Programme  OS5n Institutional and legal development  abstract 504

Governmental Intervention into Water Rights Trading in the Context of China’s Water Policy Reform

Author(s): Min Jiang

Keyword(s): governmental intervention, water rights trading, policy reform, China

Article: abs504_article.pdf
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Session: OS5n Institutional and legal development
AbstractAlthough China is one of the first six countries

in the ranking list of total water availability of the world, its water resources are far from adequate to satisfy the

increasing demand of crowded cities and booming industries for water due to its rapid population growth and

economic development. Meanwhile, water pollution and ecological degradation are worsening the already limited

water availability. Unfortunately, China’s current water policy fails to solve the problem because of its inefficient

administrative allocation approach and fragmented water resources management. As a response to this urgent

situation, the Chinese government has initiated an ambitious water policy reform, “Building a water-saving society”,

to integrate water management and promote the implementation of market-based mechanism, especially water rights

trading in water management and allocation.

In many societies around the world, water rights trading has been

applied in various patterns to allocate the precious water resources among competing water users. Its function of

reallocating water from lower valued uses to higher valued uses is widely recognized in the international water field.

However, under China’s traditional water institutional arrangements, water resources are administratively allocated.

The transfer of water abstraction permits was explicitly prohibited by its water legislation. In the context of the new

reform initiative, water rights trading as a market-based allocation instrument has been explored. Indeed, establishing

a national water rights system is at the core of China’s ongoing water policy reform. This system is based on the

principle that China’s water rights trading should be a combination of administrative management and market-based

mechanism to allocate and reallocate water resources in the context of China’s socialist market economy.


paper aims to explore the institutional arrangements of necessary governmental intervention into water rights trading,

which would not go so far that it would undermine its function in optimal water allocation. To do so, this paper

includes four sections. Section 1 looks at the institutional framework of China’s water management and allocation

within which water rights trading exists and operates. Section 2 observes the current practices of water rights trading

occurring in several parts of China and examines how governmental intervention works in those practices. In Section

3, the latest development in China’s water rights legal system is to be reviewed in order to figure out what

institutional arrangements are absent for facilitating necessary governmental intervention into water rights trading.

Section 4 attempts to elaborate different aspects of governmental intervention into water rights trading, namely, the

approval procedure of water rights trading, restrictions to types of tradable water rights, the protection to the third

parties, environmental needs and basic human needs for water. Based on theses analyses, the paper concludes with

an evaluation of current practices of governmental intervention into water rights trading and its implications to China’s

water policy reform.

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