Water Transfer and Water Savings through Interprovincial Trade within China: from the Perspective of Value Chains 仿真方法 Xi Liu, College of Management and Economics, Tianjin University, Tianjin 300072, China Huibin Du* , College of Management and Economics, Tianjin University, Tianjin 300072, China Zengkai Zhang, College of Management and Economics, Tianjin University, Tianjin 300072, China John Crittenden*, Brook Byers Institute for Sustainable Systems, School of Civil and Environmental Engineering, Georgia Institute of Technology, Atlanta, GA, USA Juan Moreno-Cruz, School of Economics, Georgia Institute of Technology, Atlanta, GA, USA Guozhu Mao*, School of Environmental Science and Engineering, Tianjin University, Tianjin 300072, China

The 40th Annual IAEE International Conference Outline Introduction Materials and Methods Results Discussion The 40th Annual IAEE International Conference

The 40th Annual IAEE International Conference Introduction 1.1 Background Water resource situation in China Renewable internal freshwater resources per capita, ranking 105 in the world in 2014 (World Bank, 2014). Water demand, 22% of total water resource endowment in 2013 (China Statistical Yearbook, 2014). Water resources uneven distribution, south China more than 60% of that in north in 2015 (China Water Resources Bulletin, 2015) Challenges China faced Water demand increasing, 16% in the last 10 years. Global climate change, exacerbate the scarcity problem as the variability of water supply may change (Kenneth and Major, 2002). Measures for water usage sustainability technology efficiency improvement. engineering measures like “the South to North Water Diversion” project. virtual water trade (Zhang et al., 2011). exacerbate英[ɪgˈzæsəbeɪt] scarcity英[ˈskeəsəti] The 40th Annual IAEE International Conference

Introduction 1.2 Previous studies Virtual water trade research (proposed by Allan, 1993) Water resources re-allocation: virtual water trade balance or direction at global, national, regional levels (Dalin et al., 2012; Kumar MD & Singh OP, 2005; Zhao et al., 2012), sources and destinations. Production fragmentation: intermediate goods trade, two thirds internationally. Without considering the production fragmentation: focus on two countries, neglecting the role of third country in water-related policy; overestimate the responsibility for water resources usage. trade in final goods trade in intermediate goods for the final stage of production value chain related trade export Commodity A Commodity B Commodity C Commodity C Commodity D export Commodity E commodity英[kəˈmɒdəti] Dalin et al., 2012: 粮食研究中缓解了发达地区的水压力 California and Illinois in USA：加利福尼亚州和伊利诺伊州 Country 1 Country 2 Country 3

The 40th Annual IAEE International Conference Introduction 1.3 Our study The motivation interregional trade in China, influenced by production fragmentation, value chain related trade being important (Meng et al., 2012) production fragmentation Multi-regional input-output (MRIO) analysis The aim provincial water uses virtual water transfer water savings With the processing trade being pervasive, it is estimated up to 48.1% of China’s total exports for example, showing that trade in intermediate inputs is also obvious besides normal final goods trade The analysis water uses by trade pattern trade direction, major flows by trade pattern national and provincial water savings The 40th Annual IAEE International Conference

The 40th Annual IAEE International Conference Material and Methods 2.1 The MRIO model the basic equation of MRIO model intermediate inputs final uses the exports from s to r, Tsr decompose英[ˌdi:kəmˈpəʊz] ①trade in final goods ②intermediate goods for the final stage of production ③ value chain related trade gross output generated from province s ①local activities ② foreign countries export ③ other provinces The 40th Annual IAEE International Conference

The 40th Annual IAEE International Conference Material and Methods gross water use of province s virtual water transfer (1) virtual water embodied in exports from province s to r: (2) balance of embodied virtual water use from province s to r: The difference between…. Greater than zero BVW> 0, the production fragmentation contributes to an increase in the water use of province s. BVW< 0, the production fragmentation promotes a decrease in the water use of province s The 40th Annual IAEE International Conference

Material and Methods national water saving effects (1) balance of avoided water use (BAW) BAW sr = VW sr − WAI sr + VW rs − WAI rs = F s L ss − F r L rr T_ f sr + F s L ss − F r L rr T_ i sr + F s L ss − F r L rr T_ v sr + F r L rr − F s L ss T_ f rs + F r L rr − F s L ss T_ i sr + F r L rr − F s L ss T_ v sr exports from s to r imports of s from r (2) national water saving effects of province s the effects of national water savings associated with the participation of region in the value chain (3) gross balance of avoided water use, total national water savings BAW> 0, the inter-provincial trade contributes to an increase in the national water use. BAW< 0, the inter-provincial trade promotes a decrease in the national water use.

The 40th Annual IAEE International Conference Material and Methods 2.2 Data sources Source materials: The 2010 multi-regional input-output (MRIO) table, 26 provinces, 4 city-regions Water use data: China Statistical Yearbook, 2011; China Urban-Rural Construction Statistical Yearbook 2010. Sectoral water use data: secondary industry sectors, sectoral ratios in Chinese Economic Census Yearbook 2008; service sectors, the intermediate input from water production and supply sector to different service sectors. Scope: Blue water, excluding green water and gray water for data unavailability statistical英[stə'tɪstɪkl] ratio英[ˈreɪʃiəʊ] The 40th Annual IAEE International Conference

The 40th Annual IAEE International Conference Results 3.1 Province’s water uses and its decomposition Figure 2 The fraction of water and GDP of different industries in top 10 water consumers Figure 1. The total water uses and its decomposition by five use patterns of 30 provinces Large water consumers: Developed regions: Jiangsu (55.4), Guangdong (47.3 billion m3) Less developed and large agriculture provinces: Xinjiang (53.5), Hunan (32.6) and Heilongjiang (32.6 billion m3) Different water uses per GDP generation: Average level: 9.32 m3/102 $ Developed regions: more efficient, 9.06/6.96 Large agricultural provinces: less efficient, 66.67/13.77/21.26. 1~10 represents Jiangsu, Xinjiang, Guangdong, Heilongjiang, Hunan, Guangxi, Anhui, Hubei, Jiangxi, Sichuan cubic英[ˈkju:bɪk] tertiary英[ˈtɜ:ʃəri] The 40th Annual IAEE International Conference

Results 3.1 Province’s water uses and its decomposition Water use decomposition: National: export, 9%; interprovincial, 34%.. Domestic water uses: the dominate type, >50% in 22 provinces. Export to foreign countries: Zhejiang, 23%; Guangdong, 21%; Shanghai, 21%; Jiangsu, 21%. Other provinces’ water uses: Hebei, 55 %; Jilin, 54%; Anhui, 49% etc. Final goods trade: Ningxia, 28%; Hebei, 23%; Anhui, 22%. Intermediate goods trade: Jilin, Hebei etc. >30%. The water use structure is related to their position in production network. Figure 1. The total water uses and its decomposition by five use patterns of 30 provinces Qinhai, 84% Gansu, 76% National local economics: 57%.

The 40th Annual IAEE International Conference Results 3.2 The province’s virtual water trade and water scarcity Net virtual transfer: Net virtual water exporters: northwest, southwest and central regions like Xinjiang, Heilongjiang, Anhui etc. Net virtual water importers: developed regions like Shanghai, Guangdong etc. . Virtual water balance V.S. water scarcity: “stressed water supply (water resources and net) water exporter” like Xinjiang, Heilongjiang, Anhui, Inner Mongolia, Ningxia, Jiangsu, Gansu, Hebei. Tianjin, Beijing, Shanghai, 3 times, 2 times, 1 times. Xinjiang, Heilongjiang and Ningxia would export about 40%, 37% and 36% of their total water consum World Water Assessment Programme), 2012. The United Nations World Water Development Report 4: Managing Water Under Uncertainty and Risk. UNESCO, Paris ption to support other region’s development. Water stress index: no stress, <0.2; water stress, >0.2 (Zhao et al., 2015) Figure 3. The four types of provinces based on net water transfer and water stress condition The 40th Annual IAEE International Conference

The 40th Annual IAEE International Conference Results 3.3 Effects of different trade patterns on province’s virtual water trade 34.5% From Xinjiang, Heilongjiang etc., agriculture products contributes most 67.3% Net virtual transfer via different trade patterns: Final goods trade: Tianjin, Shanghai, Hunan, Anhui, Heilongjiang and Xinjiang. Intermediate products for the final stage of production: Beijing and Shandong. Value chain related trade: Zhejiang, Guangdong, Hubei and Guangxi. The major trade pattern in net water transfer differs due to the water use efficiency, trade structure and also its position in the value chain. 61.2% From Guangxi, Jiangxi, Hunan etc. 1.8 and 2.4 times of Shanghai Primary industry: 36.9% Beijing focuses on the final goods trade in both inflows and outflows, while resulting in its net water inflow via intermediate goods trade finally, which takes a share of 34.5%, a bit higher than the final goods trade (30.2%) and domestic value chain related trade (33.6%). Figure 4 The decomposition of water uses embodied in the trade of six largest net water inflow and outflow regions (unit: billion m3) The 40th Annual IAEE International Conference

The 40th Annual IAEE International Conference Results 3.4 Major virtual water flows under different trade patterns (a) final goods trade (b) intermediate goods trade for the final stage of production (c) the value chain related trade Figure 5 The 20 largest net water flows under different trade patterns Spatial distribution of virtual water flows: Final goods trade: northwest, central regions to east coast, Xinjiang and Shanghai. Immediate goods trade for the final stage of production: Shandong. Value chain related trade: Guangdong, Zhejiang, Shandong, 61%, 59%, 47% for exports. Flow direction: northwest, northeast, central regions to north coast and east coast; southwest, central regions to south coast. The 40th Annual IAEE International Conference

The 40th Annual IAEE International Conference Results 3.5 Regional virtual water trade under different trade patterns (a) final goods trade (b) intermediate goods trade for the final stage of production (c) the value chain related trade Figure 6 The eight regions’ bilateral water trade under three trade patterns Coast regions: east coast, final goods import (51%); south coast and north coast, value chain related trade (44%, 60%). Central regions: Yangtze River (central), final goods trade (44%), Yellow River (central) import virtual water. Northeast, southwest and northwest regions: value chain related trade (38%, 60%); final goods trade (43%). Reasons for the transfer direction: uneven development and economic structure; policies. The 40th Annual IAEE International Conference

The 40th Annual IAEE International Conference Results 3.6 Water savings National water savings, more water used by 13.9 billion m3: Final goods trade: 39.0% of total interregional trade, BAE (-0.8 billion m3), Guangdong (-1.1 billion m3) and Shandong (-2.1 billion m3) Intermediate goods trade for the final stage of production: 28.7% of the total interregional trade, BAE (5.0 billion m3) Value chain related trade: 32.3% of the total interregional trade, BAE (9.6 billion m3), contributes the most. Positive BAE, BEE: Inner Mongolia, Heilongjiang, Anhui, Jiangxi, Hainan, Ningxia and Xinjiang. Large agricultural provinces with lower water use efficiencies Positive BEE, negative BAE: Hebei (to shanghai, jiangsu), Jiangsu, Hubei, Hunan, Guangxi, Sichuan, Guizhou, Yunnan and Gansu Negative BEE, positive BAE: Beijing, Tianjin, Shanxi, Liaoning, Shanghai, Zhejiang, Shandong, Chongqing and Shaanxi Negative BAE, BEE: Jilin, Fujian, Henan, Guangdong and Qinghai Heilongjiang: 价值链，95%水利用在这3个部门 The 40th Annual IAEE International Conference

The 40th Annual IAEE International Conference Results (0.5, 7.0) (2.0, 12.0) (5.9, 21.6) 3.6 Water savings Positive BAE, BEE: Inner Mongolia, Heilongjiang, Anhui, Jiangxi, Hainan, Ningxia and Xinjiang. Large agricultural provinces with lower water use efficiencies Positive BEE, negative BAE: Hebei (to shanghai, jiangsu), Jiangsu, Hubei, Hunan, Guangxi, Sichuan, Guizhou, Yunnan and Gansu Negative BEE, positive BAE: Beijing, Tianjin, Shanxi, Liaoning, Shanghai, Zhejiang, Shandong, Chongqing and Shaanxi Negative BAE, BEE: Jilin, Fujian, Henan, Guangdong and Qinghai Heilongjiang: 价值链，95%水利用在这3个部门 Anhui: 94% Xinjiang: 98% quadrant英[ˈkwɒdrənt] Figure 7 The distribution of total BAW and BVW of 30 provinces in China (billion m3) Large national and provincial water saving potential lies in: Xinjiang: Shanghai, Tianjin, Jiangsu and Henan in the final goods export; agriculture sector. Heilongjiang: Shandong, Jilin and Liaoning in the value chain related trade export; agriculture, electricity and heat generation and crude oil and nature gas extraction sector. Anhui: Shaanxi, Shanghai and Zhejiang in the final goods export; agriculture, electricity and heat generation, metals smelting and pressing, chemical industry and food, beverage and tobacco sector. The 40th Annual IAEE International Conference

The 40th Annual IAEE International Conference Discussion virtual water trade may aggravate the water stress situation in some virtual water exporters, such as Xinjiang (final goods trade), Inner Mongolia (value chain related trade): improving the direct water use efficiency, optimizing its production process to save water indirectly and adjusting its goods outflow strategy virtual water flows from west to east, where the environmental externalities of virtual water transfer should be paid attention to: water compensation scheme taking all the participants into consideration. national and provincial water savings: in Xinjiang, Heilongjiang, Anhui etc. in different trade patterns and sectors. And water use efficiency is of great importance to save total water uses, especially agriculture products, electricity and heat generation sector. [ekstɜ:'nælɪtɪz] [ˌkɒmpenˈseɪʃn] aggravate英[ˈægrəveɪt] + The 40th Annual IAEE International Conference

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