Spatiotemporal Evolution and Drivers of Chinese Industrial Virtual Water in International Trade

Abstract

As a water-scarce country and the world’s largest trader of industrial products, China’s industrial virtual water (VW) flow may exacerbate its water scarcity problem. Thus, industrial VW flows’ spatial and temporal evolution in international trade should be analyzed, and influencing factors must be identified. This study developed the multiregional input–output (MRIO) model, combined with the Leontief inverse matrix, to measure and decompose the industrial VW flows between China and other economies from 2000 to 2014. This extended MRIO model considers intermediate production water consumption and indirect water use, which technically distinguishes the sources of pressure on water use more accurately, thus enabling a new elaboration of the composition of China’s industrial water use. Then, the evolution of China’s industrial VW trade is analyzed spatiotemporally, and the structural decomposition analysis (SDA) method is invoked to identify the endogenous drivers further. The results indicate the following. (1) China was a net exporter of industrial VW trade. The main VW export sectors in China were the manufacture of textiles and wearing apparel, paper products, and chemical products, which had the characteristics of high water consumption, high pollution, and low added value, respectively. (2) The net exports of industrial VW from China mainly went to the US, EU, ROW (rest of the world), and Japan. China’s VW exports to the US and Japan are declining, while exports to the EU and Russia are increasing. (3) The decrease in the water-use coefficient in all industrial sectors in China was the most critical reason for inhibiting the increase in the country’s industrial VW exports. The export structure effect of intermediate products, product structure effect of foreign final demand, and scale effect of foreign final demand were the primary reasons for the rise in VW exports, but all gradually diminished. Moreover, the structural effects of China on the use of domestic intermediate products had a significant positive effect on the increase in VW exports. In contrast, those of foreign products had an extremely weak effect.