China will construct the world's biggest inter-valley water market based on its gigantic south-to-north water diversion project.

The water market, whose macro-control will be undertaken by the governments at central and local levels, will be operated by companies for providing the source of water, water transmission in the trunk canals, as well as local companies for water supplies, Wu Xinmu, a well-known Chinese economist.

"The south-to-north water diversion project will help move over 40 billion cu m of water, equivalent to the total water volume in the Yellow River, China's second longest, from the country's water-rich southern areas to its water-deficient northern regions by crossing several major river valleys of the country, and the volume of trading thereafter will be the biggest of the kind in the world, " said Wu, who is now a professor with Wuhan University, central China's Hubei Province.

In light of the overall development plan of the gigantic project, water will be diverted from the upper, middle and lower reaches of the Yangtze River to the northern and northwestern parts of China through the west, central and east routes.

And construction of the east and central routes began in 2002 and 2003, respectively. Principal works on the eastern and central routes alone will cost 124 billion yuan (about US$15.29 billion).

Upon completion of the entire project, 13 Chinese provinces, municipalities and autonomous regions in north China including Beijing, Tianjin, Hebei, Henan, Shandong, Qinghai, Gansu, Ningxia Hui and Inner Mongolia autonomous regions, Shaanxi and Shanxi, with a total population of 300 million, will benefit. The above-mentioned areas produce one third of the country's grain output and GDP with merely one fifth of the country's average per capita water resource.

So far, two companies, one for sourcing of water and another for water transmission in the trunk canals, have been set up with the eastern route, and two more such companies with the central route.

Relevant provinces and municipalities have also established their own specialized companies in charge of water supplies. Companies responsible for water transmission in the trunk canals are supposed to sign contracts with relevant local companies over supplies of water.

The central route of the south-to-north water diversion project, for instance, is designed to solve water shortages in daily life of residents and industrial purposes along the route.

With a budget of 92 billion yuan for the phase construction, the middle route will be capable of supplying the market with 9.5 billion cu m by the year of 2010. The annual volume of trading on the water market with the middle route is estimated at 28.5 billion yuan according to the lowest water price of 3 yuan per cu m.

Li Antian, a water conservancy specialist, contended that though the south-to-north water diversion project would extend far and wide, the market demand remain huge.

"The conditions are ripe for constructing a water trading establishment where in the law of the market will play a basic role in mobilizing rare resources," said Li, who is a member with the national committee of the Chinese People's Political Consultative Conference (CPPCC).

Zhang Jiyao, head of the Office to the Committee for Construction of the South-to-North Water Diversion Project of the State Council, said they would draft details regarding water price setting with the south-to-north water diversion project by taking into account the characteristics of the water diversion project and the law of the market economy.

Professor Wu Xinmu was confident in operating the massive inter-valley water market according to the law of the market would mean a breakthrough on China's part in an endeavor to put in place a market-oriented water market.

"In the process of building the water market, we will treat water as a commodity, decide proportions of investments in accordance with a principle of 'investment for the use of water, and investment for benefit', promote trading of water via fostering market players, regulate the relations between supply and demand by using pricing as a leverage, help find new sources of water and efficiently use the water, so as to solve the problem of water shortages in the country," said Wu.

(Xinhua News Agency November 9, 2005)