Water pricing reform for sustainable water resources management in China’s agricultural sector

Abstract

Strengthening water resource management and improving water-use efficiency are crucial for sustainable development, as described in the Target 6.4 of the Sustainable Development Goals. Compared with developed countries, developing countries are facing some general obstacles on agricultural water management from policy making, pricing mechanisms, infrastructure, and subsidy implementations, which has left developing countries with little progress in improving agricultural water management through water pricing. However, China is moving towards more sustainable water resource management in the agricultural sector by implementing a nationwide agricultural water pricing reform. The ongoing reform contributes to the improvement of water use efficiency and water-saving rate through the core pricing mechanisms of “reasonable pricing” and “precise subsidies and water saving incentives”. In the meanwhile, the measure of “infrastructure development and management” safeguards the reform implementation and water pricing combined with “quota control management” is the tool to improve the agricultural water management. The progress of the reform shows that China has achieved remarkable results in water conservation and increasing water use efficiency but has also revealed uneven progress across the country and challenges to financial sustainability. China's changes in agricultural water pricing shows that an integrated water pricing method based on farmers' affordability is a pragmatic option for developing countries, but the implementation urgently requires upgrading of irrigation infrastructure and management systems. The policies of precise subsidies and water-saving incentives provide a solution to price failure caused by excessive subsidies that are common in developing countries. The financial constraints of current reform highlight the importance of diversifying funding channels for financial sustainability. The lessons and implications of China could provide insights for developing countries on sustainable water management in the agricultural sector.