Industrial production "lost" is a measure of the potential gains from providing a more secure supply of water or investing in improved storage and water-saving facilities, not of an absolute limit to growth.
In many cases, the constraint is one of finance more than of water. This limit in turn is exacerbated by the lack of adequate cost recovery for public water supply and sewerage facilities. The Chinese government appears to have made a serious commitment to making "economic" projects self-financing with the issuing of a Water Sector Policy at the end of last year. Since irrigation projects are considered to be not "economic," this new policy is likely to favor the development of urban and industrial water supply investments.
In practice, the response of many of China's cities to chronic water shortages has been to tap local sources that would otherwise go to nearby farmers for irrigation. In Beijing and Shenyang, this has meant transferring surface water from reservoirs. In many other cities, especially in southern Hebei Province, urban users have relied on wells to draw groundwater from ever-receding depths, creating "cones of depression" that can extend over thousands of square kilometers. The situation is particularly grim in Hengshui and Cangzhou municipalities, and Dezhou in neighboring Shandong, where water is drawn from deep aquifers over 50 meters deep and also has a high natural fluoride content that can be hazardous to the health when used for drinking over long periods of time.11
The lowering of the water table raises the pumping costs to nearby farmers when they also have to rely on wells. Nonetheless, irrigated area and grain production have increased in Hebei in recent years.
