Diverting China's Water

In North China, lack of rainfall has exacerbated a long term problem in a very dry region. declining water tables and the increasing urban population is forcing agricultural intensity. In the last 12 months, more than 100 rainless days was a record in recent decades.

The Northern half of China has over 40% of the country's population, more than 50% of the arable land and much industry due to its coal reserves – yet less than 20% of the nation's water.

Most of the Water is in the South of China.

China said last month that it would spend 21.3bn yuan on the next phase of its ambitious water diversion project to help the arid north. The multibillion dollar scheme, which will take up to half a century to complete, will connect the Yangtze, Huaihe, Yellow and Haihe rivers. It will require the creation of east, middle and western channels and will eventually divert 44.8bn cubic metres of water annually. The first phase of the eastern programme will begin to deliver water by 2013.

The scheme was first conceived in the fifties, but that many people believed its time had come because the situation in the north was now so dire. This will not fill up the whole gap, conserving water is the most urgent priority that needs attention.

Meanwhile in Beijing
Beijing’s water supply will reach crisis point in 2010. Probe International, a Canadian environmental group, estimated in a report in June that with Beijing’s reservoirs down to one-tenth of their capacity, two-thirds of Beijing’s water supply was now being drawn from underground.
Beijing has been trying to reduce demand by increasing water tariffs, which are far too low to cover costs. Xinhua reported that the city government was considering a plan to charge residents two to five times more for water if they exceed a monthly quota. Boosting prices might also encourage recycling. Probe International said Beijing’s industries were now recycling 15% of their water consumption, compared with 85% in developed countries.

trading water and crop outsourcing

China secured the right to grow palm oil for biofuel on 2.8m hectares of Congo, which would be the world's largest palm-oil plantation. It is negotiating to grow biofuels on 2m hectares in Zambia, a country where Chinese farms are said to produce a quarter of the eggs sold in the capital, Lusaka. According to one estimate, 1m Chinese farm labourers will be working in Africa this year, a number one African leader called "catastrophic".

If any investor has a long view on world markets, it's Lord Jacob Rothschild. The 73-year-old scion of the world-famous European banking dynasty need only look to his own family history, which dates back some 200 years to the rise of patriarch Mayer Amschel Rothschild in Frankfurt. "We think right now is an excellent point of entry for taking a long-term position in agriculture," he recently said.

Rothschild did just that last year when he invested $36 million for a 24% stake in a venture called Agrifirma Brazil.

Agrifirma has already acquired some 100,000 acres in the Brazilian state of Bahia and holds an option on another 60,000. This summer it will produce its first crops of soybeans, cotton, and corn. Rothschild and Watson say they chose Brazil in part because there was a large quantity of scrubland, or cerrado, that could be irrigated and converted to farmland, enhancing the value greatly. They also liked the fact that its economy has been growing robustly. And perhaps most important, Brazil has 14% of the world's freshwater resources, the most of any country. "The world is fully in a water crisis, and we haven't realized it yet," says Watson. "When you're exporting agriculture, you're de facto exporting water."

If Water is becoming the "rate limiting Step", the the drought in Australia is forcing farmed to decide crop planting based on water efficiency. recently , the Australian govt. passed tradable rights laws which allow Australian farmers to have the right to use a certain amount of water free. They can sell that right (called a “usufructuary right”) to others. But if they want more water themselves, they must buy it from a neighbour. The result of this trading is a market that has done what markets do: allocate resources to more productive use. Australia has endured its worst drought in modern history in the past ten years. Water supplies in some farming areas have fallen by half. Yet farmers have responded to the new market signals by switching to less thirsty crops and kept the value of farm output stable. Water productivity has doubled. Australia’s system overcomes the usual objections because it confirms farmers’ rights to water and lets them have much of it for nothing.
Tradable-usage rights have another advantage: they can be used in rough and ready form in huge countries such as China and India that do not have meters to measure usage, or strong legal systems to enforce usage rights. Instead of sophisticated infrastructure, they depend on local trust and knowledge: farmers sell a share of their time at the village pump. A system like that works in parts of Pakistan’s Punjab.


As the adjoining graph shows, India, China have to find ways to combat the unsustainable water withdrawal rates and outsourcing crops and tradable water rights are one water to drive the productive use of water. exporting the entire crop production to Africa, as China is pioneering, is one way to conserve water.

Grow your food where the water is : Even if that's in another country !

In China the water table under the North China Plain, an area that produces more than half of the country's wheat and a third of its corn, is falling fast. Overpumping has used up most of the water in a shallow aquifer there, forcing well drillers to turn to the region's deep aquifer, which is not replenishable. As water tables have fallen and irrigation wells have gone dry, China's wheat crop, the world's largest, has declined by 8% since it peaked at 123 million tons in 1997. In that same period China's rice production dropped 4%. The world's most populous nation may soon be importing massive quantities of grain.

But water shortages are even more worrying in India. There the margin between food consumption and survival is more precarious. Millions of irrigation wells have dropped water tables in almost every state. Half of India's traditional hand-dug wells and millions of shallower tube wells have already dried up, bringing a spate of suicides among those who rely on them. Electricity blackouts are reaching epidemic proportions in states where half of the electricity is used to pump water from depths of up to a kilometer [3,300 feet].

A World Bank study reports that 15 % of India's food supply is produced by mining groundwater. Stated otherwise, 175 million Indians consume grain produced with water from irrigation wells that will soon be exhausted. The continued shrinking of water supplies could lead to unmanageable food shortages and social conflict.

Between the start of 2007 and the middle of 2008, The Economist index of food prices rose 78%; soybeans and rice both soared more than 130%. In the five largest grain exporters, the ratio of stocks to consumption-plus-exports fell to 11% in 2009, below its ten-year average of over 15% , this shrinking of food stocks is driving countries with large populations ( India, china ) to try out alternative investment models to food security.

Traditionally Governments used to invest in domestic agriculture, cereal and food production became a prime target for investments. ( Rice in Japan, Fruit in Saudi Arabia Etc..) However, in the recent past, Governments are inviting other governments to develop and invest in their Ag sector. Africa is a very prominent destination and China is a large investor..OPEC/Mid East oil exporting countries are another.

China secured the right to grow palm oil for biofuel on 2.8m hectares of Congo, which would be the world’s largest palm-oil plantation. It is negotiating to grow biofuels on 2m hectares in Zambia, a country where Chinese farms are said to produce a quarter of the eggs sold in the capital, Lusaka. According to one estimate, 1m Chinese farm labourers will be working in Africa this year.Peter Brabeck-Letmathe, the chairman of Nestlé, claims: “The purchases weren’t about land, but water. For with the land comes the right to withdraw the water linked to it, in most countries essentially a freebie that increasingly could be the most valuable part of the deal.” He calls it “the great water grab”.

The China Development Bank has granted loans worth millions of dollars to agricultural processing firms in East Africa. Chinese assistance has been provided to plan crops of cereals as well as cash crops like rubber and pine. Angola has received a $ 1 billion agricultural loan from Beijing to improve the sector after decades of war. Senegal recently signed a deal to sell 10,000 tons of groundnut oil to China during Chinese premier Hu Jintao’s visit.

This is a solution that balances the water-ag-food connection. Given 70% of the world water se is Agriculture, the "export" of crop production to "water-rich" countries in Africa is a trend that will accelerate is the coming years.

Agasthya and the Water Trifecta

Legend has it that Agasthya, the Indian Vedic guru, drank all the water in the oceans to pursue a demon. Now India needs a lot of water to support it's growing populations and a reverse-Agasthya is needed to convert the ocean waters to better use - desalination ?

India is largely a Vegetarian country living off cereals and vegetables. The water needed to grow these crops is a fraction of the water needed to produce meat. China, on the other hand, has a growing population with accelerating consumption of meat. China in 1985 had a per capita consumption of Beef of 20 Kg. In 2009 this consumption is 50kg ..water needed to support the production of meat is 390 Trillion Liters. A kilogram of Meat needs about 15 000 Liters of water compared to about 1000 Liters for Wheat.

The majority of the 2 Billion humans that will be added to the world by 2025, will be in India and China. Over this time frame, wealth will drive the per capita protein consumption in both India and China putting a disproportionate pressure on water needed to grow this food.

Even the cloth to clothe these populations will demand a lot of water. To make a Kg of cotton cloth, 11 000 Liters of Water are consumed. India and China are among the top 3 producers of cotton :

Millions of Bales of Cotton :

1. China 25,500

2.United States 17,559

3.India 12,500


In fact India and China combined are twice the size of the US cotton Production.


With current drought conditions in China and scarcity of Water in India, a change in the policy of both countries to reuse and recycle water is needed now to endure the coming crises in Water.

The trifecta of food, population and water scarcity is the impending challenge before us.