1 E.g. Wu Mulin argues that the main problem with China's abstraction policies lies in low charges so the government should increase them: Mulin, Wu, “Jiangxi shuiziyuan fei xianzhuang, cunzai de wenti jiqi biaozhun de kexue queding” (“Status quo, existing problems and scientific standards of water abstraction charges in Jiangxi”), Jiage yuekan (Prices Monthly), No. 2 (2003), pp. 22–24Google Scholar.

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7 This is because of difficulties in measuring the exact magnitude of negative externalities. Indirect methods, such as hedonic pricing and contingent valuation methods, have shortcomings and the evaluated costs are far from comprehensive. E.g. when hedonic pricing uses variations in housing prices to reflect the value of local environmental attributes, the method only captures people's willingness to pay for perceived differences. However, if people are unaware of the links between environmental attributes and their property, the value will not be reflected in house prices.

8 In response, Baumol and Oates have suggested the standards and prices approach. In particular, because assessing the quality of externalities is nearly impossible, they propose that the government should initially establish an arbitrary target for environmental quality. Once a target of environmental quality was set, the use of charges to achieve specific targets will possess a least-cost optimality quality. Moreover, the information costs of the procedure are very low because a government could always adjust or readjust the charging levels to achieve the desired targets. See Baumol, William and Oates, Wallace E., “The use of standards and prices for protection of the environment,” The Swedish Journal of Economics, Vol. 73, No. 1 (1971), pp. 42–54CrossRefGoogle Scholar; Baumol, William and Oates, Wallace, The Theory of Environmental Policy (Cambridge: Cambridge University Press, 1988)CrossRefGoogle Scholar.

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11 The 1988 Water Law stipulated that the central government would set guidelines on abstraction policies design, while provincial governments would design and implement regulations according to local hydrological and economic conditions.

12 In 1993, the Ministry of Electricity and Industry issued a circular to provincial governments stating that hydroelectric and thermal power plants must be exempted from abstraction licence and abstraction charge policies since power production did not actually consume water (Circular on Problems Concerning Levying Abstraction Charges and Reservoir Development Fees for Hydroelectric Power Plants, 1993). However, the Ministry of Water Resources immediately issued the Circular on Collecting Abstraction Charges (1993) to provincial governments renouncing the exemption of hydroelectric and thermal power plants and stating that an abstraction charge is a user fee applied to whoever uses the resources. The difficulties faced by provincial governments in implementing these policies are easy to imagine.

13 Hong Kong and Macao are excluded from this study.

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16 Evidence of groundwater depletion and its impacts in China is contained in China Ministry of Water Resources and Nanjin Hydraulic Research Institute, China's Groundwater Exploitation and Conservancy, pp. 24–40Google Scholar.

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43 Lan, Jin and Zhengyong, Miao, “Liaoningsheng shuiziyuan fei zhengshou guanli cunzai de ruogan wenti yu gaige duice” (“Several problems in collection and management of abstraction charges and reform measures in Liaoning province”), Liaoning jingji (Liaoning Economy), No. 8 (2005), pp. 48–49Google Scholar; Quan Yirong and Liu Hongxia, “Existing issues in collecting,” pp. 17–18, 26.

44 Interview with staff from a municipal level water resource bureau in Liaoning province, 20 May 2009.

45 Jin and Miao, “Several problems.”

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