By Fan Xuezhi, Task Force on "Improving Mechanism for the Construction and Management of Small Water Conservancy Works", Research Department of Foreign Economic Relations of DRC

Research Report No 95, 2011

I. Investment Structure for Small Water Conservancy Works

1. Importance of water conservancy works drives up investment

During the 9th Five-Year Plan period, an accumulative total of 213.3 billion yuan was invested for the construction of water conservancy works across the country and the figure reached 362.5 billion yuan during the 10th Five-Year Plan period. During the 11th Five-Year Plan period, the construction of water conservancy works scaled new heights, with the nationwide investment reaching a total of 700 billion yuan or so. Of this total, the investment by the central government reached 293.4 billion yuan.

During the 11th Five-Year Plan period, the small water conservancy works contributed much to the increase of grain yield in years running. Since 2006, China has made a total investment of 18.04 billion yuan for the transformation of supporting and water-saving facilities for the continuous construction of large irrigated areas and transformed the supporting and water-saving facilities for the continuous construction of 398 large irrigated areas. The construction of water conservancy works has increased the effective irrigated area by an accumulative total of 50 million mu, improved an irrigated area of 190 million mu, increased the water-saving irrigation area by 85 million mu and raised the effective utilization coefficient of agricultural irrigation water from 0.45 to 0.50. China has produced such cash crops as cotton and vegetables making up respectively 75% and 90% of the national total on an irrigated area less than half of the arable lands of the whole country. Irrigated areas have become important base areas to ensure China’s food security. According to the survey made by the research group in 12 provinces, municipalities and autonomous regions, the absolute amount of water conservancy investments made by various localities in recent 5 years has increased substantially in years running, and such investments have been mainly made in farmland irrigation, consolidation of dangerous reservoirs, land reclamation, flood control and drought relief. For example, since the 11th Five-Year Plan period, a total of investment of 3.39 billion yuan has been made in the construction of small water conservancy works in Sichuan province, making up 14% of the total water conservancy investment. Of this total, the investment by the central government amounted to 755 million yuan and the funds provided by the Sichuan provincial government came to 1.079 billion yuan, accounting for 22.3% and 31.8% respectively of the total water conservancy investment. After the removal of the rural labor accumulation and voluntary labor service system, the investment in the construction of small water conservancy works has reduced sharply in Jiangsu province. In 2005, the investment in the construction of water conservancy works at various levels added up to only 67 million yuan in Jiangsu, of which the investment by the central government accounted for 10 million yuan, the investment by the provincial government accounted for 10 billion yuan, the investment by the municipal governments accounted for 1.7 million yuan, the investment by the county governments accounted for 43 million yuan and the self-raised funds from the farmers amounted to 42 million yuan, making up 62% of the total investment. Since 2009, by taking the establishment of key counties for the construction of small water conservancy works as the turning point, the Jiangsu provincial government has intensified its financial investment efforts, adjusted its investment structure and changed the farmer-labor-oriented construction of small water conservancy works in the past to the present construction based mainly on public investment, setting off a new upsurge of construction of water conservancy works. In 2010, a total of 1.824 billion yuan was invested in the construction of small water conservancy works in Jiangsu, being 27 times that in 2005, of which the investment by the central government reached 376 million yuan, making up 21%, the investment by the provincial government reached 674 million yuan, making up 37%, the investment by both municipal and county governments reached 717 million yuan, making up 39%, and the self-raised funds from the farmers and other funds accounted for 3.1% in all.

2. Support by the central government intensifies and the multi-level investment pattern takes its initial shape

According to the survey made by the research group, during the 11th Five-year Plan period, of the water conservancy investments in 6 provinces, municipalities and autonomous regions including Chongqing, Jiangxi, Hubei, Anhui, Gansu and Inner Mongolia, the investment by the central government accounted for 48.6%, the investment by provincial governments accounted for 21.3%, the investment by prefectural and municipal governments accounted for 5.6% and the investment by governments at the county level and under accounted for 24.5%.

In recent years, with the widening coverage of public finance in rural areas, the central government has evidently increased its investment in the construction of small water conservancy works, which holds a dominant position in various types of major expenditures. In 2005, the central government set up a special subsidy fund for the construction of small water conservancy works and has mounted up the investment year by year. During 2005~2010, the central government invested a total of 17.2 billion yuan for the construction of the works, bringing along more than 17 billion yuan of local investment. According to statistics, since the launching of investment project by the central government for the construction of small water conservancy works, 8.6 billion cubic meters of water has been conserved, the area of increased and restored effective irrigated lands has reached more than 52 million mu, more than 59 million mu of effective irrigated areas have been reclaimed and the overall agricultural production capacity has increased by 11.6 billion jin¹. Take Hubei Province as an example. From 2005 to 2009, a total of 1.269 billion yuan was invested in the said province for the construction of small water conservancy works, of which the investment by the central government amounted to 378 million yuan, the investment by the provincial government amounted to 262 million yuan, the investment by municipal and county governments amounted to 67 million yuan and the self-raised funds from the farmers amounted to 562 million yuan. In 2010, a total of 803 million yuan of investment was made for the construction of small water conservancy works in Hubei, of which the investment by the central government reached 321 million yuan, the investment by the provincial government reached 168 million yuan, the investment by municipal and county governments reached 84 million yuan and the farmers’ self-raised funds paid by labor reached 230 million yuan; and the investment by the central government increased by 10 percentage points. From 2009 onward, 37 counties in Hubei have been placed among the key counties nationwide for the construction of small water conservancy works, with the investment by various kinds of major units totaling more than 1 billion yuan, of which 42% are investment from the central government. For instance, during the 11th Five-Year Plan period, the Water Conservancy Department, the Department of Land Resources, the Poverty Alleviation Department and the Department for Comprehensive Agricultural Development of the Inner Mongolia Autonomous Region invested a total of funds of 6.494 billion yuan in the construction of water conservancy works, accounting for 38.78% of the total water conservancy investment. Of this total, the input by the four departments were respectively 2.266 billion yuan, 1.751 billion yuan, 246 million yuan and 2.231 billion yuan. Under the guidance of the central finance, a pattern of investment for small water conservancy works has now taken initial shape in various localities, with central government spending holding a dominant position and other spending undertaken by governments at various levels and with the participation by all relevant departments.

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^{1Source: Rural Water Conservancy Department of the Ministry of Water Resources, P.R.C.}