Introduction

On July 2 2016 the National People's Congress Standing Committee passed Presidential Order 48 to amend six laws, including the Water Law. The amendment to the Water Law (the 2016 Water Law) illustrates the government's attempt to limit water use in light of the present shortage and the important role that water plays in maintaining a sustainable economy. The Water Law was substantially amended in 2002, when the basic framework of its regulatory system was established. However, after 14 years, China is still struggling to deal with water shortages.

The amendment relates only to water projects under Article 19 of the law and strengthens the enforcement of comprehensive water basin plans. However, it is likely that the amendment is just the beginning of an initiative to improve China's water regulatory system.

Legislative history

After 1949, China had no legal concept of water rights. Like many other resources, water resources were owned and allocated by the state at various levels of the centrally planned economy. However, this changed (albeit slowly) once China's economic reform commenced and it became aware of the value of market mechanisms.

The Water Law was enacted in January 1988 and was officially implemented on July 1 1988 (the 1988 Water Law). The law was intended to combine the development, utilisation and protection of water resources to ensure a comprehensive framework and achieve maximum benefits from water use. The 1988 Water Law also prescribed a long-term water use management plan and, for the first time, set out a water-drawing permit system for the direct use of water resources.(1)

However, the 1988 Water Law was unsatisfactory. The law's legislative intent and the mechanism for regulating water resources were problematic and failed to curb the further deterioration of water resources. Specifically, the 1988 Water Law focused on the development and utilisation of water resources, rather than their protection. It also lacked many important regulatory systems for the administration of water resources – for example, it did not include:

  • a water conservation system;
  • a water use planning system; or
  • a water resources allocation and protection system.

As such, the National People's Congress Standing Committee passed a significant amendment to the 1988 Water Law in 2002 (the 2002 Water Law). The 2002 Water Law:

  • amended 40 articles and 61 sub-sections;
  • removed 16 articles and 23 sub-sections; and
  • left unchanged only two articles and two sub-sections.(2)

Essentially, the 2002 Water Law formally established China's fundamental water resources regulatory system and introduced the following basic principles:

  • All water resources became state owned.(3)
  • A licensing and compensation system was introduced for water drawing and a compensation system was introduced for water use. Any person who intends to take water directly from a river or lake or from underground must apply for a water-drawing permit and pay a water resources fee, with the following exceptions:
    • collective economic organisations and their members can freely use the water of ponds and reservoirs which belong to such economic organisations;
    • a small amount of water can be freely taken for domestic use or drinking water for poultry and livestock reared outdoors or in pens.(4)
  • All parties became obliged to conserve water.(5)
  • A mixed system was implemented, which combined the water basin management and administrative regions division systems.(6)
  • The right to use water became subject to public interests and other parties' legitimate interests.

Compared with the 1988 Water Law, the 2002 Water Law had two major achievements. First, it introduced the concept of a water-drawing right and established a compensation system for water use.(7) This was the first time the commodity value of water resources was recognised by law, which lay the foundations for the further development of the water rights transaction system. Second, the 2002 Water Law recognised the water basin as a unit of water resource management. This required government authorities to enact comprehensive water basin plans, ensuring sustainable utilisation and better protection of water resources based on a more comprehensive and complete understanding of the natural processes and characteristics of rivers and lakes. As China continues to face serious challenges regarding water resource constraints, the status of comprehensive water basin plans is increasingly crucial, as reflected in the 2016 Water Law.

Amended Article 19

Article 19 of the 2002 Water Law provided that:

"Water projects shall be built in conformity with the comprehensive water basin plans. For construction of any water projects on the key rivers and lakes defined as such by the State or on the rivers or lakes that run or straddle across provinces, autonomous regions or municipalities under the Central Government, the relevant water basin authority shall, before the feasibility study report on the water projects is submitted for approval, examine whether the water projects conform to the comprehensive water basin plan, write down their comments and sign off for such projects. For construction of water projects on other rivers and lakes, the administrative departments for water resources of the local people's governments at or above the county level shall, within the limits of their administrative powers, before the feasibility study reports of the water projects are submitted for approval, examine whether the water projects conform to the comprehensive water basin plans and sign with their comments." (Emphasis added.)

Article 19 of the 2002 Water Law stipulated that a water project must be constructed in accordance with the comprehensive water basin plans, and that the relevant water basin authority would review and provide feedback on the project regarding whether construction on the river or lake conformed to the plan.(8)

Under Article 79 of the 2002 Water Law, the term 'water projects' is broadly defined as "various kinds of works on rivers, lakes and underground water sources for development, utilization, control, allocation and distribution, and protection of water resources".(9)

By definition, the term 'water basin comprehensive plan' in Article 14 of the 2002 Water Law refers to:

"those general outlines enacted, in light of the need of economic and social development and the present conditions of water resource development and utilization, for the development, utilization, conservation and protection of water resources and for prevention and control of water disasters."(10)

To enact a comprehensive plan, comprehensive scientific surveys, investigations and assessments of water resources must be conducted.(11)

In 2013, under the State Council's unified deployment, the Ministry of Water Resources – together with the National Development and Reform Commission, the Ministry of Land Resources and seven other ministries – completed the development of comprehensive water basin plans for the following rivers and lakes:

  • Changjiang River;
  • Liaohe River;
  • Yellow River;
  • Huaihe River;
  • Haihe River;
  • Pearl River;
  • Songhua River; and
  • Taihu Lake.

Each plan stipulates the applicable basin's criteria for overall water consumption control and water use efficiency control.

Article 19 of the 2002 Water Law explicitly required the construction of water projects to be reviewed by the relevant water basin regulatory authorities, which would decide whether the project complied with the applicable water basin comprehensive plan. Presumably, water projects could not proceed without sign-off from the relevant water basin regulatory authority, although this was unclear. However, this article proved to be poorly enforced as it only set the requirement and failed to indicate explicitly the consequences for violation. The 2016 Water Law is intended to fix this loophole by amending Article 19 to read as follows:

"Water projects shall be constructed in conformity with the comprehensive water basin plans. For construction of any water projects on the key rivers and lakes defined as such by the State or on the rivers or lakes that run or straddle across provinces, autonomous regions or municipalities directly under the Central Government, a construction entity may not start construction without a written consent and sign-off from the relevant river basin authority to show that the water project meets the requirements of the comprehensive river basin plan. For construction of water projects on other rivers and lakes, the construction entity may not start construction without a written consent signed by the administrative departments for water resources of the local people's governments at or above the county level within the limits of their administrative powers to show that the waterworks meet the requirements of the comprehensive river basin plan."(12) (Emphasis added.)

Comment

The 2016 Water Law sends an important message: the government is serious about conserving water resources in water projects. Despite this, China has not yet reached the point where water resource conservation requirements apply to all major industrial projects. If China wants to make its economy more sustainable and cope with the increasing water shortage, it will need more stringent laws and regulations regarding water resource conservation rules.

From 1980 to 2001, China's water consumption increased from 443.7 billion cubic metres(13) to 556.7 billion cubic metres.(14) In 2014 its total water consumption was 609.5 billion cubic metres, of which:

  • 22.2% was for industry use;
  • 12.6% was for household use;
  • 1.7% was for environmental flow (artificial supply of city environment water and river, lake and wetland moisturising only); and
  • 63.5% was for agricultural use.(15)

These figures represent only a general statistic. In different localities and regions, the percentage for agricultural use could be even higher (eg, in northwest China the water used for agricultural purposes could be more than 70%, most of which is used for irrigation). China must develop and adopt better irrigation technology and learn from foreign countries (eg, Israel) to improve the efficiency of water utilisation and reduce water consumption in its agriculture sector.

Water use efficiency and conservation is also unsatisfactory in other sectors. Fresh water used for mining, processing and consuming coal accounts for the largest share of industrial water use in China – approximately 120 billion cubic meters a year or one-fifth of all water consumed nationally. The slowing down of China's coal sector will presumably help to ease this tension. However, China is aiming to develop unconventional gas resources, such as shale gas, to replace coal, and the associated fracking process will require a significant amount of water. China's water shortage will undoubtedly limit its industry development ambitions. Unless it makes substantial progress in water resource conservation technology and improves how its regulatory system addresses water efficiency and waste prevention, China will eventually face a dangerous bottleneck of water resources.

For further information on this topic please contact Libin Zhang or Yanbin Zhao at Broad & Bright by telephone (+86 10 8513 1818) or email (libin_zhang@broadbright.com or yanbin_zhao@broadbright.com). The Broad & Bright website can be accessed at www.broadbright.com.

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