Assessment of the development of groundwater market in rural China

Abstract

Using field survey data collected by the authors, this chapter first describes groundwater markets in northern China that have been developing rapidly in the past two decades. Groundwater markets in the area are informal, localized and mostly unregulated. There is little price discrimination, and institutional characteristics tend to be similar in both high- and low-income villages. The privatization of tubewells is one of the most important driving forces encouraging the development of groundwater markets. Increasing water and land scarcity are also major determinants. The chapter also explores the impacts of the emergence of the groundwater markets on agricultural production – including crop water use and crop yields – and farmer income in northern China. Results indicate farmers that buy water from groundwater markets use less water than those that have their own tubewells. However yields of water buyers are not negatively affected. This is probably because water buyers exert more efforts to improve water use efficiency. Results also show that other things held constant, the crop incomes of water buyers are not statistically different from those of well owners. The chapter also finds that groundwater markets in northern China are not monopolistic, supporting the notion that they offer poor rural households affordable access to irrigation water.