The impact of water scarcity on Chinese inter-provincial virtual water trade

Abstract

Chinese water resources are limited and unevenly distributed across space, making the inter-provincial virtual water trade increasingly prosperous. Many studies have focused on the impact of virtual water trade on regional water scarcity, but little consideration has been paid to the impact of water scarcity on virtual water trade, particularly in China. To fill this gap, we addressed the Chinese inter-provincial virtual water trade in 2012, 2015 and 2017, and we combined a multi-regional input-output analysis with a gravity model supplemented by the instrumental variable method. Our results indicated water pressure values were higher in northern areas, and provinces with extreme water stress were distributed in the eastern coastal areas. Additionally, virtual water tends to be exported from water-poor regions to water-rich regions. The results of the gravity model show that the Chinese inter-provincial virtual water trade is significantly related to water scarcity. We found that virtual water flow is positively correlated with the water scarcity of exporting regions, such as Xinjiang, Heilongjiang, Anhui, and Jiangsu, and it is negatively correlated with the water scarcity of importing regions, such as Shandong, Guangdong and Zhejiang. Therefore, water scarcity affects the virtual water trade flow, and the trade in turn exacerbates the regional water shortage in the northern and eastern coast of China. In addition, the virtual water trade is affected by socio-economic factors and environmental factors. We suggest that related policies should be developed to terminate this malignant cycle. The virtual water trade should be guided towards becoming more adaptable to sustainable development rather than allowing for water-scarce areas to pursue economic development at the cost of scarce water resources.