ABSTRACT
China is facing an acute water scarcity challenge. Driven by population growth, demographic change and rapid economic development, a dramatic increase in urban and industrial water use is occurring (Yong, 2009). Given this situation, it is easy to recommend that China should include water rights trading in the suite of mechanisms it uses to manage water scarcity. China, however, is a socialist economy with little history of formal property rights and market-based approaches to environmental policy problems. Given this background, the proposition that China might consider using water rights trading to help resolve its increasingly acute water scarcity challenges seems impossible. Yet, this is what this country is trying to do.
