The South-North Water Transfer Project (SNWTP), if fully developed, could divert 40-50 km3/yr from the Yangtse basin to the North China plain, alleviating water scarcity for 300-325M people living in what even then will be a highly water-stressed region. Construction of the next stage, diverting up to 20 km3 at a cost of about $17,000M (including $7000M in ancillary costs), is to start in 2002/3. A recent World Bank study suggests that the project is economically attractive. This conclusion has been disputed by the World Wildlife Fund (now the Worldwide Fund for Nature). This paper concludes that little confidence can be placed in either of these analyses. It therefore seeks to throw light on how the project fits within a broader regional and agricultural development setting. The project is hugely expensive, and would at the margin tend to preserve water in low value agriculture and require the resettlement of upwards of 300,000 people. On the other hand, the pace and scale of socio-economic change in China are without precedent, and adjustment problems on the North China plain are greatly exacerbated by water scarcity. Reallocation of water from irrigation to municipal and industrial uses or to the environment is socially divisive and in some instances physically impracticable. The transfer project would greatly alleviate these difficulties. It is these arguments (which are ultimately political and pragmatic), rather than those based strictly on economic or food security concerns, that make the Government's decision to proceed with the project fully understandable.

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