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WATER POLITICS

Courtesy China Water Risk, an interesting look at 5 water challenges lurking behind the dazzling economic success & water sources of the China’s Pearl River Delta region:

The Pearl River Delta (PRD) is one of the most developed regions in China. In 2016, this small delta region in the South generated RMB6.8 trillion, or 9.1% of the total national GDP¹. This ‘jewel in the crown’ is considered a model for the rest of the country, according to The Economist.

Surface freshwater & seawater are both important for the PRD, which drives 9.1% of China’s GDP

Water is essential for the economy and people. Being close to China’s second largest river, surface water supports 98.7% of the region’s water needs from agriculture, industrial production to domestic use. Meanwhile, cities on the coast also use almost as much seawater, nearly 22 billion m³, for cooling power plants and desalination.

However, behind such dazzling economic success and seemingly abundant water resources lurk many water challenges. These water risks could constrain or even threaten its future growth.

Here are 5 key challenges to watch out for:

1. Guangdong is not water scarce but PRD is highly stressed due to rapid urbanisation 

The PRD commonly refers to 9 cities in Guangdong province, including Guangzhou, Shenzhen, Zhuhai, Foshan, Jiangmen, Dongguan, Zhongshan, Huizhou and Zhaoqing.

Let’s first be clear that, Guangdong province is not water scarce. With abundant water supplied by many of its rivers, the provincial annual water resources per capita was 1,782m³ in 2015. This makes it better off than many other provinces in China, more specifically the ‘Dry 11‘.

But if we look at the PRD, we see a very different picture: the average annual water resources per capita of this region was only 693m³. This is over 60% less than the provincial level. There are at least three reasons:

• First, the PRD only has 31% of Guangdong’s water resources;
• Second, population density of the PRD is 2.7x that of the rest of Guangdong: with only 30% of Guangdong’s land area, PRD 9 cities are home to 58.7 million people or 54% of Guangdong’s population. The most densely populated city, Shenzhen, is almost 36x more crowded than Shaoguan, a non-PRD city in the northern mountain region of Guangdong; and
• Third, the PRD accounts for 79% of Guangdong’s GDP. Dominance in economic power, together with densely populated urban clusters, means that the PRD accounts for half of Guangdong’s water use.

At the provincial level, Guangdong has already capped its total water use at 45.604 billion m³ and 45.018 billion m³ by 2020 and 2030, respectively. But clearly, the pressure from these water caps will be mainly on the water-stressed PRD cities.

2. 88% of PRD’s GDP generated by 6 cities in ‘water poverty’

As seen from above chart, six out of the nine PRD cities are considered water scarce – their annual water resources per capita fall below the 1,000m³ water poverty mark as defined by the World Bank (see above chart). The worst is Shenzhen, where annual water resources per capita was merely 163m³, nearly half of that of Pakistan (297m³).

These 6 cities account for 77% of the PRD’s total population and 88% of its GDP. This means water scarcity in these cities could pose serious threat for the long-term development of this region.

To secure future water supply a RMB34.8 bn project is planned to divert 1.8 billion m³ of water to PRD

To secure future water supply in the PRD cities, a project with a total investment of RMB34.8 billion is expected to start construction later this year. Once completed, around 1.8 billion m³ of water will be diverted annually from the Xijiang River (the western tributary of the Pearl River) to three PRD cities: Guangzhou, Dongguan and Shenzhen. This is about 17% of the current water use of these three cities.

However, in addition to expensive large-scale engineering solutions, the region should also look into other ways in dealing with ‘water poverty’, such as improving water efficiency.

3. Water savings need to come from all users in the PRD

With nearly 59 million people living in this highly developed and urbanised region, domestic use takes up almost as much water as agriculture and industries. This is quite different from the situations at the provincial and national levels, where agricultural water use dominates (see pie charts below). As a result,

• at the national level, the key focus is more on managing water use in irrigation and power;
• at the provincial level, agriculture also accounts for over half of the total water use, but three quarters of grain crops sown areas lie outside the PRD;
• while, for the PRD, savings have to come from all users including the people and industries.

Guangdong is one of the 7 pilot provinces for water rights trading

It also uses tiered water prices to encourage saving

Tougher competition instigates innovative solutions, which can be technological, but also regulatory. Guangdong is one of the 7 pilot provinces for water rights trading: this provincial regulation, put in force on 1 February 2017, allows such trading between water users or above-county level governments.

Moreover, Guangzhou city was amongst the earliest in China to introduce a tiered water tariff system to encourage water saving, which targets both domestic and industrial uses. Other PRD cities are expected to follow.

4. PRD is feeling more heat from ‘Water Ten’ & set for economic transformation

The Pearl River, in spite of its beautiful name, was once one of the most polluted rivers in China. Rapid growth in resource-intensive & polluting industries as well as urbanisation has put much pressure on the river.

As seen from the chart below, the overall water quality of the Pearl River Basin has been improving with Grade I-III up from 85% in 2009 to 95% in 2015. Despite the persistent Grade V+ water bodies, those with Grade IV-V quality dropped from 12% in 2009 to 2% in 2015.

39% of river waters in PRD were considered ‘unfit for human touch’

However, if we zoom into the PRD and the Dongjiang River, both within the Pearl River Basin, the situation gets worrying. Measured as a share of assessed river length by water resources department (different from the method used by environmental authorities), 24% of the PRD watershed and 11% of the Dongjiang River were classified as Grade V+ water quality in 2015. For the PRD, 39% of its river waters were considered ‘unfit for human touch’ (below Grade III).

Given such a dire situation, the PRD, along with the Yangtze River Delta and the Beijing-Tianjin-Hebei region, is facing tighter deadlines in meeting water targets in both the national and provincial ‘Water Ten Plan’. This pressure, together with economic slowdown and labor shortage, is forcing the PRD to seek new engines of growth.

Services, often with smaller water footprints, already account for 55% of its GDP. Industries are also moving up the value chains: in 2016, advanced manufacturing industries and high-tech industries accounted for 54.9% and 32.5% of the region’s total industrial added value respectively.

 Water use per unit of GDP in Guangdong fell by 85.3% from 1997-2015

Such changes have brought positive impacts on water use: at the provincial level, water use per RMB10,000 of GDP dropped by 85.3% from 547m³ in 1997 to 80m³ in 2015, and water per RMB10,000 of industrial added values fell by 92.4% from 401m³ to 31m³ in the same period.

But for wastewater discharge, change is coming but slower. Data in 12^th Five Year Period show a rather restrained trend from industrial sources in PRD 9 cities, despite an overall increase in total discharge. To further bring down wastewater discharge, there needs to be a shift towards cleaner and higher added-value industries in the economy.

5. Floods, saltwater intrusion & sea level rise call for more comprehensive risk assessment

Being on China’s southern coast with a sub-tropical climate, the PRD is prone to extreme weather events such as typhoons and floods. In 2016, Guangzhou city had a very wet year with 42% more annual rainfall than a normal year, the highest in historical records. For instance, heavy rains during 9 and 10 of May 2016 led to a subway station being flooded and many roads turning to waterways.

• 80% developed urban areas to meet ‘sponge city’ standards by 2030

The good news is that the city recently announced its plan to transform 80% of its developed areas to meet relevant ‘sponge city’ standards by 2030, in line with the provincial plan. The nearby Shenzhen city is also picked as one of 30 national sponge city pilots. Large investment is expected and celebrated by many. But, how to attract more private investment and also integrate ‘sponge city’ features in the planning stage are important issues to address before another infrastructure spree.

• Saltwater intrusion threatens water supply

In addition to urban floods, the PRD also faces saltwater intrusion near the river mouth of the Pear River. This has been a threat to the water security of nearby cities, in particular Zhongshan, Zhuhai and Macau. From October 2016 to February 2017, due to active saltwater intrusions, the local government had to transfer in total 133 million m³ of water from upstream to secure water supply for Zhuhai and Macau.

• Guangdong’s coast will see 0.065-0.170m sea level rise in the next 30 years

Furthermore, the risk of sea level rise is also increasing due to climate change. The State Oceanic Administration’s 2016 Sea Level Report warns that Guangdong’s coastal regions may see a 0.065-0.170m rise in the next 30 years. This should be alarming news for airports and many other assets located right on the coast.

We should definitely re-assess the importance of protecting 19,800ha mangrove forests along Guangdong’s coast (see photo), which researchers believe can serve as natural defence, but are constantly threatened by rapid urban development.

Moreover, investing on hard infrastructure is also needed. Guangdong has been investing to strengthen its existing coastal flood barriers and build new ones since 2011. Recently, it announced to invest another RMB11.3 billion to continue such efforts.

But, to finance these projects, the government will need private investment as well. After all, this is to protect the interest of all the stakeholders that face risks. Much more could be done by businesses & investors:

• on one hand, to better understand water & climate risks in the region; and
• on the other hand, to find ways to mitigate these risks and build resilience.

By 2020, Guangdong hopes to establish the PRD as a national pilot on green development. For water, given all these challenges, it would mean that businesses in the region need to lead in water stewardship. Only by doing this, can it ensure long-term water security and economic prosperity for both individual business and the PRD.