Analysis of Dynamic Correlation Between Economic Growth and WaterConsumption in China Based on VAR Model

Abstract

China is a country with severe water shortage. With rapid urbanization and industrialization, the significance of water resources to economic growth is increasing. And because of the high exploitation of economic activities, the water resources consumption in China is keeping increasing. Here, in order to investigate the water use situation, we studied the relationship between water use and economic growth based on the VAR (Vector Auto Regression) model. Through the co-integration test, generalized impulse response and predictive variance decomposition analysis between them, we aim to reveal the long-term dynamic relationship between water resources utilization and economic growth. Then, we used the main water system related indicators and GDP data from 2003 to 2017 to predict and analyze the overloaded state of water use in 2017-2025. Our results show that: (1) During the study period, China's economic growth has a co-integration relationship with total water consumption. (2) The cumulative value of GDP response to total water consumption per unit is negative, while the cumulative value of total water consumption response to GDP is positive. (3) In 2025, sewage discharge will be 8.5×1010t, which is about 1.8 times larger than that of 2003. Therefore, we should build more sewage treatment facilities and adopt other measures to alleviate the situation of water overload.