Designing Tradable Water Rights for China

Abstract

Well-defined water rights are a central element of a functional water rights market where limited water resources can be reallocated towards higher valued use. The examination of China’s water reforms reveals that the ill-defined water rights are one of the major constraints that need to be addressed to make the market mechanism work. This chapter explores how clear and secure tradable water rights can be defined in China’s context. Referring to international experiences (e.g. those in Australia and the US) in defining tradable water rights, the chapter elaborates on a number of essential attributes of water rights that affect their security and certainty. These include the origin, duration, predictability and priority of water rights, the level of government interference, transferability and divisibility. A framework of water rights arrangements for China’s South-to-North Water Diversion Project (SNWDP) is also proposed to prepare the world’s largest water transfer project to become the world’s largest water rights trading market.