Understanding of Regional Trade and Virtual Water Flows: The Case Study of Arid Inland River Basin in Northwestern China

Living with the increasingly severe water stress has currently become a crucial concern in the arid inland river basin in northwestern China. Despite water scarcity, water consumption in the basin has been on the rise, due to improvement in the standards of living and a rapid growth of the basin population over the past few decades. We present the first analysis of virtual water flows across all economic sectors within arid inland river basin in northwestern China, the area with the geopolitical importance of China’s Belt and Road Initiative, and with domestic importance as a major agricultural producer and trade power. Results show that the arid inland river basin in northwestern is an absolute net exporter (gross exports greater than gross imports). Approximately, 72.3% of water consumption in the basin is for exported commodities, with the biggest export flows of virtual water being associated with agricultural production. The traded volumes of virtual water have been increasing progressively over the years. It is important to note that the basin produces and exports water-intensive products but imports water non-intensive commodities as the basin in northwestern China where the water scarcity is a problem and the environment is negatively affected. This opens the domain question of whether environmental damage in the arid basin caused by water consumption is worth the socioeconomic benefits. We highlight the major role of economic scale in increasing virtual water changes in the basin over the time period of around 10 years. Demand for water use in agriculture will continue to increase as a result of growing population and economic growth. Environmental demands for water will also vie for scarce water supplies in the future. A better detailed understanding of regional trade and virtual water flows within arid inland river basin in northwestern China can in turn help decision-making processes when trying to promote appropriate policy measures, reflecting local water scarcities, water prices and ecological health concerns.