1、1The use of market mechanisms in water management in China1.Abstract China is a country short of water resource, the per capita water resource is limited and the spatial distribution of water resources is extremely uneven. As a consequence, a major portion of regions in China are facing serious prob
2、lem of water quality pollution, quantity shortage, aquatic ecosystem degradation and landscape destruction. Research on economics of water is orientated from the water shortage. Once if the water becomes a scarce good resulting from the shortage, commercialization and market-orientation has become a
3、 natural or inevitable choice. Water would shift to general commodity from natural object which means the introduction of market mechanisms in water management. 中图分类号：H059 文献标识码：A 文章编号：1673-0992（2010）11-0000-01 2.Market mechanism 2.1The price mechanism 2Price provides the incentive to both the consu
4、mer and producer. High prices would encourage the producers to make more production, but less consumption by the consumers. On the contrary, Low prices discourage the producers production, and encourage consumption by the consumers. The price would balance the forces of consumption (demand) and prod
5、uction (supply) by both incentives with no external institution for direction. This balance is so called the “equilibrium” by economists. 2.2.The supply and demand mechanism The supply and demand mechanism (the economic model) provides the most efficient economic outcomes possible - maximized satisf
6、action for society, minimum cost. This efficiency outcome is always located on the production possibility curves frontier, where all resources are fully utilized. 3.The use of market mechanism in water management 3.1.The three different management methods To attribute to the dual properties of water
7、 - daily necessity and scarce resource, it has a strong externality. In china, there are three methods in water management: limiting indicator, charge of water, transferrable water usage license. 3.31.Indicator as a limit 3This method means that give companies a certain indicator of water usage or s
8、ewage pollution. The companies would pay the penalty if they exceed the limits. But it is difficult to determine the most efficient restriction criteria: if the indicator set too high, then it equals to encourage firms to loosen the disciplines to some extent; if the indicator set too low, that mean
9、s the damage to the production or the so called inefficiency. 3.1.2. Charge of water Fee that is charged with raising the price of water and sewage pollution is used to encourage corporations to reduce water consumption or to cut down the sewage disposal. In this way, the cost of water or sewage is
10、counted towards the production costs making the social costs to achieve the optimal sense, and also be able to inspire firms with water conservation. This method has the following advantages: 1. The fairness. Companies have their own methods when they face the similar cost of water or sewage, but fr
11、om the whole market, they pay identical marginal cost. 2. The strong incentive. 4Charges exercise great influence on corporations to maximize their water conservation. 3. The optimized allocation. To encourage low water-saving cost firms in more water, high cost firms in less water. As a result, the
12、 whole society would obtain the maximum water conservation and emission reduction at the lowest cost. 3.1.3. Transferrable water usage license In this way of the management, each license has ruled the specific usage quantity of water or sewage. Corporations could be heavily fined if they use water o
13、r make pollutant discharging without the licenses. Government can regulate the amount of the transferrable licenses to control water usage or sewage disposal reaching its ideal result. Under this system, companies at high water-saving cost would buy licenses whereas others would sale the licenses. I
14、n the end, the water management would reach the optimal efficiency. If there are enough firms and licenses, a competitive license market would be developed. When reaching the equilibrium, the price of license equals to the cost of saving water. 3.2Water pricing in China 5Price is an important econom
15、ic method in water management playing a role in water resource supply and demand, discouraging excess growth of water demand, and providing water-saving incentives so that to optimize the allocation of water resource. Since the founding of China, water pricing had gone through three stages - free wa
16、ter supply (1949 1964), low charge of supply (1964 1979), supply at cost price (1979 now). For a long time, Chinas water policy is low price or even free supply, resulting in excessive water consumption and water shortages. However, low-priced policy has resulted in excess demand in water usage, whi
17、ch means exceeding the equilibrium supply. Over the years, water price does not reflect the full economic value in China and individuals maximize the self-interests which lead to an excessive consumption of water and reduce the benefits in the whole society. Chinas water system was forming in the sw
18、itching from planned economy to the market economy. Most cities of China are commonly using the progressive pricing mechanism which means the more water you consume, the higher water price you pay. 6This kind of pricing system is simple, easy enough for consumers to understand and accept. China now
19、is under market principles after the economic reform. For the incentive of public water-saving, China has increased the water price. 3.21Improvement in water management China has legislated quite number of laws to improve the water management, such as the Water Law, the Flood Control Law, the Law on
20、 Water Pollution Prevention and Control, combined with relevant policies and regulations. A sequence of policies has been put into effect to elevate the water tariff reform, introduce market mechanism in urban water supply and wastewater treatment. On January 1, 2004, China enacted “Administrative R
21、egulation on the price of water conservancy projects” aiming to establish a system of basic water price and price measurement. To reflect the scarcity value of water resources, water price formation gradual adopts the full cost method, including water resource price, price of water for project and p
22、rice of water for environment . 4.Chinas efforts In recent years, under the guidance of the new policies and laws, China has come on a lot in water management. 7The per capita water in China only accounts for 28% of the world average. Especially in northern china, water resources have been diminishe
23、d because of climate change and human activity influence. But there was worse to come, the approximate runoff loss in Yellow River, Huai River and Hai River has reached 10% to 40% respectively. As a consequence, drought and water scarcity have become a bottle-neck factor restricting the economic dev
24、elopment in northern China. In order to ameliorate this status, China has implemented the pilot projects of establishing water-saving society in more than 100 cities aiming at the water right allocation for all provinces along the major rivers and lakes by 2010. We will define maximum water use avai
25、lability; make each province clear about rights and obligations of water usage. Thanks to the water shortage and ecological deterioration, China established the South-to-North Water Transfer Project to mitigate this situation in North China, including Beijing and Tianjin. 5.Conclusion It is the grea
26、t achievements for China being able to support about 20% of world population only with 6.8% of world cultivated land and 6% of world water resources. To guarantee a sustainable water resource management, the core is to develop 8the mechanism in water management. With the continuous increase in water
27、 consumption, the elasticity of water relatively became smaller and smaller so that the significance of price mechanism functions gradually appears. The going price of water is low in China. To ensure the protection of water resources, government should strengthen the water price collection and supe
28、rvision. The economic structure and market mechanism has changed dramatically and the market is playing a greater and greater role in socioeconomic life in China. Bibliography 1.Wan ChengLin, Wen Xiaoqing and Deng Xiangrong (2004): Principles of Market. Tianjin. TIANJIN UNIVERSITY PRESS. pp. 107-120
29、 2.Li Qiang and others (2005): Water Problems of China. Beijing. China Renmin University Press. pp. 246-277 3.Xie Yonggang (2004): Water Property and Economic Performance. Beijing. Economic Science Press. pp. 135-149 4.H.E. Dr. Jiao Yong (2005): Chinas Water Policy and Practice. 95.ZHOU Yuxi & GE Yanxiang (2008): Research on the Mechanism Forming Supply-Demand Equilibrium of Water Resource. pp. 1-12
