Water Resour Manage (2009) 23:2655–2668 DOI 10.1007/s11269-009-9401-x Water Scarcity and Water Use in Economic Systems in Zhangye City, Northwestern China Yong Wang · Hong-lang Xiao · Rui-fang Wang Received: 8 December 2007 / Accepted: 14 January 2009 / Published online: 10 February 2009 © Springer Science + Business Media B.V. 2009 Abstract Water has traditionally been considered a physically scarce resource in Northwestern China, and most investigations of water scarcity focus on the finite nature of water supplies. Based on the input–output analysis, this paper establishes a number of indicators of water consumption to analyze the structural relationships between economic activities and their physical relationships with the water resources. These indicators allow us to calculate the level of total water consumed by each sector and to distinguish between direct and indirect consumption, thus, offering the possibility of tracing the source of indirect water consumption. By drawing on the water consumption in Zhangye, a city situated in Northwestern China which is characterized by water shortage, we have discussed how the “problem” of scarcity has been constructed in this area. It is shown that the expanding agriculture and the unsuitable trade structure of exports and imports are likely to be responsible for the increasing scarcity of water in Zhangye. As a result, it seems that the problem of water scarcity in Zhangye is not necessarily a given, but instead the results of poor resource use, coordination and inadequate resource management. Keywords Water scarcity · Input–output analysis · Water consumption · Virtual water Y. Wang (B) · H.-l. Xiao Heihe Key Laboratory of Ecohydrology and Integrated River Basin Science, Cold and Arid Regions Environment and Engineering Research Institute, Chinese Academy of Sciences, Lanzhou, 730000, China e-mail: [email protected] R.-f. Wang Zoucheng Environmental Supervision and Protection Center, Jining, 273500, China Y. Wang 320 Donggang West Road, Lanzhou 730000, People’s Republic of China 2656 Y. Wang et al. 1 Introduction Over the past two decades, China has experienced an unprecedented economic boom, with real GDP growing at an annual average rate of about 10%. Despite the robust performance, the potential risks associated with water scarcity have brought about an emerging challenge to the country’s economy and environment. This is particularly true for the inland river basins in northwestern China that facing severe water shortage. In these areas, annual rainfalls are low and water resources are deficient. Rapid economic growth and expanding agriculture in resent years have resulted in excessive use of their water resources, causing environmental degradation and generating tensions in the eco-economic system. For example, the Ejina Oasis downstream the Heihe River (the second-longest inland river in China) shrank from 6,940 km2 in the early 1960s to 3,328 km2 in the early 2000s because of the huge consumption of the limited water resources in the middle reaches, and the area of desert increased by 460 km2 during this period (Feng and Cheng 2001). Currently, the Ejina Oasis has become a main source of dust for sandstorms in northwestern China (Gao et al. 2003; Wang et al. 2008). There are numbers of researches related to the water scarcity in the inland river basins in northwestern China. Previous researches have shown that the main cause of the scarcity was the limited water availability due to low rainfall (Gao and Shi 1992; Feng and Qu 1997; Qu et al. 1997). Indeed, for these areas, water is a limited natural resource and water scarcity is emerging when the demand outstrips the lands ability to provide the needed water. As a result, more recent studies tend to show that the water scarcity is not only produced by natural causes, but also induced by human activities. For example, Lu et al. (2003) examined the changes of landscape structure and composition in the upstream of the Heihe River and found that the forest and grass land had been being replaced by crop land due to growing population in rural area. They pointed out that the degradation and land use conversion of watersheds inevitably reduced the amount of water available downstream. Yang et al. (2003), from an analysis of water availability, water demand and water price, concluded that man-made dry regimes were now adding to the natural water scarce conditions, in many cases aggravating the existing situation. Qi and Luo (2005) indicated that cases of downstream users receiving polluted water from middle reaches had increased dramatically due to a large increase in agricultural fertilizer and pesticide use in the past decades. Ji et al. (2006) studied the water supply and demand in the middle reaches of the Heihe River and found that the groundwater level had been steadily decreasing due to over pumping and decrease in recharges. Moreover, while there is some acknowledgement of the differences between water shortage (levels of available water do not meet certain minimum requirements) and water scarcity (a “social construct” that determined both by the availability of water and by consumption patterns), largely most of the researches focused on volumetric and physical measures, especially with respect to both a growing population and competing demands for water (Yang and Zehnder 2001; Xu and Long 2004; Li et al. 2005; Xiao and Cheng 2006; Fang et al. 2007; Cai 2008). In addition, none of the existing researches have investigated the socio-economic processes of water use that have led to the creation of water scarcity in these areas till now. Based on the input–output analysis, we established a number of indicators of water consumption and applied them to Zhangye, middle reach of the Heihe River, to Water Scarcity and Water Use in Economic Systems in Zhangye City 2657 analyze the structural relationships between economic activities and their physical relationships with the region’s water resources. The objectives of this paper are to examine how a “problematic” agriculture has exacerbated scarcity conditions and how the “problem” of scarcity has been constructed. The rest of the paper is organized as follows: the study area, data and methods employed are introduced first. Then, the results are reported. Lastly, there is a discussion of the findings and a brief conclusion. 2 Materials and Methods 2.1 Study Area The Zhangye City, located in the middle reaches of the Heihe River (Fig. 1), is 42,000 km2 in size and has a population of 1.264 million, including a rural population of 911,000 and an urban population of 353,000. The climate of this region is arid, with annual precipitation ranging from 100 to 300 mm, and potential annual evapotranspiration reaching 2,000 mm. Although located in one of the driest zones in the world, Zhangye consists of many oasis ecosystems that are mainly watered by the Heihe River. Water use in this city accounts for about 93% of all water use from the river, with 94% of this water used for agriculture. According to the Zhangye Statistical Yearbook, the irrigated area in Zhangye was about 68,667 ha in the 1950s, but by 2002, had expanded to almost 266,000 ha, including 212,000 ha of farmland and 41,000 ha of forest and grassland. Based on irrigated farming, Zhangye has become an important center of Gansu Province for the production of commodity grains. Since the Chinese national economic reforms that began in 1978, new industrial sectors have arisen, such as mining (including coal production), production of building materials, electric power, metallurgy, machinery assembly, transportation, and services. In recent years, Zhangye has experienced considerable economic growth as a result of these changes. The gross domestic product (GDP) was $837.3 million in 2001, which was 8% greater than that in 2000. In 2002, 2003, and 2004, the GDP increased to 916.8, 1013.1, and 1206.7 million US$, respectively, representing annual increases of 10%, 11%, and 12%, respectively, over the values in the previous year (GSB 2001–2005). Expanding agriculture and rapid economic growth have resulted in excessive use of the region’s water resources. According to GPBWR (2003), in 2002, the annual available water resources were 2.05 billion cubic meters, including 1.63 billion cubic meters surface water and 0.42 billion cubic meters groundwater, while the actual annual water utilizations were 2.42 billion cubic meters, of which 90% was consumed by the socio-economic systems, and of this amount, 96% was used for agriculture (Table 1). Ecological and environmental water demands are severely restricted for the excessive water use in socio-economic systems. As a result, the city seems to have locked into an environmental-economic dilemma through increasing dependency on the scarce water resources and further erosion of environmental quality. 2658 Y. Wang et al. Fig. 1 Location of Zhangye and the Heihe River Basin N Juyanhai He ihe Riv e Ejina Oasis Jiayuguan Jiuquan Zhangye Qil ia nM ou nta ins 50Km 0 50Km 2.2 Methodology 2.2.1 Input–output Analysis The input–output analysis is a top–down economic technique that uses sectoral monetary transactions data to account for the complex interdependencies of industries in modern economies (Lenzen 2003). Formally, for an economy of n sectors the standard input–output model is represented by the following expression: x = (I − A)−1 y (1) Table 1 The situation of water use in Zhangye City, 2002 (106 m3 ) Sources Surface water Groundwater Sum Production use Agricultural sectors Industrial sectors Service sectors 1,885.6 213.5 2,099.1 12.2 24.7 36.9 1.4 3.0 4.3 Household use Ecological use Sum 32.5 11.6 44.1 72.0 168.0 240.0 2,003.8 420.8 2,424.5 Source: The Gansu Water Resource Official Reports (GPBWR 2003) Water Scarcity and Water Use in Economic Systems in Zhangye City 2659 where x is an n × 1 vector of gross output, y is an n × 1 vector of final demand, A is an n × n matrix of technical coefficients, I is the n × n unity matrix, and (I - A)−1 is the “Leontief inverse” which gives the direct as well as indirect requirement coefficients. For more detailed introduction to input–output analysis see Miller and Blair (1985) and Leontief (1986). Equation 1 provides a framework for considering specific questions about the relationship between economic structure and economic activity and so opens up a path for the study not only of economic production but also of the effects of production and consumption on the physical environment (Suh 2004; Munksgaard et al. 2005; Roca and Serrano 2007). 2.2.2 The Intensity of Water Consumption As done in other works (Lenzen and Foran 2001; Velázquez 2005; Okadera et al. 2006), water was considered to be a production factor and measured in physical units in the study. The physical water consumption of a given sector w dj , j = 1, . . . , n divided by the gross output of this sector (x j) leads to a coefficient of direct water consumption intensity w d∗ j , that is d w d∗ (2) xj j = wj In addition to this physical water consumption, other goods and services are required by the production processes of a given sector. Consequently, in order to produce the inputs generated by other sectors, another requirement of water is also necessary. For this sector, it is the indirect water consumption. Direct consumption plus indirect consumption together amount to the total water consumption. Following Lenzen and Foran (2001), the level of total water consumption per output can be calculated as: w t∗ = w d∗ (I − A)−1 (3) t∗ t∗ d∗ d∗ t∗ t∗ d∗ d∗ where w = w1 , w2 , · · · , wn and w = w1 , w2 , · · · , wn represent the coefficient vectors of total and direct water consumption intensities, respectively. 2.2.3 The Matrix of Intersectoral Water Relationships Equation 3 captures the total water consumption if the final demand of any given sector changes by one unit. Rewriting this equation as its Taylor expansion, one can separate the direct from the total water consumption required to sustain production by an economy (Waugh 1950): w t∗ = w d∗ + w d∗ A + w d∗ A2 + · · · + w d∗ An + · · · (4) where, w is the water requirement for one unit of final demand from all sectors, I. This represents the direct water consumption. w d∗ A is the water required to allow the production of A · I. This is the “first-round” indirect water consumption. w d∗ A2 is the water necessary to allow the production of A(A I). This is the “secondround” indirect water consumption. w d∗ An is the water needed to produce the goods A(An−1 I). This is the “nth-round” indirect water consumption. Clearly, the total indirect water consumption is the sum of all rounds of consumption. Based on Eqs. 3 and 4, we can proceed to formulate a matrix of intersectoral water relationships (w ∗ ) associated with the final demand of an economy by subtracting the d∗ 2660 Y. Wang et al. direct water consumption from the total water consumption and changing the form of the direct water consumption vector. ∧ w ∗ = w d∗ (I − A)−1 − I ŷ (5) where ∧ indicates that the vector’s elements should be placed along the diagonal of a matrix. The elements wij∗ i, j=1,2,...,n of w* indicate the additional quantity of water consumed by sector i for the production of final demand in sector j. Thus, the sum of all the elements of column j expresses the total indirect water that required by sector j to produce the final demand of an economy, and the sum of all the elements of row i expresses the total indirect water that supplied by sector i to produce the final demand of an economy. 2.2.4 The Water Consumption Multiplier Our analysis also accounts for the “drag” effect of direct water consumption, which can be calculated with the intensities of total and direct water consumption defined earlier (Velázquez 2005): (6) mdj = w t∗j w d∗ j where mdj is the water consumption multiplier that expresses the total quantity of water consumed by the whole economy per unit of physical water used directly to satisfy the demand of sector j. After the multiplier mdj has been defined, it is easy to obtain a multiplier of indirect water consumption midj , simply by subtracting one from the mdj . midj = mdj − 1 (7) In this way, the indicator yields an estimate of the quantity of water used indirectly by sector j for each unit of physical water that is consumed directly. 2.3 Data In our analysis, we used two primary datasets: the quantity of water consumption for production sectors (in biophysical units) and the input–output tables (in monetary value units). The water data used in this paper was obtained from the Gansu Water Resource Official Reports, published every year by the Gansu Provincial Bureau of Water Resources (GPBWR 2003). At the most detailed level, water-intensive agricultural water use is divided into four categories: “Farming”, “Forestry”, “Animal husbandry”, and “Fisheries”. Other production use categories include “Mining and processing”, “Manufacturing”, “Production and supply of electric power and heat”, “Construction”, “Transportation and communications”, and “Services”. Thus, in this analysis, we used ten categories of production consumption of water. For the economic data, the basic input-output table for Zhangye in 2002 was constructed by the Office of the Input–Output Survey, Gansu Statistical Bureau. This input–output table classification is based on 17 sectors, and its framework centers on the supply and use tables for products, including the structure of the Water Scarcity and Water Use in Economic Systems in Zhangye City 2661 intermediate consumption of production sectors, final consumption, and exports and use of imported goods at current prices. To make the complete data set consistent, a few adjustments to the basic input–output table were necessary due to limitations of the water consumption data. As a result, we integrated the seven of the 17 sectors into the other sectors and created a simplified 2002 table for Zhangye that represents a ten sector by ten sector input–output table, whose classification of economic sectors is consistent with our division of the ten water use categories. 3 Results Table 2 shows the intensities and multipliers of water consumption in Zhangye. Our results show that the water consumption intensity (direct or total) of the agricultural sectors (“Farming”, “Forestry”, “Animal husbandry”, and “Fisheries”) was considerably greater than that of the other sectors because of the large physical water use in these sectors. As shown in Table 2, Per unit output, direct and total water consumption were all highest in the “Fisheries” sector at 1,294.2 and 1,688.5 m3 per thousand Yuan, respectively. In comparison, although indirect water use by the industrial and service sectors (“Mining and processing”, “Manufacturing”, “Production and supply of electric power and heat”, “Construction”, “Transportation and communications”, and “Services”) revealed that their total water use was higher than has been traditionally assumed, their water consumption intensities remained lower than those of the agricultural sectors. As examining the composition of total water consumption (i.e., by comparing direct versus indirect consumption), one can note that the water consumption was primarily direct in all agricultural water use categories except “Animal husbandry”. As shown in Fig. 2, direct consumption accounted for 83% of the total consumption in “Forestry”, 81% in “Farming”, and 77% in “Fisheries”. The high ratios of direct water consumption to total water consumption indicates that the water used in their production processes is primarily “real” water that originates from the limited surface and underground water resources. Contrary to the situation in the agricultural sectors, most industrial and service sectors were characterized by relatively high ratios of indirect water consumption to total water consumption. With the exception of the “Production and supply Table 2 Water consumption intensities and water consumption multipliers for Zhangye City, 2002 Sectors Farming Forestry Animal husbandry Fisheries Mining and processing Manufacturing Production and supply of electric power and heat Construction Transportation and communications Services Intensities (m3 /103 yuan) Multipliers Direct Total Total Indirect 589.8 854.2 89.8 1,294.2 5.4 9.3 41.2 1.8 1.2 1.8 725.3 1,025.1 308.5 1,688.5 65.3 163.1 87.3 89.6 62.8 45.4 1.2 1.2 3.4 1.3 12.0 17.6 2.1 48.7 54.6 25.4 0.2 0.2 2.4 0.3 11.0 16.6 1.1 47.7 53.6 24.4 2662 Y. Wang et al. Scetors Fig. 2 Composition of the total water consumption 10 9 8 7 6 5 4 3 2 1 0% 20% 40% 60% Compositions direct water consumption 80% 100% indirect water consumption of electric power and heat”, more than 90% of the total water consumption in the industrial and service sectors was attributable to indirect water consumption (Fig. 2). In our view, although these sectors use only a small amount of water directly in production, in order to produce the inputs (generated by other sectors) that they incorporate into their production processes, a high consumption of water is necessary. This can be confirmed by examining the values of the indirect water consumption multiplier (Table 2). For each cubic meter of water consumed directly in the “Transportation and communications sector”, satisfying an increase of production requires the consumption of an additional 53.6 m3 of water by other production sectors. Similarly, in the “Construction” sector, each cubic meter of water consumed directly requires the indirect consumption of an additional 47.7 m3 of water by the other sectors. Overall, increases in the production of these industrial and service sectors would require additional inputs from other sectors, locally or nationally. Table 3 shows the intersectoral water relationships, which indicate that the indirect water demand of the economy in the study area was mainly satisfied with products generated by “Farming” sector. As shown in Table 3, satisfying the production of final demand required an additional 1,329.1 × 106 m3 of indirect water to be consumed by the economy of Zhangye. Among them, 1,072.4 × 106 m3 of indirect water were supplied by “Farming”. Although sectors such as “Animal Table 3 Matrix of intersectoral water relationships (106 m3 ) Sectors Sectors 1 2 Sum 3 4 5 6 7 8 9 10 Farming 245.4 3.8 157.2 24.3 14.4 341.4 7.5 184.1 21.5 72.9 1072.4 Forestry 1.9 19.0 0.6 0.4 0.3 2.8 0.1 1.8 0.3 3.4 30.5 Animal husbandry 18.6 0.1 3.0 0.4 0.6 14.6 0.3 7.5 0.9 3.2 49.2 Fisheries 0.9 0.1 0.4 5.1 0.6 3.4 0.3 3.4 0.7 14.5 29.3 Mining and processing 0.2 0.0 0.1 0.0 0.5 1.4 0.2 2.1 0.1 0.5 5.2 Manufacturing 4.2 0.2 1.5 0.2 1.5 13.6 0.8 18.9 2.1 6.6 49.5 Production and supply of 5.1 0.3 1.3 0.3 6.1 22.4 5.4 28.9 3.0 11.1 83.9 electric power and heat Construction 0.2 0.0 0.0 0.0 0.1 0.4 0.1 1.0 0.2 0.8 2.7 Transportation 0.1 0.0 0.0 0.0 0.1 0.3 0.0 0.4 0.1 0.3 1.4 and communications Services 0.4 0.0 0.1 0.0 0.2 1.4 0.1 1.4 0.3 1.2 5.2 Sum 276.9 23.6 164.2 30.7 24.3 401.6 14.8 249.4 29.2 114.5 1329.1 Water Scarcity and Water Use in Economic Systems in Zhangye City 2663 Husbandry”, “Manufacturing”, and “Production and Supply of Electric power and heat” were other significant suppliers of indirect water, their indirect water demands in production process were satisfied with “Farming” sector. For instance, in “Animal Husbandry” sector, the indirect water supplied by the “Farming” sector was 157.2 × 106 m3 , amount to 96% of its all indirect water requirements. Similarly, the percentages in “Manufacturing”, and “Production and Supply of Electric power and heat” sectors were 85% and 51% respectively. These results convey the idea that the water consumed in Zhangye is first “embodied” in “Farming” products, and then incorporated into other sectors as an intermediate input. 4 Discussion and Conclusions Decades ago, water was viewed as a non-limited natural resource because it was renewed every year in the course of the seasons. Man progressively appropriated this resource and used it with few restrictions. Developments in controlling and diverting surface waters, exploring groundwater, and in using the resources for a variety of purposes have been undertaken without sufficient care being given to conserving and avoiding misuse the natural resource. As a result, the physical water resource scarcity condition was transformed into a socially conditioned water resource scarcity. Irrigated agriculture, which represents the bulk of the demand for water in most developing countries, is also usually the first sector affected by water shortage and increased water scarcity. In addition to the magnitude of the production in this sector, it can be explained by the great water consumption intensities and the high rate of direct consumption. The findings indicate that a slight increase in production in this sector would greatly increase the consumption of real water. However, we found that the increase of agricultural production was extraordinary over the past two decades. Between 1978 and 2002, the output value for “Farming” has increased from 136.0 million Yuan to 726.5 million Yuan in constant 1978 prices, representing an increase to above five times the 1978 value. The outputs of “Forestry” and “Fisheries” also increased remarkably during the same period, with increases from 2.4 million Yuan to 28.1 million Yuan and from 8,000 Yuan to 2.7 million Yuan, respectively (GSB 1979–2003). The massive expansion of agricultural activities during this period, therefore, had inevitably resulted in increasing use of water resources. Water consumption and demand have increased everywhere for agriculture and irrigation. However, these increases were particularly evident in Zhangye, where water is scarce and extremely valuable. As shown in Fig. 3, with the exception of “Animal husbandry”, other agricultural sectors in Zhangye City had experienced greater growth than those in China and Gansu Province since the Chinese national economic reforms that began in 1978. Moreover, in spite of the improvement in water-use efficiency in China year after year, the improvement in the study area is insignificant because of the fixed plant structure and the old irrigation system. Nowadays, 97% of the farmers continue using traditional flood irrigation methods such as flood and furrow irrigation (Chen et al. 2005). The expanding agriculture, therefore, is likely to be responsible for the increasing scarcity of water in Zhangye city. Virtual water provides a trade policy approach to resolving the regional watercrisis. According to the theory of comparative advantage, nations can gain from trade 2664 Y. Wang et al. 600 1300 Farming Forestry 550 1100 Growth rate (%) Growth rate (%) 500 450 400 350 300 250 200 900 700 500 300 150 100 100 1978 1990 1993 1996 1999 2002 1978 1990 Year 1000 1993 1996 1999 2002 1999 2002 Year 48100 Animal husbandry Fishery 900 40100 Growth rate (%) Growth rate (%) 800 700 600 500 400 32100 24100 16100 300 8100 200 100 1978 1990 1993 1996 1999 2002 100 1978 1990 1993 1996 Year Year Zhangye Gansu China Fig. 3 The growth rates of agricultural gross output in China, Gansu Province and Zhangye City during the period 1978–2002. Take the gross output value of 1978 as 100 and all the gross output values (GSB 1979–2003; NBSC 1979–2003) are calculated at constant 1978 prices if they concentrate or specialize in exporting the production of goods and services for which they have a comparative advantage, while importing goods and services for which they have a comparative disadvantage (Wichelns 2004). Consequently, a water-scarce region can thus aim at importing products that require a lot of water in their production (water-intensive products) and exporting products or services that require less water (water-extensive products). This is called the “import of virtual water” (Allan 1997), and net import of virtual water in a water-scarce region can relieve the pressure on its water resources. However, this does not currently seem to be happening in Zhangye. As analyzed in Section 3, the production of the economy (especially of the industrial and service sectors) would cause a high consumption of physical water by the “Farming” sector. This means that the industrial and service sectors require large quantities of products produced by the “Farming” sector as intermediate inputs to satisfy the demand created by their production. But it is important to note that in our study area, most of these inputs from the “Farming” sector are supplied only locally, not by other regions. In fact, as an important producer of commodity grains for Gansu province, Zhangye exports large volumes of farm products every year to other Water Scarcity and Water Use in Economic Systems in Zhangye City 2665 regions, in addition to meeting its own demand. Consequently, outside agricultural products, with high virtual water content, can not currently enter Zhangye in large quantities via commodity trade. Table 4 shows the commodity and the virtual water trade balance in Zhangye. Products of “Farming” and “Animal husbandry”, which are characterized by relatively higher virtual water contents, show a strongly positive net export balance. That is, large amounts of virtual water flow from Zhangye to other regions every year in the form of exported agricultural products. In contrast, products such as those of the “Manufacturing”, “Production and supply of electric power and heat”, “Construction”, and “Services” sectors show strong positive net imports. That is, the virtual water imports are lower due to the low total water consumption in the production processes of these sectors. Overall, although the commodity trade presented a net import balance, Zhangye made a great net virtual water “loss” from the exchange of commodities. This led to a net outflow of approximately 489.0 million cubic meters water, roughly equivalent to 20% of all the water consumption of the city. A net regional virtual water loss from a trade relation puts increasing pressures on the scarce water resources. With the regard to the calculation of virtual water contents of imports, we would like to point out that the task is not so straightforward as for exports, since the coefficients of water consumption intensity should be estimated based on input– output tables of the relevant regions from which the imports come. Evidently, this would be a difficult task in operation. Here, we assumed that the water consumption intensities to be used in assessing the virtual water embodied in imports are the same estimated for domestic industrial production. While this may not be ideal, the calculation method is useful because it could provide information to the decision maker how much water was saved by importing goods. Even though the most direct positive effect of virtual water trade is the water savings that generated from product imports for importing regions, water loss generated from product exports is still obvious for exporting regions. This is the case with Zhangye. To judge from our findings, the trade structure of exports and Table 4 Commodity trade and virtual water balance in Zhangye City, 2002 Sectors Farming Forestry Animal husbandry Fisheries Mining and processing Manufacturing Production and supply of electric power and heat Construction Transportation and communications Services Sum a Come Commodity (106 Yuan) Virtual water (106 m3 ) Exportsa Importsa Net exports Exports 1,179.85 22.76 380.96 5.40 210.15 285.16 0.00 12.05 38.18 93.16 77.40 139.58 1,642.30 877.17 1,167.80 −15.42 287.81 −72.00 70.56 −1, 357.14 −877.17 868.91 251.35 982.83 111.63 549.79 3,754.32 876.78 4,851.07 Imports Net exports 855.79 23.33 117.51 9.12 13.72 46.50 0.00 8.74 39.13 28.73 130.68 9.11 267.79 76.54 847.04 −15.81 88.78 −121.57 4.61 −221.29 −76.54 −113.92 139.72 77.82 15.78 88.03 7.01 −10.20 8.77 −326.98 −1, 096.75 24.94 1,184.50 39.77 695.53 −14.83 488.97 from The Office of the Input–Output Survey, Gansu Statistical Bureau. 2666 Y. Wang et al. imports is inconsistent with a virtual water strategy designed to maximize the value of Zhangye’s limited water resources. Therefore, water resource scarcity is not always the consequence of limited absolute supply or increased demand, but may also be due to inadequate resource management, poor coordination and poor allocation. From the point of view of regional sustainable development, switching from waterintensive, low-valued crops to higher-valued crops that require smaller diversions of irrigation water and reducing the export of virtual water appear to be necessary strategies for this arid area. Moreover, the industrial and service sectors which exhibited higher figures of indirect water consumption are the “driving forces” of the Zhangye economy due to the strong influence that their respective demands exert on the production of the rest sectors. These sectors should be supported by the local government for their drag effects upon the economy as well as the agricultural sectors. Their developments could maximize the value of Zhangye’s virtual water. The causes of water scarcity are varied. This study has addressed only the question of how a problematic agriculture and trade had exacerbated water scarcity conditions in Zhangye City based on the analysis of structural relationships between economic activities and their physical relationships with the region’s water resources. Hence, we think that our research is merely a first and incomplete approach to the issue. Another potential problem is that the division of the economic sectors is rough. Such a rough division might hide the differences of sub-sectors, as mentioned by one reviewer of this paper. Moreover, the input–output table used in our analysis was for the year 2002, and the present economic structure might be different from that of 2002. This problem may impose certain limitations on the analysis of our results. In addition, the input–output model adopted in our study is characterized by constant prices, fixed proportion production, and linear demand (Lenzen 2003; Spörri et al. 2007). This situation might lead to overstate the indirect water consumption because it ignores the potential substitution of production factors. Not withstanding these limitations, this study has produced some important findings, which might help to raise the awareness of governments about local water resources management. In the next stage of our research, we plan to update the data and complete our analysis on the issue of water scarcity with other factors, such as the land use pattern, the water price policy and the employment generated by each economic sector. Acknowledgements This research is part of the results from project KZCX2-XB2-04-03, which was funded by the Chinese Academy of Sciences. 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