Dynamic change of inter-regional virtual water transfers in China: Driving factors and economic benefits

Abstract

Whether rapid urbanization promote inter-regional virtual water transfers, and whether economic benefits produced by virtual water trade differ across regions, which have become the two significant issues concerned by relevant stakeholders. To this end, on the basis of investigating dynamic change of inter-regional virtual water transfers in Chinese 30 provinces from 2002 to 2015, this paper constructed the Logarithmic Mean Divisia Index models to analyze the factors driving such change, particularly the impacts from the urbanization, and evaluated quantitatively regional economic benefits resulted from virtual water transfers, so as to develop relevant policies that potentially facilitate optimal allocation of water resources. Results indicated that compared to that from 2002 to 2007, the total volume of inter-regional virtual water transfers in China were smaller during 2010 and 2015. The rapid development of urbanization within China continued to improve the increase in the trend of virtual water flowing out of water-scarce regions. Moreover, regarding provincial economic benefits resulted from inter-regional virtual water trade, the ratio of income to loss for most provinces in the eastern region was greater than one, while the ratio was less than one for the rest of China. Furthermore, this paper articulated more targeted water resources management measures from the perspective of the economically benefited regions and the economically damaged regions. • Rapid urbanization facilitated inter-regional virtual water transfers. • Water shortages in northern China had become more severe owing to rapid urbanization. • The ratio of income to loss for eastern regions was greater than one.