Lifting China's Water Spell

China is a country with significant but unevenly distributed water resources. The water stressed North stays in contrast to the water abundant and polluted South defining China's current water environment. In this paper we use the latest available data sets and adopt structural decomposition analysis for the years 1992 to 2007 to investigate the driving forces behind the emerging water crisis in China. We employ four water indicators in China, that is, freshwater consumption, discharge of COD (chemical oxygen demand) in effluent water, cumulative COD and dilution water requirements for cumulative pollution, to investigate the driving forces behind the emerging crisis. The paper finds water intensity improvements can effectively offset annual freshwater consumption and COD discharge driven by per capita GDP growth, but that it had failed to eliminate cumulative pollution in water bodies. Between 1992 and 2007, 225 million tonnes of COD accumulated in Chinese water bodies, which would require 3.2-8.5 trillion m3 freshwater, depending on the water quality of the recipient water bodies to dilute pollution to a minimum reusable standard. Cumulative water pollution is a key driver to pollution induced water scarcity across China. In addition, urban household consumption, export of goods and services, and infrastructure investment are the main factors contributing to accumulated water pollution since 2000.