China trades rainwater for first time, but analysts say unstable trading system is far from being market-driven
- A government-affiliated landscaping company paid a middleman a 450 per cent mark-up on the price of the water, but it was still cheaper than water from the tap
- China is experiencing a water-shortage crisis, particularly in northern provinces that have been hit by droughts and inefficient water management
China traded rainwater for the first time on a state-run exchange this week – taking a small step toward reallocating water resources to solve its water crisis – but analysts say the country’s water-trading system still has a long way to go.
China’s deepening water-shortage crisis has been exacerbated by pollution and inefficient water management. With 80 per cent of its water resources concentrated in the south, at least a dozen northern provinces – including the Beijing-Tianjin-Hebei economic powerhouse – are suffering from water scarcity. Economic development is only putting more pressure on water demand.
Since 2014, Beijing has tried to use a market-based system to trade water rights in several pilot provinces across the country, and it formally set up the China Water Exchange in 2016. The process is similar to carbon emissions trading, which allows for the buying and selling of credits as a way to reduce greenhouse gas emissions and mitigate the effects of climate change.
On Monday, the exchange reported its first rainwater trade between two local private companies and the local government in Changsha, the provincial capital of Hunan province, in central China.
According to the exchange, the Hunan Yuchuang Environmental Protection Engineering Company bought 20,000 cubic metres of rainwater collected by a local property management firm, over the next three years, at a price of 0.7 yuan (US$0.11) per cubic metre. The former then sold 12,000 cubic metres of that rainwater to an urban landscaping company affiliated with the city government at a price of 3.85 yuan (US$0.60) per cubic metre for three years to replace the use of tap water for urban greenery and street cleaning.
