a region that has been relatively late to develop, industrialize and in the process, the extent to which unit water consumption declines. There are many difficult issues involved in making predictions relating to the advance of industrialization: the future economic growth of China as a whole; the progress of the China West Development Strategy, which the Chinese government is concentrating on in the Tenth Five-Year Plan (for the period 2001 to 2005); and how the industrial structure will change. If one examines the industrial sector's (secondary industry's) share of GDP, no large gaps are evident between China’s provinces, but considering long-term trends, it is predicted that the GDP share held by tertiary industries will be higher along the eastern coastal areas, which are more advanced economically.

There are two issues that concern unit water consumption by industry: the technology levels of individual industrial sectors or factories, and local industrial structure. Even within the same industry, there are large local differences in

technology levels. In addition, there is not necessarily a clear relationship between the overall technology level in an area and unit water consumption. For example, Shanghai City and Guangdong Province have high technology levels overall, but because they have abundant water resources, their rates of unit water consumption are higher than that in Beijing and Tianjin to the north.

As mentioned, the midstream regions of the Yellow River are generally slow to industrialize, and the overall technology levels here could not be described as being high. The unit consumption level for water is high in Shannxi Province, Gansu Province and Shanxi Province. Because their industrial production is relatively small within China as a whole, the factories that are large in size appear to be situated in areas that have a relative abundance of water resources within the provinces. On the other hand, small townships and village enterprises appear to be spread widely within the provinces. To correctly assess the current situation and to make future predictions, it is essential to better grasp the micro-level conditions of cities and districts within the provinces.

4.2.5 Urban Domestic Water

In China enormous gaps exist in standards of living between large cities and rural villages. Domestic water use per capita exceeds 200 liters per day in some large cities, while it is only about 50 liters per day in rural villages. By comparison, urban per capita domestic water consumption in Japan has stabilized at about 300 liters per day. Domestic water demand generally rises with the standard of living, but reaches a ceiling after a certain level has been reached. In China's major cities, one could expect that it would be sufficient to secure about 200 to 250 liters of water per capita per day. A major factor affecting whether that amount can be secured is the availability of good quality water nearby. If the only water sources are far away, dams must be built and water diverted to the city. Shannxi Province is planning to construct municipal water supply systems in various cities within the province, but the feasibility of each must be studied separately. In the case of rural villages, as living standards rise, unit consumption is predicted to rise to about 80 to 120 liters per capita per day, but whether this amount can be secured depends on the water source situation of each individual town. Wells provide the source of water for many rural villages, and the water volume available from these depends on local natural conditions. In addition, besides the irrigation districts fed by river water, in many places, the supply of agricultural water also comes from wells.

The amount of total demand for urban domestic water is ultimately calculated by multiplying the urban population served by water from municipal water supply

systems by per capita unit consumption. Toward that final amount, demand changes annually over time will be determined by the way in which investments are put into the construction of municipal water supply systems as the income levels of citizens rise. When municipal water supply systems are built in a given city, that city's unit consumption will gradually increase.

4.3 Policies to Control Demand for Water Resources

4.3.1 Water Conservation Targets

Under instructions from China’s Ministry of Water Resources, starting in 2001, detailed water-conservation targets were to be set for each type of water use, for each province and city. However, only a few cities such as Shanghai have decided on and published their targets so far. Actually, in order to set their targets, it is necessary to ascertain the actual situation of water use for each industry and each type of manufacturing. Shannxi and other provinces are now in the process of conducting studies for these purposes. It is hoped that the results will be of use in the future.

4.3.2 Water Pricing Policies

The use of pricing to control demand for water resources is a topic that receives considerable attention today, particularly from China’s Ministry of Water Resources. Until now, on a nationwide basis, there was little intention to make users pay the necessary costs of providing water. In the context of the shift to a market economy in recent years, however, the idea of trying to control water demand by using pricing has emerged.

The discussions surrounding water pricing differ with each sector, whether it be agriculture, industry, or urban. Pricing for agricultural water is generally at a low level of about 0.1 yuan per cubic meter. This reflects policies that consider the livelihoods of relatively low-income farmers, making it a difficult prospect for governments to raise prices for agricultural water.

Industrial water has been mostly affected by the wave of the shift to a market economy and has a low resistance to the control of demand through price increases. Industrial water prices in the large cities of the Yellow River Basin are generally about 1 to 2 yuan per cubic meter, but in some areas there have been attempts to apply prices as high as 40 yuan per cubic meter (for example, Weihai City in Shandong Province).

With regards to urban domestic water, the idea of trying to raise prices in

response to the consumer’s ability to pay (as income levels rise) is now gaining popularity. This is particularly true in large coastal cities such as Beijing and Shanghai. For inland areas that have been slower to develop economically, however, provincial and city governments are cautious and consider the consumer’s limited ability to pay, due to concerns about directly affecting the lifestyles of their consumers. In large cities that already have fairly well developed municipal sewerage systems, besides charges for municipal water supply systems, water prices also include levies for sewerage systems.

4.3.3 Water Allocation Policies—Efficiency and Equity

In the face of strains on water supply and demand, revisions to legislation are being considered in the interest of strengthening the functions of the Yellow River Conservancy Commission for inter-provincial coordination. Demand control based on pricing is an effective approach in terms of efficient resource allocation through the market. However, in the allocation of water, there is also the need for policy judgment relating to equity between regions, sectors and income classes. If the industrial sector is given priority in water allocation, poor farmers will bear a greater burden. The income gaps between large cities and rural villages are already causing a number of social problems, and there is already a huge gap between the two in terms of water consumption. An increasing number of city dwellers are adopting lifestyles that involve high water consumption, and this is expanding the inequity between the wealthy urban and poor rural classes.

Coordination between upper/midstream and downstream water users is another challenging area. Considering the reality that income levels are higher downstream, where water is scarce, it is possible to argue the need for some type of income transfer from downstream to upper/midstream areas for water resource conservation and measures to deal with water and soil runoff. The argument has been made that conducting this coordination through trading in a virtual market between provinces would be one effective approach to find a balance between the need for efficiency and the need for equity.

Chapter V. Concluding Remarks

This study was conducted as a preliminary research relating to water resource issues of the Yellow River Basin. It is hoped that a more detailed analysis will be conducted in the future. For this reason, here, the study conducted a literature review on studies implemented to date relating to water resource issues in the Yellow River Basin and the region of northern China that includes this basin. Weaknesses with existing research were identified, and a survey of research and analytical methodologies was also conducted for consideration in this study. Next, in order to ascertain the status of water resource shortages, an analysis was conducted at the macro-level regarding water resource supply and demand in the Yellow River Basin. More specifically, demand projections were conducted for the entire basin for agricultural, industrial and urban domestic water uses, based on land-use maps and statistical data by province, district and sector, available from statistical reports. It would be more accurate, however, to say that this study conducted a preliminary discussion to serve as a basis for more precise water demand projections in the future.

It is hoped that, in the near future, studies will be conducted based on these results, but the biggest difficulty in this regard is a lack of data. To conduct an analysis that has a high degree of reliability, it is necessary to collect data methodically through local studies that include questionnaires and survey forms, focusing on the target areas and sectors. For example, the central plain (Weihe River basin) in the middle reaches of the basin would be an interesting subject of research, as it has historically been an agricultural area, has a high population, and is expected to undergo industrial development under the China West Development Strategy.

On the one hand, a demand prediction model must take into account the mutual interrelations and feedback between various related factors. In doing that, if one is to entrust the allocation of that scarce resource, that is water, to market mechanisms, the development of a model must explicitly take pricing structures into account. In that case, it is essential to know the price elasticity of water demand for agricultural, industrial and urban domestic sectors. But here one faces the problem of sparse data, as China was under a planned economy for many years. In the past, the agricultural sector accounted for the largest share of water demand. Because agricultural water is intimately connected with issues of food supply and demand, projections of future demand for agricultural water represent major issues that connect not only to China's economy and population, but also to the global food market. It is essential to develop scenarios within a macro-level context that include such issues. For industrial water, it is necessary to create future region-by-region scenarios relating to changes in the

industrial structure. For urban domestic water, it is necessary to make region-by-region projections of urbanization and lifestyle changes. These are topics that require more detailed analysis in each sector, but there is also a need to consider mutual feedback between the sectors. For example, if industrialization intensifies at the same time as the unit water consumption by industry declines, one might expect that it would be possible to use tax revenues from the industrial sector to invest in the modernization of the agricultural sector, and this would lead to a lowering of unit consumption of agricultural water. To analyze accurately issues such as the above, it is necessary to take into account the entire economy of China. That work, however, would be a huge undertaking. As a realistic approach, in parallel with macro-level analysis that covers the entire country, one must not forget the need to collect local data from individual regions and sectors. In addition, it is necessary to conduct research into policy assessments by focusing on individual policies such as price policies; technology introduction such as the improvement of production processes; industrial policies; etc.

Besides the points raised above, in addition to research on an overall framework of water supply and demand, the following research is also needed: (a) case studies that focus on specific regions, cities or factories and present success stories of efficient water resources management; (b) the efficient allocation of water resources based on cost-benefit analyses that also take social and environmental costs into account; (c) water allocation policies that consider not only efficiency but also equity; (d) water resource allocation systems for the entire basin, for example, combinations that utilize both centrally-planned allocation and market pricing mechanisms; (e) water resource pricing levels, willingness to pay and ability to pay; and (f) economic ripple effects that arise when changes occur in the amount of supply. In order to conduct research on such issues, it is essential to improve further the supply and demand model developed in this study, and also to consider further the potential to use demand controls to mitigate water shortages.

References

Asian Development Bank (2001). “Report and Recommendation of the President to the Board of Directors on A Proposed Loan and Technical Assistance Grant to the People’s Republic of China for the Yellow River Flood Management (Sector) Project”. Brown, Lester (1995). Who Will Feed China: Wake-up Call For A Small Planet, World Watch Institute. Chinese Academy of Engineering (2001). A Series of Reports on Water Resource Strategies for China’s Sustainable Development (in Chinese) Vol.1-9, Water Publication Company of China Horton J T, Ding Y, Griggs D J, Noguer M, Van der Linden P J and Xiaosu D (2001). Climate Change 2001: The Scientific Basis, Cambridge University Press. Kaneko Shinji, Mieda Yuji, Imura Hidefumi (1999). “Study on the water demand and supply in China based on business as usual scenarios”, Journal of Global Environmental Engineering Vol.5, pp139-154 Office of the National Ecological Agriculture: Leading Group (1999). Chinese Ecological Agriculture and Intensive Farming System, China Environmental Science Press. Renshou Fu, Yi Qian and Shoemaker Christine A (1995). Groundwater Contamination and Its Control, Tsinhua University Press. The World Bank, Sinclair Knight Merz and Egis Consulting Australia, the General Institute of Water Resources & Hydropower Planning and Design (2001). China Agenda for Water Sector Strategy for North China Volume1 Watson, Robert T. (2001) Climate Change 2001-Synthesis Report (Contribution of Working Group I, II, and III to the Third Assessment Report of the Intergovernmental Panel on Climate Change),” Cambridge University Press

Appendix

Appendix 1 Results of Monthly Evapotranspiration

Figure A 1 Evapotranspiration in January

0 mm 250 mm

Source: Graduate School of Environmental Studies, Nagoya University

Figure A 2 Evapotranspiration in February

0 mm 250 mm

Source: Graduate School of Environmental Studies, Nagoya University

A-1

Figure A 3 Evapotranspiration in March

0 mm 250 mm

Source: Graduate School of Environmental Studies, Nagoya University

Figure A 4 Evapotranspiration in April

0 mm 250 mm

Source: Graduate School of Environmental Studies, Nagoya University

A-2

Figure A 5 Evapotranspiration in May

0 mm 250 mm

Source: Graduate School of Environmental Studies, Nagoya University

Figure A 6 Evapotranspiration in June

0 mm 250 mm Source: Graduate School of Environmental Studies, Nagoya University

A-3

Figure A 7 Evapotranspiration in July

0 mm 250 mm Source: Graduate School of Environmental Studies, Nagoya University

Figure A 8 Evapotranspiration in August

0 mm 250 mm

Source: Graduate School of Environmental Studies, Nagoya University

A-4

Figure A 9 Evapotranspiration in September

0 mm 250 mm

Source: Graduate School of Environmental Studies, Nagoya University

Figure A 10 Evapotranspiration in October

0 mm 250 mm

Source: Graduate School of Environmental Studies, Nagoya University

A-5

Figure A 11 Evapotranspiration in November

0 mm 250 mm

Source: Graduate School of Environmental Studies, Nagoya University

Figure A 12 Evapotranspiration in December

0 mm 250 mm

Source: Graduate School of Environmental Studies, Nagoya University

A-6

Appendix 2 Method for Setting a Macro-frame for Economic Growth

From the estimated values of GDP and population for each province in the Yellow River Basin, in the report, the GDP per capita in each province in the Yellow River Basin was calculated as follows:

GDP / cap(t)i = GDP(t)i / Population(t) I

From this value, the GDP growth rate per capita within each province of the Yellow River Province was calculated.

GDP/cap i Growth rate (t) = GDP / cap(t+1)i - 1

GDP / cap(t)i

The GDP growth rate per capita in each province of the Yellow River Basin obtained in this way was presumed as the regular value within the province and from this value, the GDP per capita of each city and county was calculated.

GDP / cap(t+1)j = GDP / cap i Growth rate(t) x GDP / cap(t)j

The GDP was determined from the GDP per capita of each city and county and estimated population size.

GDP(t) j = GDP / cap (t) j x Population (t)j

A-7

JAPAN BANK FOR INTERNATIONAL COOPERATION (JBIC)

http://www.jbic.go.jp/

4-1, Ohtemachi 1-Chome Chiyoda-ku, Tokyo 100-8144, Japan Telephone +81-3-5218-9720 (JBIC Institute) Facsimile +81-3-5218-9846

Osaka Branch 13th Fl., Aqua Dojima East 4-4, Dojimahama 1-Chome Kita-ku, Osaka 530-0004, Japan Telephone +81-6-6346-4770 Facsimile +81-6-6346-4779

Overseas Network

Representative Office in Beijing Representative Office in Jakarta Representative Office in Dhaka 3131, 31st Fl., China World Trade Center, Summitmas II 7th Fl., IDB Bhaban (5th Floor), No.1 Jian Guo Men Wai Ave., Beijing Jl. Jenderal Sudirman, Kav. 61-62, E/8-A, Begum Rokeya Sharani, 100004, Jakarta Selatan, Jakarta, Indonesia Sher-E-Bangla Nagar, The People's Republic of China Tel. 62-21-522-0693 Dhaka-1207, Bangladesh Tel. 86-10-6505-8989, 3825～8, Fax.62-21-520-0975 Tel.880-2-811-4081, 6700 (Direct) 1196, 1197 Fax.880-2-811-3336（Direct） Fax.86-10-6505-3829,1198 Representative Office in Kuala Lumpur 22nd Fl., UBN Tower, Letter Box No.59, Representative Office in Islamabad Hong Kong Office Jalan P, Ramlee 50250, 5th Floor, Evacuee Trust Complex, Aga Suite 3706, Level37, One Pacific Place, Kuala Lumpur, Malaysia Khan Road, F-5/1 88 Queensway, Hong Kong Tel. 60-3-2072-3255,2201,2202 Islamabad, Pakistan Tel. 852-2869-8505～7 Fax.60-3-2072-2115 Tel. 92-51-2820119 Fax.852-2869-8712 Fax.92-51-2822546 Representative Office in Manila Representative Office in Bangkok 31st / Floor, Citibank Tower, Representative Office in New Delhi 14th Fl., Nantawan Building, Valero St. corner Villar St., 3rd Fl., DLF Centre, Sansad Marg, 161 Rajdamri Road, Makati, Metro Manila, Philippines New Delhi 110001, India Bangkok 10330, Thailand Tel. 63-2-848-1828, 752-5682 Tel. 91-11-371-4362, 4363, 7090, 6200 Tel. 66-2-252-5050 Fax.63-2-848-1833～35 Fax.91-11-371-5066, 373-8389 Fax.66-2-252-5514,5515 Representative Office in Singapore Representative Office in Sydney Representative Office in Hanoi 9 Raffles Place, #53-01 Republic Plaza, Suite 2501, Level 25, Gateway 6th Fl., 63 Ly Thai To Street, Singapore 048619 1 Macquarie Place, Sydney, Hanoi, Viet Nam Tel. 65-6557-2806 N.S.W. 2000, Australia Tel. 84-4-8248934～6 Fax. 65-6557-2807 Tel. 61-2-9241-1388 Fax.84-4-8248937 Fax.61-2-9231-1053 Representative Office in Colombo Level 13, Development Holdings 42, Representative Office in Moscow Navam Mawatha, Colombo 2, 123610 Moscow, Sri Lanka Krasnopresnenskaya Nab.12, Tel. 94-11-300470 World Trade Center, Office No. 905, Fax.94-11-300473 Russian Federation Tel. 7-095-258-1832, 1835, 1836 Fax.7-095-258-1858

Representative Office in Frankfurt Representative Office in New York Representative Office in Lima Taunustor 2, 60311 Frankfurt am Main, 520 Madison Avenue, 40th Floor, Av.Canaval Moreyra No380, San Isidro, Germany New York, NY 10022, U.S.A. Lima 27, Peru Tel. 49-69-2385770 Tel. 1-212-888-9500, 9501, 9502 Tel. 51-1-442-3031 Fax.49-69-23857710 Fax.1-212-888-9503 Fax.51-1-440-9657 -Web site of this office Representative Office in London Representative Office in Mexico City 4th Fl., River Plate House, Representative Office in Washington, Paseo de la Reforma 265 Piso-16, 7- 11 Finsbury Circus, London, D.C. Col. Cuauhtemoc, EC2M 7EX, U.K. 1909 K St. N.W., Suite 300, Mexico, D.F. 06500, Mexico Tel. 44-20-7638-0175 Washington, D.C., 20006, U.S.A. Tel. 52-55-5525-67-90 Fax.44-20-7638-2401 Tel. 1-202-785-5242 Fax.52-55-5525-34-73 Fax.1-202-785-8484 Representative Office in Paris Representative Office in Rio de Janeiro 21, Boulevard de la Madeleine Representative Office in Bogota Praia de Botafogo, 228-801 B, Botafogo, 75038 Paris Cedex 01, France Calle 114 No 9-45 Torre B, Oficina 601, CEP.22359-900, Tel. 33-1-4703-6190 Teleport Business Park, Bogota, D.C., Rio de Janeiro, RJ, Brazil Fax.33-1-4703-3236 Colombia Tel. 55-21-2553-0817 Tel. 57-1-629 -2436, 2437, 2438 Fax.55-21-2554-8798 Representative Office in Cairo Fax.57-1-629-2707 -Web site of this office Abu El Feda Bldg., 16th Fl., 3 Abu El Feda Street, Zamalek, Representative Office in Buenos Aires Toronto Liaison Office Cairo, Egypt Av. Del Libertador No.498, Piso19, 1001 P.O.Box493, 2 First Canadian Place, Tel. 20-2-738-3608～9 Capital Federal, Buenos Aires, Suite3660, Toronto, Ontario, M5X 1E5, Fax.20-2-738-3607 Argentina Canada Tel. 54-11-4394-1379, 1803 Tel. 1-416-865-1700 Representative Office in Nairobi Fax.54-11-4394-1763 Fax. 1-416-865-0124 6th Fl., International House, Mama Ngina Street, P.O. Box 49526, Nairobi, Kenya Tel. 254-2-221420, 221637 Fax.254-2-221569

JBICI Research Paper Series1 1. Issues of Sustainable Economic Growth from the Perspective of the Four East Asian Countries, December 1999 2. Organizational Capacity of Executing Agencies in the Developing Countries: Case Studies on Bangladesh, Thailand and Indonesia, December 1999 3. Urban Development and Housing Sector in Viet Nam, December 1999 4. Urban Public Transportation in Viet Nam: Improving Regulatory Framework, December 1999* 5. Current Situation of Rice Distribution System in Indonesia, December 19992 6. Energy Balance Simulations to 2010 for China and Japan, March 2000 7. Rural Enterprises Finance: A Case Study of the Bank for Agriculture and Agricultural Cooperatives (BAAC) in Thailand, November 20003 8-1. Issues of Sustainable Development in Asian Countries: Focused on SMIs in Thailand, December 2000 8-2. Issues of Sustainable Development in Asian Countries: Focused on SMIs in Malaysia, December 2000 9. Policy Issues and Institutional Reform in Road Sector in Developing Countries, February 20014 10. Public Expenditure Management in Developing Countries, March 2001 11. INDIA: Fiscal Reforms and Public Expenditure Management, August 2001 12. Cash Crop Distribution System in the Philippines - Issues and Measures to Address Them -, March 2002 13. MERCOSUR Experience In Regional Freight Transport Development, March 2002 14. Regional Cooperation for Infrastructure Development in Central and Eastern Europe, March 20025 15. Foreign Direct Investment and Development: Where Do We Stand?, June 2002 16-1. Development Assistance Strategies in the 21st Century (volume1), July 2002 16-2. Development Assistance Strategies in the 21st Century (volume2), July 2002 17. Education Sector in Thailand, Vietnam, Indonesia, and Malaysia, July 20026 18. Regional Cooperation Strategy on Interconnected Power Networks in Indochina, August 2002 19. Impact Assessment of Irrigation Infrastructure Development on Poverty Alleviation: A Case Study from Sri Lanka, November 2002 20. Macroeconomic Impact of IT Adoption and Diffusion, December 2002 21. Cost Benefit Analysis of Participatory Approach － Conceptual Review and Framework for Qualitative Analysis－, January 2003 22. Higher Education Development in Asia － Cooperation among Universities and Building Partnership of Universities with Private Companies－, May 2003 23. Direction of Development Policy of Central American Countries, August 2003 24. Conflict and Development: Roles of JBIC－Development Assistance Strategy for Peace Building and Reconstruction of Sri Lanka－, August 2003 25. Religions, Ethnic and Social Issues in Indonesia and its Prospects for National Reunification－, November 2003 26. Public Finance and Debt Sustainability in Indonesia-Structure－Policy Effects and Simulation Analysis－, December 2003 27. Restoring Economic Growth in Argentina, January 2004 28. Issues and Challenges for Water Resources in North China－Case of the Yellow River Basin－, March 2004

*No.1~No.14 were published as ‘JBIC Research Paper Series’.

1 Full texts can be downloaded from the JBIC website. 2 In Japanese only. English summary can be downloaded from the JBIC website. 3 In Japanese only 4 In Japanese only 5 In Japanese only 6 In Japanese only

JBIC Institute, Japan Bank for International Cooperation 4-1, Ohtemachi 1-chome, Chiyoda-ku, Tokyo 100-8144, Japan Tel: 03-5218-9720, Fax: 03-5218-9846 (Planning and Coordination Division) Internet: http://www.jbic.go.jp/

ISSN 1347-5703

4-1, Ohtemachi 1-chome, Chiyoda-ku, Tokyo 100-8144, Japan Tel: 03-5218-9720（JBIC Institute） Internet: http://www.jbic.go.jp/ Recycled paper