7 Nov 8 @ 1:03pm by Matt Smith in Blog, Economy, Global Energy, risk management, Risk Strategy

China’s Unquenchable Thirst For Water

As regular burrito readers will know, China is a hugely huge producer and consumer of commodities. Not only is it the largest global producer of key crops and meat, it has the largest appetite for goods that cover the gamut from rice to rubber, from cotton to copper. But one of its largest addictions has become one of its biggest problems, as it has an unquenchable thirst……for water. 

Let’s zoom out here for a second. Only 2.5% of the earth’s water is freshwater. And 70% of that is locked up in glaciers, ice caps, and permafrost. A mere 0.4% of the world’s freshwater is in the form of lakes and wetlands (76%), in the soil (13%), and in the atmosphere (9.5%).

Although China is home to 7% of the world’s freshwater reserves…it is also home to 20% of the world’s population. To put this in perspective, China has over four times the population of the US, but only about a fifth of the water availability.

Water usage in China has quintupled since 1949. One key driver has been The Communist Party, which has always encouraged grain self sufficiency. This has meant that rural areas have persisted in growing highly-water intensive crops, rather than focusing on agriculture which is better suited to its environment.

This situation was exacerbated after Chairman Mao’s death, as economic reforms led to a farming renaissance. This meant a ramp up in agricultural production, ergo…….a ramp up in water use.

Agriculture makes up the lion’s share of water consumption in China, and when combined with industry, this number reaches 85%:

But here’s the main problem facing agriculture in China: only 15% of China’s land is arable, but 60% of this lies in the North – where there is a lack of water availability. The North China Plain is home to over 200 million people, but only receives limited rainfall. At current levels, it will be drained of all its groundwater within 30 years.

Also, agriculture is not just the largest user of water in China, but it is also the biggest polluter. 912 kilograms of chemical fertilizer is used for an area the size of a soccer pitch. According to the World Bank, 300 million rural Chinese lack access to safe drinking water.

This scenario is only expected to worsen. By 2020, 30 million Chinese are expected to be displaced by water stress. The 2030 Water Resources Group – a consortium of consultants – predict there will be a huge shortfall in water by 2030:

Problems not only persist in rural areas and agricultural use, but for cities and industries alike. More than two-thirds of China’s cities have water shortages, with some city wells more than 600 feet deep. Meanwhile, not only is 52% of industrial output produced in water scarce regions, but inefficient water use is rife. Dependent upon the product, 3 to 10 times more water is used to produce goods than the equivalent industries in developed nations.

So what is being done to address this behemoth of an issue? The solution underway dates back to Chairman Mao. Called the South-to-North Water Transfer Project, it took decades of debating by engineers and scientists before finally being approved in 2002. It is a plan to funnel more than 12 trillion gallons northward every year from the Yangtze River basin to where it is needed most (as an aside, approximately 41% of China’s waste water is dumped into the Yangtze, often untreated).

To complicate the water situation further, China is the home to half of the world’s dams. The most prominent, The Three Gorges Dam, is the world’s most powerful and largest hydroelectric dam. It generates 11x more power than the Hoover Dam, and the same amount of power as fifteen nuclear reactors.

But this is just the start. In August of this year, the Chinese government announced its aim to cut carbon emissions 17% by 2015 from 2010 levels. And one of the key ways it is going to do this is through strong focus on hydropower. It intends to add 120GW of new conventional hydropower capacity by 2015, which is the equivalent to building one Three Gorges Dam each year for five years.

Is there any way China can avoid a water crisis? The South-to-North Water Transfer Project is not expected to be completed until 2050, by which time areas of Northern China may have run out of water already. Pollution laws would help to clean up the water, but given the widespread nature of the pollution it would be hard to enforce.

As for new supplies, several coastal cities are building desalination projects, but these are extremely expensive (to epitomize this, Saudi Arabia is home to 25% of desalination facilities given its wealth), as well as requiring significant power to run (…and ironically, power generation is exceedingly water intensive…). All the while, a number of other countries are dependent on China and the rivers that flow through it. Unless China ramps up its efforts to address both its pollution and regional water shortages, it is going to end up parched.

7 Comments on this post:

  1. SidAbma says:

    And China wants and needs natural gas. The only way they can get this is with hydraulic fracturing which is also very water intensive.
    They have their challenges ahead of them.

  2. Matt Smith says:

    It was the whole water / fracking subject in China that set me off on the tangent of this week’s post. I suspect I’ll circle back the wagon and write about this at some point going forward. Thanks for the comment!

  3. Atyendra says:

    Dear smith, It seems next world war signing to be for water.
    Kindly confirm if you have similar report on India.

  4. Matt Smith says:

    I haven’t looked into India, perhaps that’s a topic I could do some digging into going forward. Thanks for the comment, Atyendra!

  5. It would seem appropriate to be lobbying China to quit the objective of grain self-sufficiency and even the electronics trade imbalance by buying grain from the USA. As we become more cordially interdependent instead of striving for independence, there is also less chance of wars. I happended to be in China arguing with a younger businessman that the USA has no intention of invading Chins at just the time that we moved our whole Pacific fleet to be next to Korea. It made the argument much tougher.
    It was his opinion that we would start a war to avoid paying our debt to China. A better trade balance would be much better. We also have a strong lobby group in Oregon wanting to not ship China Natural Gas, further limiting balancing trade and limiting cooperation.

  6. [...] Water shortages are the key constraint on power and energy. Piggy-backing on last week’s burrito post about China’s water scarcity comes this nifty chart from the IEA, highlighting the vulnerability [...]

  7. [...] not have much water to begin with: China holds almost 20 percent of the world’s population, but only 7 percent of its freshwater reserves. Water is one of China’s scarcest resources. Hence, ensuring the efficient use of the water at [...]

Leave a comment:

» will not be published