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WWRC 94-31
Developing Economic Performance Information for Water Management Projects in North China


The heavily industrialized region of north China is experiencing rapid economic growth resulting in increasing demands and competition for water and other resources. Local water supplies in this relatively arid region are inadequate to satisfy projected demand with current patterns of water use. In addition, ground water depletions and pollution from economic development have already resulted in land subsidence in some areas and wide-spread water quality problems further reducing the availability of existing water resources.

The Chinese government is considering the construction of several very large and expensive projects to increase and improve the water supply of the north China Plain. Projects being considered include the construction of new reservoirs and as many as three separate interbasin diversions transferring water from the Yantze River, over and under the Yellow River more than 600 km north, to the cities of Beijing and Tianjin. Other, more management oriented alternatives are also being considered, such as improvements in water use efficiency, price incentives and treatment to allow reuse of industrial water.

Reflecting the transition to a market oriented economy and given the scarcity of investment funds and other resources, the economic performance or monetary benefits of government projects is becoming an increasingly important criteria in planning and management decisions. To estimate the economic performance of water projects, information is needed about current and forecast economic conditions (e.g. industry production, value, structure, interrelationships, and growth), water use rates (efficiency), hydrologic conditions (supply availability and uncertainty), and institutional requirements (planned allocation of resources and other socio-economic objectives such as population growth, water quality and agricultural production targets). However, the availability of this information for north China is quite limited.

We developed a method and, using available data, constructed the necessary models to estimate the economic performance of water projects while simultaneously considering the resource requirements and constraints and impacts of other policy and management objectives. These models can be used to evaluate the economic performance of a single project or, as applied here, to evaluate the economic performance of a combination of potential water projects and management alternatives in an effort to achieve desired economic performance and other policy objectives through integrated resource management.

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