A Brief Introduction to How China Builds Its Water Trading System

On November 26th, an article by Li Guoying, the Minister of China’s Water Resources Ministry, was published in the Economic Daily. From his article, we can generally understand how China builds its water trading system.

Li believes that establishing a water use rights trading system is of great significance for promoting the optimal allocation and conservation and utilization of water resources.

From his article we can see that China's water trading system mainly includes the initial water allocation system, the water resources monitoring system, and the water trading market system. The construction goal of China's water trading system is to achieve clear ownership, definite rights and responsibilities, and effective supervision.

The initial allocation system of water use rights is regarded as the most important prerequisite for the water use rights trading system. According to China’s Constitution, the ownership of water resources belongs to the state, and the initial allocation of water use rights is implemented by the state. At present, China has completed the water quantity allocation of 94 trans-provincial rivers and 373 intra-provincial rivers across administrative regions, determined the total groundwater extraction amount and water level control indicators of 31 provinces, autonomous regions and municipalities directly under the Central Government, and issued 630,000 sets of electronic licenses for water extraction to users. The allocation of water resources takes into account water use for living, production, and ecological purposes, and comprehensively considers current and future water use. According to the changes in water resource conditions and the needs of ecological protection and economic and social development, the allocation of water in various regions will be adjusted.

The water resources monitoring system is regarded as the most important basic work for the construction of the water trading system. This system includes monitoring of river and lake sections, measurement of water intakes, and groundwater monitoring.

The water trading market system is regarded as an important task for the construction of the water use rights trading system. The broad water market can be divided into three levels: the market between the state and water resource operators, the market between water resource operators and water resource users, and the market among water resource users. The water use rights transactions among water resource users can be further divided into three categories: among administrative regions, among industries, and among water users. Since its establishment in 2016, the China Water Rights Exchange has witnessed a cumulative number of transactions exceeding 15,700, with a trading volume of 4.79 billion cubic meters, covering 29 provinces across the country. In 2023, Sichuan and Ningxia successfully completed the first trans-provincial water use rights transaction in the Yellow River Basin. However, Li wrote that, on the whole, China's water trading is still not active enough.

He also wrote that China will accelerate the improvement of the water trading platform system and the supervision system of the water market.

I think that from the water trading system, we can see the role of the Chinese government in the socialist market economy. Water resources belong to the state and are rationally allocated by the government. Users can trade the surplus water rights saved in the market, and the government supervises water rights trading.

I don't know how water trading is carried out in other countries. Welcome you my respected readers to tell me.