Decline of virtual water inequality in China's inter-provincial trade: An environmental economic trade-off analysis.

The trade-off between economic growth and environmental conservation is a significant factor in national environmental management. Previous studies have revealed that there are substantial water resources embodied in the inter-regional trade of China, but there is a scarcity of studies analyzing the cost-benefit inequality in trade, which should be considered when developing water resource allocation and conservation policies. The aim of the present study was to fill the gap in existing research by constructing a novel virtual water inequality index based on the net transfers of virtual water and value added between trading provinces. The results of the present study reveal that the virtual water trade of China accounts for about a third of the annual water use thereof and tends to flow from interior developing provinces to coastal developed provinces. Over 70% of consumption-based water consumption of richer provinces (Beijing, Tianjin and Shanghai) is imported from other regions; however, approximately 60% of the value added triggered by the final consumption of said regions is retained within the region. When trading with rich provinces, several developing provinces with rich water resources, such as Xinjiang and Heilongjiang, not only incur net water outflows but also suffer a negative balance of value added, thereby resulting in the occurrence of virtual water inequality. However, with the coordinated development of China's economy, the problem of virtual water inequality in China's inter-provincial trade has been alleviated to some extent. Advocating water pricing system reform to reflect local water scarcity is suggested, especially in arid regions. Additionally, a virtual water compensation scheme considering cost-benefit inequality in trade may also be a practical solution.