Managing the Middle-Income Transition
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Managing the Middle-Income Transition

Challenges Facing the People’s Republic of China

Edited by Juhzon Zhuang, Paul Vandenberg and Yiping Huang

The growth model of the People’s Republic of China has been based on high investments, exports, low-cost advantage, and government interventions. This model has successfully transformed the country from a low-income to an upper middle-income economy. However, the model has generated contradictions that could undermine future growth. Making the transition to high income requires greater reliance on efficiency and productivity improvement, innovation, and market competition. This book examines the challenges faced by the People’s Republic of China in sustaining robust growth, and policy options for making a successful transition to a high-income economy to avoid getting caught in the middle-income trap.
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Chapter 19: Managing water resources for sustainable growth

Yi Jiang and Jingmin Huang


The scarcity of water resources in the People’s Republic of China (PRC) has received less attention than the country’s shortage of arable land, but a number of high-profile government policies on water management and intense media interest in recent years are changing this. For example, in 2011 the Central Committee of the Chinese Communist Party and the State Council approved the Acceleration of Water Resources Reform and Development, which became the year’s Number One Decree. The decree sets three ‘red lines’ on water use. The first limits total water consumption nationwide to below 670 billion cubic meters (m3) a year by 2020. The second sets targets substantially improving the efficiency of water use in industry and agriculture. The third aims to control pollution discharge into river basins and designated water areas. Under the policy, the government is committed to doubling annual investments in the water sector to CNY4 trillion by 2020. The policy, which comes from the country’s highest decision-making authority, makes clear that improving water resources management is part of an urgent national strategy. Because the PRC’s water use accounts for over 20 percent of total water availability, more than twice the world average, it will be difficult to markedly expand water supply. To keep to the red lines, the annual growth of water use has to be contained at or below 1 percent. Yet, water demand, especially from industry and households is expected to rise sharply in coming decades amid continuing industrialization and urbanization.

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