China’s uneven distribution of water sources presents unique difficulties to China as demand for water is increasing rapidly.

China’s water supply problems are well-known globally. However, the main problem facing China is how to distribute its water, rather than lack of water per se. 80% of China’s water supply lies in southern China. But this water cannot be used by the population of 12 Chinese provinces representing 41% of its total population, 38% of Chinese agriculture, 46% of its industry, and 50% of its power generation. Eight of these provinces are currently experiencing acute water scarcity, while in four provinces water is merely “scarce,” and two provinces are largely desert. Moreover, the problem is getting worse, with 28,000 rivers in China having dried up over the past 25 years. And China’s appetite for water continues to grow, with consumption forecast to rise to 670 billion cubic meters a year by the early 2020s.

Adding to the problem is the fact that coal mining is a water-intensive as well as polluting process, and 85% of coal reserves in China are located in provinces where water is scarce and must be shared with a large agriculture industry. Reportedly 20% of all water use in China is for mining, processing, or consumption of coal, and almost 70% is for agricultural purposes. Rapid growth in water demand, combined with a reliance on groundwater drawn from aquifers, has resulted in a new problem — subsidence. This poses a threat to over 50 cities in China and is being closely monitored by the government.

Under Xi Jinping’s administration, Beijing, Tianjin, and the surrounding province of Hebei have developed significantly. However, the 112 million people living there manage with less than the per capita annual water consumption of Saudi Arabia. In 2016, the mayor of Beijing announced that primarily due to scarcity of water, the population of the city could not rise above 23 million people. In 2016, the Gansu province faced severe problems and residents only had access to water for one hour a day, and then had to transport the water into their high-rise flats.

The government has been focused on water issues for some time. In 2005, the Minister of Water Resources reportedly said the challenge facing China is “to fight for every drop of water or die.” The former Premier, Wen Jiabao, added that “the very survival of the Chinese nation” is threatened by lack of water supply.

Potential resolutions

The South North Water Transfer Project (SNWTP) is a mega-scale engineering project designed to divert 44.8 billion cubic meters of water from the south to the north. The SNWTP has the potential to bridge the water gap between the south and the north. However, the SNWTP already services three dry provinces, and would not provide enough water to meet the needs of the 12 provinces currently experiencing water scarcity.

Other solutions are available, but these solutions pose significant challenges. For example, 8.3% of China’s water is too polluted to be used for agriculture or industrial purposes; addressing this pollution would free up much-needed water resources, but is a daunting problem in its own right.

Desalination would provide additional water, but is generally not considered a viable option due to its energy-intensity, and in China, generating the energy needed requires around half the amount of water that would be produced. Raising the price of water is another possibility, particularly in dry regions, but also has the potential to put enormous pressure on water-intensive industries. Moreover, this could result in such companies moving to less regulated regions if increased water prices are implemented only on a local level.

Current government initiatives

The government is currently relying on administrative orders and inspections to address water pollution. The new Ministry of Environment and Ecology (MEE) has now added water pollution to the issues formerly under the jurisdiction of the old Ministry of Environmental Protection (MEP). However, exactly how the MEE will address this problem remains unclear.

The government announced in 2015 that it would invest CNY800 billion (US$127 billion) into improving irrigation through water conservation projects, many of which were focused on improving irrigation. The government also reportedly plans to invest more than CNY6 trillion over the next few years improving China’s water infrastructure and decreasing water pollution.

China’s plans to address water pollution are included in the 13th Five Year Plan, which contains the government’s strategy to counter this problem, as does the 2013 Water allocation Plan for the Development of Coal Bases and the 2015 10-Point Water Plan. The 10-Point Water Plan focuses on promoting recycling and decreasing pollution levels to increase the supply of water. The 13th Five Year Plan sets out targets and stipulates which ministry would be responsible for implementing each part of the plan.

To further clarify authority and responsibility for water issues, the government is in the process of completing a “River Chief System” and a “Lake Chief System.” These systems will assign the protection of rivers and lakes to specific stewards who are responsible for environmental damage to the water they supervise.

How effectively the government will deal with this water crisis remains unclear. Latham will continue to monitor its progress.

This post was prepared with the assistance of Olivia Featherstone in the London office of Latham & Watkins.