(John Kemp is a Reuters market analyst. The views expressed are his own)
By John Kemp
LONDON, July 7 (Reuters) - Booming demand for food in China's southern and eastern cities is worsening water shortages in arid northern provinces, adding to the country's environmental problems, new research shows.
"Consumption in highly developed coastal provinces is largely relying on water resources in the water-scarce northern provinces, such as Xinjiang, Hebei and Inner Mongolia, thus significantly contributing to the water scarcity in these regions," an international group of researchers wrote in the latest edition of the journal Environmental Science and Technology.
"Rich coastal provinces gain economic profits from international exports at the expense of ecosystem quality in the less developed regions," the researchers from the University of Maryland and the International Institute for Applied Systems Analysis concluded ("Virtual Scarce Water in China" June 2014).
Rain and snowfall is concentrated in south and south-western China, as well as along the east coast, which should be the most favourable regions for agricultural production.
But these provinces have experienced the fastest industrialisation and urbanisation since reform and opening in 1979. Large amounts of farm land have been converted to industrial and residential use.
In response, much of the country's agricultural production has been pushed north and inland to regions with much less rain.
TERMS OF TRADE
Some 109 billion cubic metres of water was traded between Chinese provinces in 2007, mostly in the form of "virtual water" contained in fresh and processed foods.
The main virtual flows are from agricultural regions like Xinjiang, Inner Mongolia, Hebei, Ningxia and Gansu to the megacities of Beijing, Tianjin, Shanghai and Chongqing, as well as the heavily industrialised provinces of Shandong, Zhejiang and Guangdong along the east coast.
Water flows demonstrate the 19th century British economist David Ricardo's theory of comparative advantage. China's southern provinces have advantages over the north in both industry and agriculture. But their comparative advantage is greater in industry, so the south has specialised in industrial production and forced the north to specialise in farming.
As provinces and cities along the eastern seaboard have become ever more dominant industrially, farm production has been driven into the drier areas of the north and west.
The key change over the last three decades, as the researchers explain, is that the south has become much better at industrial production, rather than the north becoming better agriculture.
Xinjiang, which has annual rainfall of less than 10 centimetres, exports billions of tonnes of water each year to Shanghai (where annual rainfall is 1 metre or more) and Guangdong (which receives 2-3 metres per year).
Farming accounts for 98 percent of water consumption in Xinjiang, 84 percent in Inner Mongolia and 83 percent in Hebei, compared with just 67 percent in Guangdong and 31 percent in Shanghai ("Virtual scarce water in China: supplemental data" June 2014).
Industrial and water imbalances are worsening China's environmental problems. Northern China is already subjected to dust storms and far worse pollution than the south. Now the region is suffering from increasing water stress.
For example, Zhejiang is a major exporting province on China's east coast. But only 20 percent of the ecological impact of Zhejiang's exports was felt in the province, according to the researchers, while the rest was "outsourced" to other parts of China, including Xinjiang (40 percent), Hebei (7 percent) and Inner Mongolia (5 percent).
Increased use of irrigation and reliance on groundwater have enabled northern provinces to boost agricultural output, but is not sustainable in the long term as regional aquifers fall.
In response, the government's controversial South-North Water Transfer Project aims to send almost 45 billion gallons each year from the Changjiang (Yangtze River) through a series of giant canals to Beijing and other parts of the north.
The project, budgeted to cost twice as much as the Three Gorges Dam, is the world's largest civil engineering endeavour and is not scheduled to be fully completed until 2050.
It might be more efficient, however, to encourage northern provinces to reduce their production of water-intensive food and focus on items which have higher value added and lower water content, according to the researchers.
But the government's efforts to encourage more industrial development in the west have so far had limited success. The south's industrial advantage has appeared to become even more entrenched in the last decade, forcing northern areas even deeper into water scarcity. (Editing by David Evans)