Kuznets type relationship between water use and economic growth in China

Abstract

Economic growth cannot completely explain water use patterns as many other factors also affect the amount of water use. Using province level panel data, this research explores the relationship between water use and economic growth in China by analyzing multiple factors. IPAT identity, which conventionally includes three factors, is expanded to elucidate five driving factors of water use: population, affluence, technology, urbanization, and industrial structure. A quadratic model, a cubic model, and a piecewise regression model are tested and analyzed. Full-sample and region-sample over the period from 2003 to 2014 are investigated. Results show that, first, all the five factors studied have positive effects on water use at both national and regional scales. Population is the most influential factor at the national scale as well as in the eastern region, and technology plays the most important role in the central and the western regions. Second, there is a clear inverted U-shape relationship between water consumption and economic growth, and the inflection point of water consumption occurs at 35,477 RMB per capita GDP as measured in 2000 constant price. In this regard, water use has not reached the inflection point at either national or any of the regional scales.It is concluded that water use in China will rise in the coming years and is expected to reach the inflection point in 2021.