Effects of production fragmentation and inter-provincial trade on spatial blue water consumption and scarcity patterns in China

Abstract

Freshwater resources are used to produce commodities that are traded and consumed elsewhere, which generate virtual water flows. The relation between regional blue water scarcity levels―the degree of competition over limited surface and groundwater flows―and inter-regional virtual water flows has been studied. However, the effects of production fragmentation on this relation are still not properly understood. Production fragmentation is the distribution of the production process across different regions, resulting in inter-regional trade of both intermediate and finished goods and services, which involve different virtual water networks. This study formulates a comprehensive trade disaggregation approach to elaborate the virtual water networks of three trade patterns (i.e., direct final goods trade, intermediate goods trade for the last step of production, and value chain-related trade) within China, and further analyzes the impacts of trade on provincial blue water scarcity by comparing the actual water scarcity with that under a “no-trade” scenario (NTS). In 2012, there was 128 km3 blue water virtually transferred across provinces because of inter-provincial trade. Direct final goods trade contributed the most to the virtual water trade (accounting for 47% of the total), whereas value chain-related trade induced the least (17%). Compared with the results under the NTS, we found that current trade alleviated the water scarcity in provinces under extreme water scarcity, but worsened the water scarcity of this nation from a broader scope. Our study suggests policy makers fully considering specific trade patterns and their impacts on provincial or national water consumption to cope with water scarcity in China.