The use of market mechanisms in water management in China.docVIP

The use of market mechanisms in water management in China 　　 1.Abstract 　　China is a country short of water resource, the per capita water resource is limited and the spatial distribution of water resources is extremely uneven. As a consequence, a major portion of regions in China are facing serious problem of water quality pollution, quantity shortage, aquatic ecosystem degradation and landscape destruction. 　　Research on economics of water is orientated from the water shortage. Once if the water becomes a scarce good resulting from the shortage, commercialization and market-orientation has become a natural or inevitable choice. Water would shift to general commodity from natural object which means the introduction of market mechanisms in water management. 　　 中图分类号：H059文献标识码：A文章编号：1673-0992（2010）11-0000-01 　　 　　2.Market mechanism 　　2.1The price mechanism 　　Price provides the incentive to both the consumer and producer. High prices would encourage the producers to make more production, but less consumption by the consumers. On the contrary, Low prices discourage the producers production, and encourage consumption by the consumers. The price would balance the forces of consumption (demand) and production (supply) by both incentives with no external institution for direction. This balance is so called the “equilibrium” by economists. 　　2.2.The supply and demand mechanism 　　The supply and demand mechanism (the economic model) provides the most efficient economic outcomes possible ---- maximized satisfaction for society, minimum cost. This efficiency outcome is always located on the production possibility curves frontier, where all resources are fully utilized. 　　3.The use of market mechanism in water management 　　3.1.The three different management methods 　　To attribute to the dual properties of water ---- daily necessity and scarce resource, it has a strong externality. In china, there are three methods in water management: limiting indicator, charge