Water Market Development in the Yellow River Basin: Challenges and Opportunities

Water market development in the Yellow River Basin (YRB) unfolds new opportunities for alleviating water scarcity and improving water productivity. However, the further development of an effective water market in the basin faces challenges such as unclear water rights, regulatory deficiencies, market deficiencies, and insufficient compensation to third-parties, among others. Studying water market development in Western countries provides useful insights for addressing similar challenges, thus providing useful case studies despite the different cultural, economic, institutional, and political settings. This paper investigates water markets in the Murray-Darling Basin in Australia, the western United States, and Chile to synthesize cases of water market development that could potentially contribute to overcoming the challenges encountered in the YRB. After analyzing these cases, recommendations are made for enhancing the YRB's water market development from the perspectives of water rights systems, as well as the roles of the government and market, legal system, and third-party effects.