Impacts of water constraints on economic outputs and trade: A multi-regional input-output analysis in China

Water resource constraints pose significant challenges to sustainable development of economy, environment, and human society. This study addresses the existing gap in understanding the impacts of water resource constraints on economic outputs and inter-provincial trade in China. A water-use constrained multi-regional input-output (MRIO) model is developed to analyze the impacts on economic outputs resulting from different water constraints imposed on economic sectors. A series of scenarios are designed to represent different levels of sectoral water use restrictions based on short-term water policy and water stress alleviation targets. Results reveal that regions experience different levels of water stress displaying diverse economic impacts due to future water restrictions. Overall, national economic outputs will experience a 0.76-1.14% decrease compared to the baseline scenario, that is, the "business-as-usual" scenario. Provinces with lower levels of economic development tend to be less resilient to the economic losses arising from water constraints. As such, Ningxia and Shanxi show with the greatest relative economic impact, accounting for 7.09% and 4.21% of their respective provinces' economic outputs under the baseline scenario. Furthermore, the direction of net bilateral trade, such as net trade between Henan and Shaanxi or between Henan and Hunan, would reverse under water constraint scenarios from the baseline scenario. This underscores the importance of considering the cascading effects of local water constraints on inter-provincial trade. Our study highlights the trade-offs between water conservation and economic development, emphasizing the need for region-specific water-saving measures.