1. How does China matter? Water, Other things and its Impact on the Rest of the World

2. Northern China’s Water Shortage Falling Supply –Rapidly falling groundwater levels –Historically low surface supplies Rising Demand –Urban and Industrial –Agricultural “Saving Water, Saves Lives”

3. Changing Trends in Water use Nationally: more and more water being allocated to urban and industrial uses National policy: Water use priorities Urban residential Industry Rural residential Irrigation (is last) 2001 1978

4. Projected Water use, 2020 2020

5. Hai River Basin Surface Water Flows – 1980 to 2003 Billions meter 3 Between 1985 and 1995, the Yellow River had between 30 to 180 days of flow interruptions in the lower reaches of the basin

6. Increase of Groundwater Irrigation in China Percent of Irrigated Area, Irrigated by Groundwater in Northern China

7. Increase of Tubewells in China Millions A B C A = number of wells reported in MWR statistical yearbook B = number of tubewells in India C = number of tubewells in the Rest of the World, including India

8. Hebei: Falling Shallow GW Table

9. Shanxi Henan Shaanxi Hebei Inner Mongolia Liaoning Data set 1 – collected by CCAP and University of California, Davis 2004 North China Water Resource Survey (NCWRS): 400 communities; 50 counties, 6 provinces National Representative (of North China)

10. I. Characteristics of Aquifer Types of aquifers: –Most pumping from shallow.04.03.02.01 0 Depth to Water in GW Using Villages Estimated Density ~% of villages 19952004 Depth (m): 0 50 100 150 Average depth 2004: 28 m Average depth 1995: 21 m

11. Groundwater Levels are Falling, but varies across Northern China Change in Average Water Level 1995-2004 Increased: 16% No Change: 18% Decreased < ¼ m/year 17% Decreasing ¼ to 1/5 m/year: 40% Decreasing > 1.5 m/year: 8% 52%

12. There are problems but not everywhere … of course, in some places, the problems are serious … Where there is a problem, is there a response by the government?

13. Water Law and Policies of MWR Wells drilled by permit only Regulation on pump spacing In areas that are “seriously over- extracted,” control volume of pumping Water extraction fee can be assessed Control price of water charged by farmers that sell water Moving towards pricing policies Less than 5% of villages Less than 7% of villages 2 out of 400 villages Zero Less than 10% actually try to control price Not very fast

14. Response by farmers? Elasticity of response is low: 0.3 to 0.4 … this means to get a large response, need to double the price of water … 75% of farmers would lose money at current prices

15. Farmers ’ response at the intensive margin: Reduction in water use per unit of land Average water depth (m) Average cost of water (yuan/m 3 ) (Mostly cost of energy, plus service fee in some areas) Average volume of water applied to wheat (m 3 /mu) 4.40.096 513 6.70.084 306 24.60.201 257 77.50.414 150 Why so much water savings? Changes on the “extensive margin” [i.e., high water users, abandon farming”.

16. Farmer ’ s response at the extensive margin: Changing cropping pattern

17. Summary In many places there is a water problem … It is very difficult to regulate … Price policy will work (tax electricity / diesel) … but there will be equity issues AND food security … What happens to China’s food economy … in a rapidly growing / free trade world?

18. Nominal Protection Rates ( NPR ) for cereal and soybean (P d -P w )/P w x 100

19. Agri. Trade Balance by Factor Intensity (mil US$) Net Exports US Dollars, Billions Labor intensive (competitive): Fruits; vegetables; livestock and aquaculture commodities Land intensive (uncompetitive): Grains; Oilseeds; Fiber; Hides; Sugar; Milk Powder; etc. exports imports

20. Rise of Supermarkets: Increasing Store Units 20 to 30 percent annual growth between 1998 and 2002 Number of Stores

21. Increasing Sown Areas of Vegetables in China and California (1000 ha) California China Every 2 years, + 1 California Producer response:

22. Trends of Cultivated Areas of Fruits and Nuts in China and California (1000 ha) CaliforniaChina Campaign to upgrade quality

23. x x x x x x x x x x x x x x x x x x x x x x x x x x x x x 36 o 40 60 80 100 140 x x x x x x x x x x x x x x x x x x x x x Selection of sample towns 10 times (once for each of 10 wedges making up the circle) Total Town Sample Size: 5 circles x 10 towns per circle = 50 towns (or N t = 50) Also need to get populations of ALL towns in each strata – for weighting

24. Where are they being grown? Inside Ring / Outside Ring Share of Cultivate Area Area / Village (acres) “Mostly here” 140 40 These figures for vegetables in 2000 / same for F&N’s

25. Who are growing them? Rich or Poor? Share of Cultivate Area Area / Village (acres) These figures for vegetables in 2000/ same for F&N’s Per capita income: “Rich” -- $7.28/day Poor -- $1.25/day Fruits / Nuts / Vegetables are being increasing grown by poor farmers in relatively remote communities! “They do”

26. Domestic policy interventions Trade liberalization: GTAP CAPSiM Aggregate impacts: by commodity at national level Price transmission models Impacts by region: Production Consumption Income …. Impacts on poor/richer: Production Consumption Income.... Based on 80,000 household, disaggregated hh dataset

27. Impacts of China’s Trade Liberalization: Chang in agricultural production between 2005 and 2010 (compared with baseline, %) Uncompetitive commodities Competitive commodities % of production

28. Self-sufficient levels (%) of food, feed and fiber Uncompetitive: Feed grains, oilseeds, fiber

29. Self-sufficient levels (%) of food, feed and fiber “Will China Starve the World?” Food grains

30. Self-sufficient levels (%) of food, feed and fiber Competitive: Fruits / vegetables and processed foods

31. Impacts of WTO on agri. output for average farm by province in China, 2005 ( %) lose gain losers winners Although on average agricultural sector is a winner, there are regional impacts

32. WTO 对各地区化肥施用量的影响,%, 2005 年 Impacts on fertilizer use in 2005, %

33. WTO 对各地区农药施用量的影响, ％, 2005 年 Impacts on pesticide use in 2005, ％

34. Baseline: Net export in 2001 and 2020 (billion USD)

35. Baseline: Percentage of China’s net export in world total export in 2001 and 2020

36. Impacts of high GDP growth scenario: Welfare change (%) in different regions in 2020

37. Final Word In worrying about number 1, 2 and 3 countries … China matters … –In the case of China, itself … –and in the case of its impact on the rest of the world …