This paper deals with heavy pressures to save water in natural resource management due to increased water scarcity. We take the example of a Chinese watershed and investigate the water use efficiency in Chinese irrigated agriculture through a field study as dependent on investments in on-farm water saving technologies and canal water conveyance. The economic and environmental impacts of farmers adopting modern irrigation technologies and public sectors improving water transit systems are studied in particular. A spatial mathematical programming model is employed for optimization. The emphasis is on private and public investments in water saving. Water saving in a canal system enables an extension of the system and provides food and income for more farmers. The model results are of great value for policy makers and project managers, who want to optimize irrigation projects, because scenarios (for instance water and product pricing) are provided. We also provide references for farmers in applying suitable irrigation technologies.

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