In a drought that's been plaguing China since July, 14 million people in the country's southwest are without adequate drinking water; 14 million acres of land are parched and hundreds of reservoirs have all but evaporated, according to Xinhua, the state news agency. The cause of China’s harshest drought in 60 years is a tragic lack of rainfall.

Four years ago, two million people in the south-central city of Wuxi found themselves without drinking water due to another cause. About 70% of their water supply had become unusable, stinking and polluted from a vast algae bloom at Lake Tai in the Yangtze Delta plain. Similarly, four million residents of the northeastern province of Harbin were without potable water for days in 2005 when a chemicals plant in neighboring Jilin province contaminated the water supply.

Whether the causes are natural or manmade, the lack of water poses an oft-downplayed threat to China’s breakneck economic growth. The country is home to nearly 20% of the world’s population, but only 6.5% of its global water resources. The country's annual per capita water availability of 2,156 cubic meters, according to the latest-available statistics from 2007, is one-fourth the world average, the World Bank reported, and hovers dangerously close to the annual per capita benchmark of 2,000 cubic meters that the Food and Agriculture Organization (FAO) uses to identify the parts of the world suffering from “water scarcity.” China’s groundwater, down 50 meters since the 1960s, is falling between three meters and five meters a year, the World Bank noted.

“Water scarcity and contamination are huge [challenges] in China," says Kevin Tu, senior associate at the Carnegie Endowment for International Peace in Washington, D.C. But, he adds, "their severity and potential consequence are only being gradually noticed by academia and regulators.” And perhaps worse, some attempts to address the situation are backfiring.

The country is paying a high price in its struggle to address the challenges. In the 2007 study, the World Bank estimated that water pollution is costing the country the equivalent of 1% of its GDP, and water scarcity 1.3%. For companies weighing how or whether to operate in the country, water is now among the chief risk factors that is assessed, especially for sectors in which it is a key component of a firm's supply chain.

“For investors, [water] carries a risk potentially as damaging as non-performing loans, real estate bubbles … and political corruption,” according to Brahman Chellaney, strategic studies professor at the Centre for Policy Research (CPR) in New Delhi, India, and author of Water: Asia’s Next Battlefield. “As water becomes increasingly scarce, coupled with pollution and environmental degradation, we will see [it] becoming a constriction for both industrial development as well as energy production.”

Exacerbating the problem is a geographic imbalance. "Like many places, it's really an issue of distribution — where the populations are and where the water is are sharply different," notes Frederick N. Scatena, professor and chair of the earth and environmental science department at the University of Pennsylvania.

North China is host to about two-thirds of the nation’s farmland but only about 20% of its water resources, according to Chellaney. In the northern Yellow River basin, annual per capita water availability is 757 cubic meters, far below the FAO water scarcity benchmark of 2,000 cubic meters. China’s answer: The US$62 billion South-to-North Water Diversion Project, which the State Council approved in 2002. Reminiscent of the 1,700-kilometer Grand Canal stretching from Hangzhou to Beijing, which began construction during the Sui Dynasty (589 AD to 618 AD), the project willdivert water from the Yangtze River to the Yellow, Huai and Hai rivers in the north when it is eventually completed.

"It's really quite amazing how they're pumping water north. It's going to be expensive, and take a long time to do," says Scatena. "They're planning water projects that will be much larger than anything [the] U.S. has when they're finally done. But there are local impacts to all that," including the need to uproot entire villages to make way for the megaproject.

Many water experts are skeptical that diverting supply alone will solve China’s water challenges. “Pumping water is a fool’s game,” notes Steven Solomon, author of Water: The Epic Struggle for Wealth, Power and Civilization. "Itbuys time [so you start to believe] you have more water, but the Yangtze River may not have as much excess water as China thinks. The country is taking a gamble that man can conquer nature.”

Muddy Waters

What's more, the effort doesn't address China's other vexing water problem: pollution. According to China’s State Environmental Protection Agency, 70% of the water in five of China’s seven major river systems is too contaminated for human use. Pollution cleanup could make available nearly 100 cubic kilometers a year of additional surface water, which is nearly one-fifth of Chinese freshwater withdrawal, says the World Bank.

And while both the massive Yellow River project and the Three Gorges hydroelectric dam — the world's largest — have grabbed international attention, other dam projects are now a cause for concern among many Chinese. In a number of articles about China's water management, Jonathan Watts of The Guardian newspaper in the U.K. has written of cases such as Shennongjia, in Hubei province, where "dozens" of hydropower diversions have been built without environmental impact assessments. According to Watts, more than half of the 88 hydropower plants in the area "were built before environmental assessments were made obligatory [by the central government] in 2003. Two out of every five built since then were illegally pushed ahead without the necessary checks on the likely impact on people and ecosystems."

Beyond governance, China's plethora of smaller dams also raises management issues, notes Penn's Scatena, who says the advantages and disadvantages of small dams versus large dams has long been debated in international water circles. On the one hand, smaller dams "have less environmental impact, you can control the watersheds more and they tend to be higher up in the landscape so you don't flood lowlands. The disadvantage is that you don't get the economies of scale of large dams and they're harder to regulate and manage."

Are the debates about China's numerous dams — as important as they are — detracting attention from the bigger issue of the country's seemingly insatiable thirst? For many experts, the answer is yes. "The government must adopt a new policy to reduce water consumption," Zheng Chunmiao, director of the Water Research Centre at Peking University, said in a recent interview with Watts of The Guardian. "The main thing is to reduce demand. We have relied too much on engineering projects, but the government realizes this is not a long-term solution."

The problem, however, is that“the people who run Chinese policy in Beijing are themselves engineers,” notes CPR's Chellaney. “They have a supply-side approach.”

Waste Not, Want Not

That could be changing. China’s State Environmental Protection Agency says the country can cut its water use significantly by addressing wastage. At US$3.60 per cubic meter, China’s water productivity, or the amount of water required to generate one unit of GDP, is below the US$4.80 per cubic meter average for middle-income countries and the US$35.80 [r1] per cubic meter average for high-income countries, according to a 2009 World Bank study. One reason for the big gap is sub-optimal farming in China, including the use of outdated irrigation methods.

"Wasteful irrigation infrastructure and poorly managed water use, as well as fast industrialization and urbanization, have led to [a] serious depletion of groundwater aquifers, loss of natural habitats and water pollution," says Chaoqing Yu, a professor at Tsinghua University's Center for Earth System Science and the Institute for Global Change Studies in Beijing. Earlier this year, Chaoqing wrote an opinion piece [r2] for about the country's now perilous water situation. In the article, she noted that over the past 60 years, China has constructed 86,000 reservoirs, drilled more than four million wells and developed 58 million hectares of irrigated land "on which 70% of the country's grain is grown."


High-tech solutions have also been called upon. In a government-run project launched in 2002, satellite sensing technology now measures the loss of water from the Hai River to the air through “evaporotranspiration” (ET) and not returned to the surface or groundwater. “The approach analyzes the actual consumptive use of water, or actual ET, and presents data on the maximum water amount available for various economic activities without harming the ecosystems of the river basin and the Bohai Sea," according to Liping Jiang, a Beijing-based senior water resources specialist and the project’s manager at the World Bank, which has been assisting the effort. Armed with such data, water specialists are providing farmers evidence of how certain techniques, such as irrigating at night and replacing irrigation ditches with pipes, can reduce those losses.

While agriculture is indeed a big water guzzler, it isn't the sole culprit. China’s industrial sector, which accounts for about a quarter of water withdrawals, is also wasteful. Chinese paper mills, for instance, consume as much as 500 tons of water to produce one ton of paper, twice the amount used by mills in industrialized countries, according to the World Bank. China’s largest steel mills use 60% more water per ton of steel than counterparts in the U.S., Japan and Germany on average. What's more, 40% of industrial water in China is recycled on average, compared with up to 80% in industrialized countries.

China’s 12th Five Year Plan, running through 2015, calls for a 30% reduction in water consumption for every new dollar of industrial output, with a big focus on sectors such as power generation, mining and steelmaking. The government says it has also begun limiting new licenses for water-intensive industries, such as paper, chemical, clothing and dye factories, in the north.

Meanwhile, a number of foreign companies operating in China are taking steps to save water, too. For U.S. chip-making giant Intel, that means a wafer fabrication facility in Dalian that opened last year with the aim of saving 68 million gallons (257 million liters) of water a year. On average, it takes 16 gallons of water to make a single computer chip, according to Todd Brady, Intel's global director of environmental services based in Arizona. At the Dalian facility, Intel is achieving water savings by using a new process that makes ultra-pure water to wash silicon wafers during fabrication, a technique already deployed at some of the company’s other facilities outside China. It then reuses the dirty water rejected during that process for cooling towers, pollution control devices and other functions that don’t require pure water, says Brady.

Other foreign firms spearheading better use of water in China can be found in a range of sectors, notes William Sarni, director and practice leader of enterprise water strategy at Deloitte Consulting in Denver, Colo. Apparel makers Puma, Nike, Adidas and H&M have pledged to eliminate all hazardous chemical discharge across their supply chains by 2020 after Greenpeace issued a report in July, entitled “Dirty Laundry,” linking these and other companies to water pollution in China.

Aware of the enormity of the problem, the government announced in January plans to invest RMB 4 trillion (US$627 billion) over the next 10 years to protect and improve access to water, noted Chaoqing on In addition to that investment, Chaoqing said other changes are needed with regard to water regulation and administration, adjustments that shouldn't require big investments but will offer a number of benefits, like greater efficiency and better risk management. That includes one major barrier to addressing the country's water woes: The lack of coordination among policy makers, regulators and business, due in part to the plethora of ministerial bodies overseeing water. "Water supply, farmland irrigation, groundwater, water pollution and weather forecasting are separately administrated by various ministries while local governments control local waterways, making it nearly impossible to collect and share critical information," he wrote.

Yet many of the government's latest plans are still a work in progress, and few concrete measures have been provided. But Chaoqing sees reason for optimism, calling the government's recent policy declarations to improve water sustainability an "extremely welcome" step on a long, but urgent, journey.