Revealing Virtual Water Transfers and Imbalanced Economic Benefits Hidden in China’s Interprovincial Trade

Abstract

Interprovincial trade has expanded China’s virtual water consumption and economic development. This study uses an environmental–economic inequality index to calculate the virtual water and economic benefit transfer imbalances in interprovincial trade and applies a structural path analysis (SPA) model to find the imbalances on the key virtual water supply chain paths between provinces. The findings are fourfold. (1) The developed provinces, such as Guangdong, Jiangsu, and Shandong, had more virtual water on the consumption side from 2002 to 2017 and had the most value added on the consumption and production sides. (2) The developing provinces in northwest and central China suffered from net virtual water outflows and negative value-added gains in bilateral trade with developed provinces. (3) The developed provinces, such as Beijing, acquired more virtual water from other provinces in 0–5 production tiers, but only a small part of the value added was transferred out. (4) All of the four top ranking virtual water supply chain paths of Beijing came from other provinces, accounting for 28.22% of the total virtual water flowing to Beijing, but their value added only accounted for 1.44%. It is suggested that provinces adopt differentiated water-use systems to reduce virtual water transfer imbalances and provide subsidies to the nodes to compensate the economic benefits on key virtual water supply chain paths.