Unveiling Economic Co-Benefits of Virtual Water Trades: An Empirical Analysis on China’s JingJinJi Megalopolis

Abstract

The development of metropolitan cities inevitably relies on natural resources beyond their boundary through trade of materials and products, particularly within the same urban agglomeration. Meanwhile trade facilitates the optimization of resource allocations under scarcity, among cities and sectors, and therefore generates economic gains. This study constructs an economic evaluation model combining a Multi-Regional Input-Output model and a Data Envelopment Analysis (DEA) to quantify the economic impacts of virtual water trades among the 13 cities in the JingJinJi region (China national capital area), one of the most water-scarce regions in China. We found that the total virtual water trade among the 13 cities amounted to 927 million m3 in 2012, among which agricultural sectors contributed 90% while the industrial sector and service sector together made up the remaining 10%. While Beijing and Tianjin are the main virtual water importers, importing respectively 300.48 and 226.92 million m3 in 2012, Shijiazhuang was the largest virtual water exporter, exporting 173.29 million m3 virtual water in the same year. Due to their more advanced economic conditions, Beijing and Tianjin also have the highest shadow prices of water, at respectively 912.21 and 831.86 CNY per m3, compared to a range of 79.31 to 263.03 CNY per m3 in cities in Hebei. Virtual water flows from cities in Hebei to Beijing and Tianjin thus generate economic gains. It is estimated that virtual water trades in the JingJinJi region have generated a net economic gain of 403.62 billion CNY in 2012, particularly owing to trades of agricultural products from Shijiazhuang to Beijing and Tianjin.

Keywords

• MRIO
• virtual water flow
• virtual water trade
• shadow price
• DEA
• China