Ecological Economics of Water in China: Towards a Sustainable Water Quality Management Regime

The main purpose of this paper is to analyze one important part of the emerging environmental problems in China. We focus on water pollution. The importance of water for any nation is obvious. In case of China it acquires particular salience because of its industrial needs as well as human needs. Particularly significant is the rapid deterioration of the water quality and development of water shortages. Unless effective policy interventions are made quickly, this can develop into a major ecological disaster. We present arguments for taking the water resources problem in China seriously. The facts are all too clear in this case. The continuing and rapid deterioration of water quality poses grave health and other types of environmental threats. If these threats are not addressed in a timely manner, the situation will deteriorate even faster. We consider the institutional and policy-making issues carefully. The complexities of the water resource administration system in China are challenging. Coordination among WMR, SEPA, MOC, MOA, SFA, MoC, MOH and many other branches of the government will tax even the most sophisticated administrative apparatus. Clearly some simplification and streamlining is called for. At the same time, decentralization that gives more resources at the local level to fund defensive measures can improve performance on the ground. In the age of globalization, at least a significant part of China's environmental problems stem from FDI-led production for export markets. Many enterprises have lax environmental management practices. This, of course, applies to many domestic SOEs as well. In all these cases, both market incentives such as effluent fees and better regulations with proper enforcement are needed. International cooperation and sharing of responsibilities are also necessary.