Pearl River Delta: 5 Water Must-Knows

By Feng Hu 18 May, 2017

CWR’s Hu on 5 water challenges lurking behind the dazzling economic success & water sources of the PRD

6 water scarce cities = 88% of PRD's GDP & >1/3 rivers 'unfit for touch'; various & holistic solutions needed
PRD set for economic transformation with 'Water Ten Plan'; industry facing tough regulations & water savings
Infrastructure & eco protection needed to manage floods, saltwater intrusion & sea level rise; business can lead

The Pearl River Delta (PRD) is one of the most developed regions in China. In 2016, this small delta region in the South generated RMB6.8 trillion, or 9.1% of the total national GDP1. This ‘jewel in the crown’ is considered a model for the rest of the country, according to The Economist.

Surface freshwater & seawater are both important for the PRD, which drives 9.1% of China’s GDP

Water is essential for the economy and people. Being close to China’s second largest river, surface water supports 98.7% of the region’s water needs from agriculture, industrial production to domestic use. Meanwhile, cities on the coast also use almost as much seawater, nearly 22 billion m3, for cooling power plants and desalination.

However, behind such dazzling economic success and seemingly abundant water resources lurk many water challenges. These water risks could constrain or even threaten its future growth.

Here are 5 key challenges to watch out for:

1. Guangdong is not water scarce but PRD is highly stressed due to rapid urbanisation 
The PRD commonly refers to 9 cities in Guangdong province, including Guangzhou, Shenzhen, Zhuhai, Foshan, Jiangmen, Dongguan, Zhongshan, Huizhou and Zhaoqing.

Let’s first be clear that, Guangdong province is not water scarce. With abundant water supplied by many of its rivers, the provincial annual water resources per capita was 1,782m3 in 2015. This makes it better off than many other provinces in China, more specifically the ‘Dry 11‘.

But if we look at the PRD, we see a very different picture: the average annual water resources per capita of this region was only 693m3. This is over 60% less than the provincial level. There are at least three reasons:

  • First, the PRD only has 31% of Guangdong’s water resources;
  • Second, population density of the PRD is 2.7x that of the rest of Guangdong: with only 30% of Guangdong’s land area, PRD 9 cities are home to 58.7 million people or 54% of Guangdong’s population. The most densely populated city, Shenzhen, is almost 36x more crowded than Shaoguan, a non-PRD city in the northern mountain region of Guangdong; and
  • Third, the PRD accounts for 79% of Guangdong’s GDP. Dominance in economic power, together with densely populated urban clusters, means that the PRD accounts for half of Guangdong’s water use.

PRD 9 Cities Map & Water Resources Per Capita
At the provincial level, Guangdong has already capped its total water use at 45.604 billion m3 and 45.018 billion m3 by 2020 and 2030, respectively. But clearly, the pressure from these water caps will be mainly on the water-stressed PRD cities.

2. 88% of PRD’s GDP generated by 6 cities in ‘water poverty’

As seen from above chart, six out of the nine PRD cities are considered water scarce – their annual water resources per capita fall below the 1,000m3 water poverty mark as defined by the World Bank (see above chart). The worst is Shenzhen, where annual water resources per capita was merely 163m3, nearly half of that of Pakistan (297m3).

These 6 cities account for 77% of the PRD’s total population and 88% of its GDP. This means water scarcity in these cities could pose serious threat for the long-term development of this region.

To secure future water supply a RMB34.8 bn project is planned to divert 1.8 billion m3 of water to PRD

To secure future water supply in the PRD cities, a project with a total investment of RMB34.8 billion is expected to start construction later this year. Once completed, around 1.8 billion m3 of water will be diverted annually from the Xijiang River (the western tributary of the Pearl River) to three PRD cities: Guangzhou, Dongguan and Shenzhen. This is about 17% of the current water use of these three cities.

However, in addition to expensive large-scale engineering solutions, the region should also look into other ways in dealing with ‘water poverty’, such as improving water efficiency.

3. Water savings need to come from all users in the PRD

With nearly 59 million people living in this highly developed and urbanised region, domestic use takes up almost as much water as agriculture and industries. This is quite different from the situations at the provincial and national levels, where agricultural water use dominates (see pie charts below). As a result,

  • at the national level, the key focus is more on managing water use in irrigation and power;
  • at the provincial level, agriculture also accounts for over half of the total water use, but three quarters of grain crops sown areas lie outside the PRD;
  • while, for the PRD, savings have to come from all users including the people and industries.

2015 Water Use Mix PRD Guangdong China

Guangdong is one of the 7 pilot provinces for water rights trading
It also uses tiered water prices to encourage saving

Tougher competition instigates innovative solutions, which can be technological, but also regulatory. Guangdong is one of the 7 pilot provinces for water rights trading: this provincial regulation, put in force on 1 February 2017, allows such trading between water users or above-county level governments.

Moreover, Guangzhou city was amongst the earliest in China to introduce a tiered water tariff system to encourage water saving, which targets both domestic and industrial uses. Other PRD cities are expected to follow.

4. PRD is feeling more heat from ‘Water Ten’ & set for economic transformation

The Pearl River, in spite of its beautiful name, was once one of the most polluted rivers in China. Rapid growth in resource-intensive & polluting industries as well as urbanisation has put much pressure on the river.

As seen from the chart below, the overall water quality of the Pearl River Basin has been improving with Grade I-III up from 85% in 2009 to 95% in 2015. Despite the persistent Grade V+ water bodies, those with Grade IV-V quality dropped from 12% in 2009 to 2% in 2015.

Water Quality Pearl River Basin PRD Dongjiang River

39% of river waters in PRD were considered ‘unfit for human touch’

However, if we zoom into the PRD and the Dongjiang River, both within the Pearl River Basin, the situation gets worrying. Measured as a share of assessed river length by water resources department (different from the method used by environmental authorities), 24% of the PRD watershed and 11% of the Dongjiang River were classified as Grade V+ water quality in 2015. For the PRD, 39% of its river waters were considered ‘unfit for human touch’ (below Grade III).

Given such a dire situation, the PRD, along with the Yangtze River Delta and the Beijing-Tianjin-Hebei region, is facing tighter deadlines in meeting water targets in both the national and provincial ‘Water Ten Plan’. This pressure, together with economic slowdown and labor shortage, is forcing the PRD to seek new engines of growth.

Services, often with smaller water footprints, already account for 55% of its GDP. Industries are also moving up the value chains: in 2016, advanced manufacturing industries and high-tech industries accounted for 54.9% and 32.5% of the region’s total industrial added value respectively.

 Water use per unit of GDP in Guangdong fell by 85.3% from 1997-2015

Such changes have brought positive impacts on water use: at the provincial level, water use per RMB10,000 of GDP dropped by 85.3% from 547m3 in 1997 to 80m3 in 2015, and water per RMB10,000 of industrial added values fell by 92.4% from 401m3 to 31m3 in the same period.

But for wastewater discharge, change is coming but slower. Data in 12th Five Year Period show a rather restrained trend from industrial sources in PRD 9 cities, despite an overall increase in total discharge. To further bring down wastewater discharge, there needs to be a shift towards cleaner and higher added-value industries in the economy.

5. Floods, saltwater intrusion & sea level rise call for more comprehensive risk assessment

Being on China’s southern coast with a sub-tropical climate, the PRD is prone to extreme weather events such as typhoons and floods. In 2016, Guangzhou city had a very wet year with 42% more annual rainfall than a normal year, the highest in historical records. For instance, heavy rains during 9 and 10 of May 2016 led to a subway station being flooded and many roads turning to waterways.

  • 80% developed urban areas to meet ‘sponge city’ standards by 2030

The good news is that the city recently announced its plan to transform 80% of its developed areas to meet relevant ‘sponge city’ standards by 2030, in line with the provincial plan. The nearby Shenzhen city is also picked as one of 30 national sponge city pilots. Large investment is expected and celebrated by many. But, how to attract more private investment and also integrate ‘sponge city’ features in the planning stage are important issues to address before another infrastructure spree.

  • Saltwater intrusion threatens water supply

In addition to urban floods, the PRD also faces saltwater intrusion near the river mouth of the Pear River. This has been a threat to the water security of nearby cities, in particular Zhongshan, Zhuhai and Macau. From October 2016 to February 2017, due to active saltwater intrusions, the local government had to transfer in total 133 million m3 of water from upstream to secure water supply for Zhuhai and Macau.
Mangroves on Shenzhen Coast As Natural Defence

  • Guangdong’s coast will see 0.065-0.170m sea level rise in the next 30 years

Furthermore, the risk of sea level rise is also increasing due to climate change. The State Oceanic Administration’s 2016 Sea Level Report warns that Guangdong’s coastal regions may see a 0.065-0.170m rise in the next 30 years. This should be alarming news for airports and many other assets located right on the coast.

We should definitely re-assess the importance of protecting 19,800ha mangrove forests along Guangdong’s coast (see photo), which researchers believe can serve as natural defence, but are constantly threatened by rapid urban development.

Moreover, investing on hard infrastructure is also needed. Guangdong has been investing to strengthen its existing coastal flood barriers and build new ones since 2011. Recently, it announced to invest another RMB11.3 billion to continue such efforts.
But, to finance these projects, the government will need private investment as well. After all, this is to protect the interest of all the stakeholders that face risks. Much more could be done by businesses & investors:

  • on one hand, to better understand water & climate risks in the region; and
  • on the other hand, to find ways to mitigate these risks and build resilience.

By 2020, Guangdong hopes to establish the PRD as a national pilot on green development. For water, given all these challenges, it would mean that businesses in the region need to lead in water stewardship. Only by doing this, can it ensure long-term water security and economic prosperity for both individual business and the PRD.

1 Hong Kong and Macau are not included in the narrow definition of the Pearl River Delta (PRD) that appear in many of China’s economic and environmental policies, nor counted in national or provincial statistics.

Further readings

  • Why Should PRD Business Lead In Water Stewardship? – With the Pearl River Delta set to lead China’s economic growth, China Water Risk’s Feng Hu & the Alliance for Water Stewardship’s Zhenzhen Xu explain why business should adopt water stewardship to ensure continued prosperity
  • Water Stewardship In Industrial Parks: TEDA Pilot – Industrial parks generate 22.5% of China’s GDP but can this last given water security and pollution concerns? An Chen, from the TEDA Eco Center & Zhenzhen Xu from the Alliance for Water Stewardship show how the Tianjin Economic-Technological Development Area leads in mitigating these risks
  • Sharing Rivers: China & Kazakhstan – China and Kazakhstan share 24 rivers. Dr. Selina Ho from the National University of Singapore reviews their history of transboundary river co-operation and why this relationship is more advanced than China’s river relations with India & the Mekong states
  • The Future Of Sustainability Reporting – With GRI replacing G4 guidelines with the first global sustainability reporting standard, we sat down with Global Reporting Initiative’s Ásthildur Hjaltadóttir to learn what this means & future trends in disclosure
  • Corporate Water Targets: A New Approach – More and more companies view water as a business risk and water stewardship as a solution but current water stewardship metrics for on-ground projects are inadequate. Tien Shiao from the Pacific Institute shares a new approach on setting corporate water targets

Water policies

  • Blue Skies & 13FYP Green Development – Air pollution and the battle on “blue skies” was by far the major environmental focus at China’s Two Sessions. Water and soil are no less important but yet softer and more general targets were set for them. See our review for the key takeaways
  • 5 Trends For The Year Of The Rooster – The Rooster crows a new pecking order as China leads the global climate fight & drives structural changes at home. Stay on top with our 5 trends and make sure you are not walking on eggshells but laying golden eggs
  • Beautiful China 2020: Water & The 13 FYP – China wants to exert tireless efforts to build a Beautiful China where the sky is blue, the land is green and the water runs clear. Find out what this means for water, the environment and the economy in the next five years in the upcoming 13th Five Year Plan
  • 5 Regulatory Trends: From Enforcement To Finance – Since 2016, China’s environmental policy landscape has undergone a series of important changes. CWR’s Xu summarises key regulations & 5 trends you need to know, from greater enforcement to green finance

Water & economy

  • Can We Build A Clean & Smart Future On Toxic Rare Earths? – Almost all smart, green & clean tech need rare earths to work, but mining & processing these are highly polluting. Lead author Liu of China Water Risk’s new report:  “Rare Earths: Shades Of Grey” explores this paradox. It is time to rethink our clean & smart future
  • Water-nomics: Trade-offs Along The Yangtze – With significant economic, water use and pollution disparities along the Yangtze River, China Water Risk & the Foreign Economic Cooperation Office of the Ministry of Environmental Protection, publish a joint brief to explore strategies to find the right development mix. Check out some of the key findings in this review
  • China Water-nomics – Will China’s economic development be hampered by limited water resources?  The very existence of the Three Red Lines signals that China can’t keep developing the way it has. Read on for why GDP will be capped at 5.7% given China’s water-nomics
  • Made in China 2025: Are You On The List? – How does the new Made in China 2025 Action Plan fit with other ‘Future China’ plans? Are the ten industries in Made in China 2025 the same as the Circular Economy Ten? Find out why which list matters

Water stewardship

  • Developing A Global Water Stewardship System – Alliance for Water Stewardship’s Zhenzhen Xu, Ma Xi & Michael Spencer introduce the first ever global water stewardship standard and share lessons learnt from Ecolab’s pilot at their Taicang China chemical plant
  • Water Stewardship: The Impact To Date – A new report finds there has been little evolution from business -as-usual in regards to water management. What behaviours need to change? How can this be achieved? We sat down with report authors James Dalton from the International Union for Conservation of Nature (IUCN) & Peter Newborne from the Overseas Development Institute (ODI)
  • Innovating Water Stewardship Through Business Ecosystems – William Sarni, water stewardship expert, on the need for innovation in water strategies in order to better position for 21st Century water risks. Sarni points to “business ecosystems” as the driver for this innovation and value creation
  • Managing the World’s Liquid Asset – Water – Savvy investors now recognise water as a business risk yet there is still no agreed global standard & framework for sustainability reporting. Biswas, Tortajada & Chandler on why corporates & governments must do more to change the culture & mindset over the use of water
Feng Hu
Author: Feng Hu
Having previously led CWR’s work on water-nomics, Feng now sits on our advisory panel to help us push the conversation on integrating water considerations in planning sustainable transition and mobilising finance toward climate and water resilience. Feng currently works on ESG advisory at a regional financial institution. Prior to that, Feng worked as Sustainable Finance Research Manager APAC at V.E, part of Moody’s ESG Solutions. During his time at CWR, he initiated and led projects for CWR including the joint policy briefs with China’s Foreign Economic Cooperation Office of the Ministry of Environmental Protection on the water-nomics of the Yangtze River Economic Belt. Feng expanded the water-nomics conversation beyond China by co-authoring CWR’s seminal report “No Water No Growth – Does Asia Have Enough Water To Develop?”. He has given talks on water-nomics and other water issues at international conferences, academic symposiums, corporate trainings and investor forums. Previously, Feng also sat on the Technical Working Group of the Initiative for Climate Action Transparency (ICAT) and worked as a senior carbon auditor on various types of climate change mitigation projects across Asia and Africa. Feng holds two MSc degrees – one in Finance (Economic Policy) from SOAS University of London and the other in Sustainable Resource Management from Technical University of Munich – and a BSc degree in Environmental Science from Zhejiang University.
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