how does china matter? water, other things and its impact on the rest of the world
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How does China matter?
Water, Other things and its Impact on the Rest of the World
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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”
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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)
11%
21%
68%
Domestic
Industrial
Agriculture
2001
19781% 14%
85%
DomesticIndustrialAgriculture
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Projected Water use, 2020
2020
17%
30%
53%
Domestic
Industrial
Agriculture
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Hai River Basin Surface Water Flows – 1980 to 2003
0
10
20
30
40
50
60
70
80
90
100
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
Billions meter3
Between 1985 and 1995, the Yellow River had between 30 to 180 days of flow interruptions in the lower reaches of the basin
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Increase of Groundwater Irrigation in China
1 5
30
55 5868
0
10
20
30
40
50
60
70
1950 1960 1970 1980 1995 2004
Percent of Irrigated Area, Irrigated by Groundwater in Northern China
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Increase of Tubewells in China
0 0.53
8
15.5
20
0
5
10
15
20
25
1950 1960 1970 1980 1995 2004
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
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Hebei: Falling Shallow GW Table
0
10
20
30
40
50
Bailuobao Station (Feixiang County)
Jiuzhou Station (Ren County)
Longhua Station (Baixiang County)
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Shanxi
HenanShaanxi
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)
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I. Characteristics of Aquifer• Types of aquifers:
– Most pumping from shallow 0
.01
.02
.03
.04
0 50 100 150x
kdensity depth95 kdensity depth04
.04 .03 .02 .01 0
Depth to Water in GW Using VillagesEstimated Density
~% of villages
1995 2004
Depth (m): 0 50 100 150
Average depth 2004: 28 m
Average depth 1995: 21 m
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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%
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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?
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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
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23
45
67
Vol
ume
of a
ppl
ied
wat
er in
log
form
, m3
/mu
-4 -3 -2 -1 0 1Average cost of water in log form, yuan/m3
bandwidth = .701
LOWESS Estimate,Bandwidth=0.701Response 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
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Farmers’ response at the intensive margin:
Reduction in water use per unit of land Average
water depth (m)
Average cost of water (yuan/m3)
(Mostly cost of energy, plus service fee in some areas)
Average volume of
water applied to wheat (m3/mu)
4.4 0.096 513
6.7 0.084 306
24.6 0.201 257
77.5 0.414 150 Why so much water savings? Changes on the “extensive margin” [i.e., high water users, abandon farming”.
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Farmer’s response at the extensive margin:
Changing cropping pattern
12.8% 15.0%
22.4%
40.6%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1-25% 26-50% 51-75% 76-100%
4.7m 8.8m 40m 79mPercentile of water depthAverage depth of water
Share of high value crop intotal sown area (cash crop,vegetables, fruits)
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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?
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Nominal Protection Rates (NPR) for cereal and soybean
(Pd-Pw)/Pw x 100
-20
0
20
40
60
80
100
78-79 80-84 85-89 90-94 95-97 98-99 00-01 02-03 2004
Rice Wheat Maize Soybean
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Agri. Trade Balance by Factor Intensity (mil US$)
-10
-5
0
5
10
15
1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
Net ExportsUS Dollars, Billions
Labor intensive (competitive): Fruits; vegetables; livestock and aquaculture commodities
Land intensive (uncompetitive): Grains; Oilseeds; Fiber; Hides; Sugar; Milk Powder; etc.
exports
imports
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Rise of Supermarkets: Increasing Store Units
0
10000
20000
30000
40000
50000
60000
1990 1992 1994 1996 1998 2000 2002
20 to 30 percent annual growth between 1998 and 2002
Number of Stores
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Increasing Sown Areas of Vegetablesin China and California (1000 ha)
70008000900010000110001200013000140001500016000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
0
200
400
600
800
1000CaliforniaChina
Every 2 years, + 1 California
Producer response:
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Trends of Cultivated Areas of Fruits and Nuts in China and California (1000 ha)
2000
4000
6000
8000
1991 1992 1993 1994 1995 1996 1997 1998 1999 20000
2000
4000
6000
8000
CaliforniaChina
Campaign to upgrade quality
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xx
x
x
x
xx
x
x
x
xx
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
36o
4060
80
100140
x
x
x
x
x
x
x
x
xx
x x
x
xx x
xx
x
xx
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 Nt = 50)
Also need to get populations of ALL towns in each strata – for weighting
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Where are they being grown?Inside Ring / Outside Ring
020406080
40 km ring 140 km ring
010203040
40 km ring 140 km ring
Share of Cultivate Area
Area / Village (acres)
“Mostly here”
140
40
These figures for vegetables in 2000 / same for F&N’s
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Who are growing them?Rich or Poor?
050
100150
Rich Poor
0204060
Rich 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”
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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 ....
A framework for regional model and policy interventions analysis
Based on 80,000 household, disaggregated hh dataset
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Impacts of China’s Trade Liberalization:Chang in agricultural production between 2005 and
2010 (compared with baseline, %)
-15
-10
-5
0
5
10
15
Uncompetitive commodities
Competitive commodities
% of production
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Self-sufficient levels (%) of food, feed and fiber
0
10
20
30
40
50
60
70
80
90
100
110
2001 2020Uncompetitive: Feed grains, oilseeds, fiber
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Self-sufficient levels (%) of food, feed and fiber
“Will China Starve the World?”
0
10
20
30
40
50
60
70
80
90
100
110
2001 2020
Food grains
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Self-sufficient levels (%) of food, feed and fiber
0
10
20
30
40
50
60
70
80
90
100
110
2001 2020 Competitive: Fruits / vegetables and processed foods
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Impacts of WTO on agri. output for average farm by province in China, 2005 (%)
lose
gain
losers
winnersAlthough on average agricultural sector is a winner, there are regional impacts
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WTO对各地区化肥施用量的影响 ,%,2005年Impacts on fertilizer use in 2005, %
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WTO对各地区农药施用量的影响 , % ,2005年Impacts on pesticide use in 2005, %
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Baseline: Net export in 2001 and 2020 (billion USD)
-100
-50
0
50
100
150
2001 2020
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Baseline: Percentage of China’s net export in world total export in 2001 and
2020
Energy
Mineral
Textile+apparel
Manufacture
Service
-20
-10
0
10
20
30
Energy
Mineral
Textile+apparel
Manufacture
Service
2001 2020
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Impacts of high GDP growth scenario: Welfare change (%) in different regions in
2020
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
HK
+Taiwan
Japan+S.K
oreaIndia
Other A
sianA
usNzl
NA
FTA
S. A
merica
Enlarged E
UR
ussia
RO
W
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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 …