Water wastage will soon leave China high and dry
The transcript of Premier Wen Jiabao's speech on Sunday to the National People's Congress reveals much about the central government's priorities - and some glaring oversights.
For example, Mr Wen mentioned the words 'health' and 'medical' a combined 48 times in various forms. He used the word 'education' 45 times.
'Technology' was trotted out 40 times, while 'science' and 'scientific' came up 35 times between them. 'Energy' came up 28 times.
'Water', however, only received 16 mentions.
Mr Wen's lack of emphasis on water is deeply troubling. China is desperately short of water, yet wastes the supplies it does have with wildly profligate abandon.
Unless Beijing reforms its water policy along more market-oriented lines soon, the country could soon find itself facing a crisis far more severe than any likely to be caused by lack of energy, healthcare or education.
The root of the problem is bad pricing. With fresh water resources estimated at just 2,200 cubic metres (or tonnes) per head, China is much shorter of water than most other countries in the world.
Elsewhere, when a commodity is in short supply, its price is pushed higher by demand until an equilibrium is reached that approximates more or less to economically efficient usage.
But not in China. Until 1985, water was provided free by the state. Charges have since been introduced, but prices are still heavily subsidised, and today China's farmers, factories and householders enjoy some of the cheapest water in the world.
The result is rampantly inefficient water use. In the country's arid north, where resources are estimated at just 750 cubic metres per head, leaky ditches channel precious water to irrigate unsuitable crops with enormous wastage. It takes 1,000 litres of water to produce a kilo of wheat, and 2,000 litres for a kilo of rice.
Dairy products are worse, with each litre of milk requiring an input of 4,000 litres of water.
Worst of all, however, is cotton, which needs well over 10,000 litres of water to produce just one kilo of material.
Agriculture swallows more than 60 per cent of China's water consumption, but the country's industrial cities are scarcely more efficient users.
According to figures compiled by Australian consultancy Urandaline Investments, Chinese paper factories use more than twice as much water to produce a tonne of paper than factories in the United States. Chinese steel mills use five times as much water to turn out a tonne of steel.
Overall, in China one tonne of water produces 24 yuan worth of output. In the US, it produces 10 times as much.
The wastage is unsustainable. At the moment, China is using about 40 billion cubic metres more water each year than is replaced though rainfall and river flows. The deficit is being fed by ancient ground-water, but the finite supplies are being used fast.
Water tables in the north are falling at rates of one metre a year or even faster. More than half of China's cities are already reporting shortages.
So far, Beijing's responses have consisted largely of grandiose projects of dubious worth, such as the planned 500 billion yuan system of canals intended to divert water from the wetter south to the dry north, state exhortations to save water, and bizarre attempts to precipitate rainfall by bombarding clouds with fireworks containing silver iodide.
None is likely to have much effect. The only way China can avert a water crisis is by allowing supply and demand dynamics to play a progressively greater role in setting water prices, and letting market discipline force users to become more efficient.
Beijing has already conceded the necessity of market pricing in the energy sector. It must now extend the principle to water. The change will be wrenching, but the costs of not making the adjustment will be far higher.