IWRA Proceedings

AbstractAlthough China is one of the first six countries in the ranking list of total water availability of the world, its water resources are far from adequate to satisfy the increasing demand of crowded cities and booming industries for water due to its rapid population growth and economic development. Meanwhile, water pollution and ecological degradation are worsening the already limited water availability. Unfortunately, China’s current water policy fails to solve the problem because of its inefficient administrative allocation approach and fragmented water resources management. As a response to this urgent situation, the Chinese government has initiated an ambitious water policy reform, “Building a water-saving society”, to integrate water management and promote the implementation of market-based mechanism, especially water rights trading in water management and allocation. In many societies around the world, water rights trading has been applied in various patterns to allocate the precious water resources among competing water users. Its function of reallocating water from lower valued uses to higher valued uses is widely recognized in the international water field. However, under China’s traditional water institutional arrangements, water resources are administratively allocated. The transfer of water abstraction permits was explicitly prohibited by its water legislation. In the context of the new reform initiative, water rights trading as a market-based allocation instrument has been explored. Indeed, establishing a national water rights system is at the core of China’s ongoing water policy reform. This system is based on the principle that China’s water rights trading should be a combination of administrative management and market-based mechanism to allocate and reallocate water resources in the context of China’s socialist market economy. This paper aims to explore the institutional arrangements of necessary governmental intervention into water rights trading, which would not go so far that it would undermine its function in optimal water allocation. To do so, this paper includes four sections. Section 1 looks at the institutional framework of China’s water management and allocation within which water rights trading exists and operates. Section 2 observes the current practices of water rights trading occurring in several parts of China and examines how governmental intervention works in those practices. In Section 3, the latest development in China’s water rights legal system is to be reviewed in order to figure out what institutional arrangements are absent for facilitating necessary governmental intervention into water rights trading. Section 4 attempts to elaborate different aspects of governmental intervention into water rights trading, namely, the approval procedure of water rights trading, restrictions to types of tradable water rights, the protection to the third parties, environmental needs and basic human needs for water. Based on theses analyses, the paper concludes with an evaluation of current practices of governmental intervention into water rights trading and its implications to China’s water policy reform.