Rapid expansion of irrigated agricultural and increasing urban demands for water have important implications for the economy of China, especially for the agricultural sector in the northern part of the nation. In response to the water crisis, China's government has begun in recent years to invest in research on techniques to save water in the agricultural sector, although there is a debate about the extent of success in adoption by farmers. Top policy makers have publicly stated they would allocate billions of dollars in funding if they knew it would succeed in saving water. Unfortunately, there has been relatively little research in China on the economics of water saving technology and there is almost no systematic information on the extent to which the technologies have been adopted, if they are appearing to save water, and the characteristics of the communities that have been adopting them. Our goal is to sketch a picture of the state of water saving technology in northern China to increase awareness of past trends and current status. In simplest terms, we seek to establish a set of first order facts about the role that water saving technology has been playing in China's agricultural sector. We pursue three specific objectives: (1) to illustrate progress in adoption over the past two decades, (2) to identify the characteristics of technologies that have been most successful and those that have not, and (3) to explain factors that might be promoting water saving technology and factors that might be holding back adoption. We find that, although water saving technologies have expanded rapidly in recent years—especially those that can be adopted by individual households (as opposed to those that require the collective action of an entire community), there is still considerable room for water saving technology to be expanded.

Despite the growing importance of groundwater in Chinese agriculture, there is a lamentable lack of systematic information on the groundwater economy, especially on the agricultural consequences of groundwater depletion. This paper makes an attempt to overcome this limitation with information and analysis on trends in the expansion of agricultural groundwater use, resource management challenges, and institutional and policy responses in the particular context of northern China. The results show that groundwater problems and their agricultural consequences in northern China are heterogeneous across space and changing rapidly over time. While the problems are serious, they do not present everywhere with the same severity. As result, policies for their solution should be clearly discriminatory and carefully targeted. Even targeted policies will be difficult to implement, and government has had little success in controlling the extraction of groundwater or protecting its quality with the many formal laws and regulations now in existence. In contrast, farmers have been responsive to increasing shortages. Individual farmers (i.e. the private sector) have taken control of most well and pump assets, developed groundwater markets, changed cropping patterns and adopted water savings technologies. While market forces and economic incentives can change use, public initiatives for agricultural groundwater regulation to balance short term economic efficiency with long resource sustainability are urgently needed.

This paper presents China's groundwater resources by briefly reviewing the main development, describing the role of groundwater in the economy and examining the technology that producers are using to extract and utilize the resource. The main problems that the sector is facing is examined, including falling groundwater levels and deteriorating groundwater quality. The responses of the major water stakeholders in China's agricultural sector - the government and agricultural producers - are documented focusing primarily on the emergence of institutions as a response to some of these problems. This paper draws primarily on two data-sets covering nearly 450 communities in northern China.

Sustainable use of water resources in the face of population and economic growth is of great importance in northern China, as it is in much of the world. Rapid expansion of irrigated agricultural and urban demand is depleting groundwater and overexploiting surface water resources in northern China. Despite substantial investment in the development of water saving technology and the potential impact of widespread adoption, there has been little research on the extent of adoption in northern China or the conditions under which water saving technology is adopted. This paper uses data from two recent surveys in northern China to measure the extent of water saving technology adoption and to analyze the determinants of this adoption. The technologies we analyze include traditional technologies (border and furrow irrigation and field leveling), household level technologies (surface pipes, plastic film, drought resistant varieties and retain stubble low till), and community level technologies (underground pipe, lined surface canals and sprinklers). We find that levels of adoption of water saving technology in northern China have increased as water has become increasingly scarce. What is surprising, however, is that the extent of adoption is quite low. Moreover, both the rate and extent of adoption vary substantially across technologies. Of the different types of technologies, household-based technologies have grown most rapidly and traditional technologies have the highest rates of adoption. While we do not have a definitive answer why the adoption of these technologies are higher than other types, it appears that the most successful technologies have been those that are highly divisible, low cost and do not require collective action or large fixed investments. Technologies that do not fit this description are adopted on a limited scale, which we believe in part is due to the failure of policy makers to overcome the constraints to adoption. In addition, producers also fail to adopt water saving technologies because of the lack of strong incentives to save water, inadequate information, and difficulty overcoming collective action constraints. If the incentives and government-provided services can be delivered to those in water scarce areas, according to our paper there is a great deal of scope to conserve water and support China's agricultural sector despite tight water supplies.