The Wulanmulun River once ran through Daliuta, a town in China’s northern Shaanxi province. All that remains of the waterway today is a pond, which locals say is contaminated by waste from the world’s biggest underground coal mine. Environmentalists also contend that mining is sapping the area’s groundwater supplies. “I worry about the water,” says Zhe Mancang, the 58-year-old owner of a liquor store in town. “But my family’s here, and my customers are from the mines.”
Daliuta is the epicenter of a looming collision between China’s scarce supplies of water and heavy reliance on coal, which diverts millions of liters a day for its extraction and cleaning. “You can’t reconcile targets for coal production in, say, Shaanxi province and Inner Mongolia with their water targets,” says Charles Yonts, head of sustainable research at brokerage CLSA Asia-Pacific Markets in Hong Kong.
About 28,000 rivers have dried up across China since 1990, according to the country’s Ministry of Water Resources and National Bureau of Statistics of China, and those that remain are mostly polluted. China’s per-person share of fresh water is 1,730 cubic meters, close to the 1,700 cubic meter level the United Nations deems “stressed.”
The situation is worse in the north, where half of China’s population, most of its coal, and only 20 percent of its water are located. A government plan to boost coal production and build more power plants near mines will lift industrial demand for water in Inner Mongolia 141 percent by 2015 from 2010 levels, causing aquifers to dry up and deserts to expand, according to a report Greenpeace commissioned from the Chinese Academy of Sciences. “After five years there won’t be enough water in Ordos in Inner Mongolia,” says Sun Qingwei, director of the climate and energy campaign at Greenpeace in Beijing. “The mines are stealing groundwater from agriculture. Local governments want their economies to boom.”
China’s central government is responding with tighter limits on water usage, a new approach to rates that allows for steep price increases, and plans to spend 4 trillion yuan ($652 billion) by 2020 to boost water infrastructure. Rules enacted this year require the manufacturing hubs of Jiangsu and Guangdong provinces and Shanghai to reduce water use every year even as their economies expand. In May 2012 authorities in the city of Guangzhou hiked prices 50 percent for residents and 89 percent for industrial users to help pay for improvements in the water supply, according to an April report by Goldman Sachs Group (GS).
To alleviate shortages in the north, the central government in 2002 approved the 500 billion yuan South-to-North water diversion project. The plan is to move 44.8 billion cubic meters of water from the Yangtze River annually along three routes. The first leg, slated for completion this year, will measure 1,467 kilometers, roughly double the length of the Erie Canal.
Even this massive undertaking may not be enough: A 2009 report by a group that includes Coca-Cola (KO) and SABMiller (SBMRY) noted that China’s annual demand may exceed supply by as much as 200 billion cubic meters by 2030, unless “major capital investments to strengthen water supplies are made beyond those presently planned.”
Chinese industry uses 4 to 10 times more water per unit of production than the average in developed countries, according to research firm China Water Risk in Hong Kong. Only 40 percent of industrial water is recycled, compared with 75 percent to 85 percent in developed countries, the World Bank says.
If the situation becomes dire enough, companies might consider transferring production elsewhere. “In an absolute worst case you’d see a large-scale shift in economic activity and population further south for lack of water, and manufacturing increasingly moving abroad,” says Scott Moore, a research fellow at the Harvard Kennedy School’s Sustainability Science Program.
Farmers in some parts of China are already paying the price, as they have to dig deeper and deeper wells to find clean water or are being forced out by local governments who see bigger economic gains from mining. In Zhanggaijie village, in Shaanxi province, Li Qiaoling says she is one of 200 people awaiting compensation after a coal mine polluted the local water supply. Officials have also promised to relocate the villagers. “We’re angry because we have to leave,” says Li, who still grows corn on her small plot, despite the contamination. “We’re worried about moving to a strange place.”