Paper for the Fourteenth International Conference on Input-Output Techniques
October 10-15, 2002, Montréal, Canada
Water Conservancy Economy Input-Occupancy-Output Tables
for China and Its Nine Major Rivers1
Chen Xikang
(Institute of Systems Science, Academy of Mathematics and Systems Science,
Chinese Academy of Sciences, Beijing, 100080
Email:xkchen@staff.iss.ac.cn
Abstract
China is faced with three serious issues in water conservancy. Firstly, water shortage and
drought. Per capita annual water resource of China in 1999 was 2230 m3, which is less than
one-third of the global average of 7,800 m3. In 2000 China met with the most serious drought in
the last 50 years. The crop areas covered by drought were 40.54 million hectares. The grain output
of China in 2000 decreased by 43.21 million tons compared with 1999. Secondly, flood and water
logging. In 1998 there was 22.3 million hectares of farm crops areas covered by flood. The direct
economic loss of floor and water logging in 1998 is about 22 billion USD. Finally, ecological
environment protection.
Under the support of Ministry of Water of China we construct water conservancy inputoccupancy-output table of 1999 for China and for drainage areas of nine big rivers. They are
Yellow River, Yangtze River, Songhuajiang River and Liaohe River, Haihe River and Luanhe
River, Huaihe River, Zhujiang River, Southeast Rivers, Southwest Rivers, and Inland Rivers.
In this paper we presented framework of water conservancy economy input-occupancy-output
model. There are two important characteristic features. First, it is a water conservancy economy
input-output table, not a water resource economy input-output table. Second, it is an
input-occupancy-output table, not a common input-output table.
We use the water conservancy input-occupancy-output table in following issues:
1. Making a suggestion to the Chinese government for creating water resource-saving national
and regional economy system, including water resource-saving production system and water
resource-saving consumption system.
2. Using input-output partially closed method econometric techniques and other methods to
study the gross effect and net effect of water conservancy investment on GDP and employment.
3. Using input-output techniques, econometrics, and mathematics to calculate the optimal ratio
of water conservancy investment in capital construction, the optimal ratio of government
expenditure for water conservancy in total government expenditure, and the optimal ratio of water
conservancy investment in Chinese GDP.
Keywords: Water conservancy economy input-occupancy-output model, Total water input
coefficient, Optimal ratio of water conservancy expenditure on total government expenditure.
1
The paper is supported by the Ministry of Water of China and National Natural Science Foundation of
China (Project Number: 70131002)
Introduction
China is faced with three serious issues in water conservancy:
1. Water Shortage and drought. China is poor in water resource with the average annual water
resource of 2812.4 billion m3. Per capita annual water resource of China in 1999 was 2230 m3,
which is less than one-third of the global average of 7,800 m3. Particularly, most water resource is
located in the southern part. The land area of northern part accounts for 64.4% of total land area of
China, but water resource only accounts for 19% of national water resource. China often meet with
the serious drought, for example, in 2000 China met with the most serious drought in the last 50
years. The crop areas covered by drought were 40.54 million hectares. The grain output of China
decreased by 43.21 million tons, compared with 1999.
2. Flood and water logging. It is reported that in 1998 there was 22.3 million hectares of farm
crops areas covered by flood. The direct economic loss of floor and water logging in 1998 is about
22 billion USD.
3. Ecological environment protection.
Why the natural disaster in China becomes even more serious year by year? The very
important reason is many natural forests were cut off in recent 50 years. In 1999 Chinese
government made a decision that tree in original forest region is forbidden to cut off. We have to
do ecological environment construction and protection in whole China.
In order to solve the above serious issues Ministry of Water of China decided to construct
water conservancy economy input-occupancy-output table of China.
According to the proposal we have to do following research works:
1.
Construct national water conservancy economy input-occupancy-output table of China for
1999;
2.
Construct water conservancy economy input-occupancy-output table for drainage areas of
nine big rivers. They are Yellow River, Yangtze River, Songhuajiang River and Liaohe River,
Haihe River and Luanhe River, Huaihe River, Zhujiang River, Southeast Rivers, Southwest Rivers,
and Inland Rivers.
3.
Construct water conservancy economy input-occupancy-output table of Shaanxi Province and
Henan Province for 1999
4.
Application of water conservancy economy input-occupancy-output table.
Water Conservancy Economy Input-Occupancy-Output Table
1. Framework of model
The framework of water conservancy economy input-occupancy-output model is as follows (table
1):
Table 1. Water conservancy economy input-occupancy-output table
Intermediate Demands
Final
Total
output
Non-water conservancy Water conservancy
Demands and
Sectors
sectors
total
1,2,……, S
S+1,S+2, ……, n 1,2, ……, t
water
Non-water
conservancy
Sectors
Water
Conservancy
Sectors
Fresh
Water
I
N
P
W
U A
T T
Recycle
Water
1
:
S
S+1
:
n
1
:
k
K+1
:
m
E Waste water
R Emission
Primary
Input
1
:
S
Total Input
O Fixed Assets
C
C
U Circulating
P
Capital
A
N
Labour
C
Force
Y
Xij
Yij
Xi
Fij
Zij
Wi
Pj
R
Ww
Vj
Xj
1
:
n
1
:
n
1
:
g
Dij
Cij
Lij
There are two important characteristic features in the above model:
(1). It is a water conservancy economy input-output table, not a water resource economy
input-output table
Up to the present input-output researchers constructed some water input-output tables. For
example, H. O. Carter and D. Ireri (1970) use interregional input-output model to study water
problem between California and Arizona. R.Thoss and K. Wiik (1974) use input-output techniques
on the water management. D.W. Hendricks (1982) uses input-output model to study supply and
demand balance of water resource. Xie Mei and others (1991) use the model to the Beijing urban
water systems. H. Bouhia (1998) incorporates water sector into the input-output table. Chen
Xikang (1990, 1992) proposed input-occupancy-output model and used the model in agriculture
and energy of China. In Chen Xikang’s paper (2000) he constructed water input-occupancy-output
model and gave a detailed study on economic value of water for Shanxi.
All water input-output tables constructed above are water resource input-output table. They
only discuss and study how to use and allocate water resource, but do not study water conservancy
construction, for example, construction of duke, reservoir, floodgate, flood discharge and flood
diversion project, water ecological construction and water conservancy management, etc. In our
model we will tackle all water conservancy activities.
(2) It is an input-occupancy-output table, not a common input-output table. From the model
we can study how much fixed assets, circulating capital and labor force at the end of year are used
by each sector, including water conservancy sector and non-water conservancy sector. In this
model, we will study not only the flow (intermediate input, primary input, intermediate demands,
final demands, gross output, etc), but also the stock (fixed assets, circulating capital, employed
persons, natural resource. etc.), and most important, it not only reflect the relationship between
output and input (flow), but also the relation between output with stock and the relation of flow
with stock
Sector Classification
Up to the present the latest input-output table of China is 1997 input-output table, constructed
by Department of National Accounts, National Bureau of Statistics. According to the scale, there
are three tables in 1997 input-output work: 6 sectors table, 40 sectors table and 124 sectors table.
The first one is a highly aggregated table, and the last one is a too disaggregated table. We
constructed the water conservancy table on the basis of 40 sectors table, in which water
conservancy is not a dependent sector, but included in several sectors. After many times of
discussion we divided the national economy into 51 sectors, of which 12 sectors are water
conservancy ones.
There are three principles to determine sector classification of water conservancy
input-occupancy-output table:
1. According to the relation with public interests, we divide all water conservancy sectors
into two classes:
(1) Public welfare sector. It is connected with everybody and its investment and expenses
are paid by the central or local government. For example, construction of dyke,
floodgate, flood discharge, flood diversion project, and some reservoirs etc.
(2) Non-public welfare sector. It is connected with some bodies and connected bodies pay
its investment and expenses. For example, hydropower production and supply, tap water
supply, water transport in river, fish breeding, waste water treatment, etc.
2. According to the role and aim of water conservancy sector, there are three types of water
conservancy sectors:
(1)
Social security sectors, for example, flood and drought control construction
(2)
Resource security sectors, for example, water supply sector
(3)
Ecological security sectors, for example, waster water treatment sector
3. Water conservancy sectors can be divided into two kinds:
(1) Construction sectors, for example, flood and drought control construction, water supply
and comprehensive use construction, water ecological environment construction.
(2) Non-construction sectors, for example, urban and industrial water supply sector,
agriculture and rural household water supply, etc.
There are 51 sectors in the water conservancy economy input-occupancy-output table, of
which 39 non-water conservancy sectors:
(1) Agriculture (excluding fresh water fish farming and ecological forest)
(2) Coal mining and processing
(3) Crude petroleum and natural gas products
(4) Metal ore mining
(5) Non-ferrous mineral mining
(6) Manufacture of food products and tobacco processing
(7) Textile goods
(8) Wearing apparel, leather, furs, down and related products
(9) Sawmills and furniture
(10) Paper and products, printing and record medium reproduction
(11) Petroleum processing and coking
(12) Chemicals
(13) Nonmetal mineral products
(14) Metal smelting and pressing
(15) Metal products
(16) Machinery and equipment
(17) Transport equipment
(18) Electric equipment and machinery
(19) Electronic and telecommunication equipment
(20) Instruments, meters, cultural and office machinery
(21) Maintenance and repair of machine and equipment
(22) Other manufacturing products
(23) Scrap and waste
(24) Electricity, steam and hot water production and supply (excluding hydropower)
(25) Gas production and supply
(26) Construction (excluding water conservancy construction)
(27) Freight transport and warehousing (excluding river freight transport)
(28) Post and telecommunication
(29) Wholesale and retail trade
(30) Eating and drinking places
(31) Passenger transport (excluding river passenger transport)
(32) Finance and insurance
(33) Real estate
(34) Social services (excluding waste water treatment)
(35) Health service, sports and social welfare
(36) Education, culture and arts, radio, film and television
(37) Scientific research
(38) General technical services (excluding management on water conservancy and water
ecological environment protection (non-construction))
(39) Public administration and other sectors
In the sector classification there are 12 water conservancy sectors
(40) Construction of flood and drought control
(41) Management of flood and drought control
(42) Construction of water ecological environment protection
(43) Water ecological environment protection (non-construction)
(44) Waste water treatment
(45) Construction of water supply and comprehensive utilization project
(46) Management of water supply and comprehensive use project
(47) Agriculture and rural household water supply
(48) Urban and industrial water supply
(49) Hydropower
(50) River transport
(51) Fresh water fish farming
Model
In table 1 horizontally there are four classes of equations:
(1) . The output use equations of non-water conservancy sectors
S
 X ij 
j 1
n
 X ij  Yi  X i
(i=1,2,…,S)
j  S 1
The intermediate demands are divided into two parts: consumption by non-water conservancy
sectors (first item in the above equations), consumption by non-water conservancy sectors (second
item). Where Xij represents interindustry flows, Yi represents final demand in ith sector
n
(Yi   Yij ) and Xi indicates total output of ith sector. In above equations, we introduce direct
j 1
input coefficients of production sectors by aij
a ij 
X ij
Xj
Then we have
S
 aij X j 
j 1
n
 aij X j  Yi  X i
(i=1,2,…,S)
(1)
j  S 1
(2) The output use equations of water conservancy sectors
S
 X ij 
j 1
n
 X ij  Yi  X i
(i=S+1,S+2,…,n)
j  S 1
Similarly we have
S
 aij X j 
j 1
n
 aij X j  Yi  X i
(i=S+1,S+2,…,n)
(2)
j  S 1
Equation (1) and (2) can be written in matrix form. A, Y and X are block matrices, which represent
direct input coefficient matrix, final demands vector and gross output vector, respectively.
 A11 A12 
Y 1 
, Y  ,
A

21 22
2
 A A 
Y 
X 1 
X  
2
 X 
where the upper subscript 1 denotes non-water conservancy sector and upper subscript 2 denotes
water conservancy sector. Then (1) and (2) can be written as
A11 X 1  A12 X 2  Y 1  X 1
(3)
A 21 X 1  A 22 X 2  Y 2  X 2
(3) The equations of water use
n
F
ij
j 1
 Z i  Wi
(i=1,2, … , m)
where Fij represents the consumption of the ith water in the jth production sector; Zi represents the
consumption of ith water in the final demands, such as, city household water consumption, rural
household water consumption. Therefore the sum of left hand in the above equations reflects the
total consumption of water resources in the production and living process. Particularly, when
i=1,2,
…
,k, the above equations represent fresh water consumption, and when i=k+1,
…
,m, the
above equations indicate recycle water use. Now we introduce the direct water input coefficient of
the production sectors, fij, in above equations
f ij 
Fij
( i=1,2, …, m; j=1,2, …, n)
Xj
Then the above equation can be rewritten as follows:
n
f
j 1
ij
X j  Z i  Wi
( i=1,2, …,m)
(4)
and in matrix form
FX + Z = W
(5)
where F denotes the direct water input coefficient matrix of the production sectors
 mn ,
F  f ij
Z represents column vector of the water consumption in final demands sectors and W represents
amount of the total water supply (water output sector).
(4) The equation of waste water emission
n
 Pj  R  W w
j 1
where Pj denotes amount of waste water released by the jth production sector; R denotes the waste
water released in the final demand sectors (household, etc.); Ww denotes the total amount of waste
water released in this period. Now we introduce the direct waste water emission coefficient p j of
the jth industry sector:
pj 
Pj
Xj
(j=1,2, … ,n )
Then we have
n
 p j X j  R W w
(j=1,2,…,h)
(6)
j 1
and in matrix form
PX + R = WW
(7)
Constructing National Water Conservancy Economy Input-OccupancyOutput Tables
Our research team, consisted of about 22 researchers and professors from Institute of Systems
Science under Chinese Academy of Sciences, Department of National Accounts under National
Bureau of Statistics, Department of National Economy Management under Renmin University of
China, School of Management Science under Xi’an Jiaotong University, Academy of Water
Conservancy and Hydropower under Ministry of Water, and etc., spent more one and half year to
construct water conservancy economy input-occupancy-output tables for China, for two provinces
and for drainage areas of nine big rivers
There are four steps to construct water conservancy economy input-occupancy-output
tables for China and for Shaanxi Province and Henan Province.
First Step. Constructing 1999 update input-output tables for China, Shaanxi Province and
Henan Province. We have already 1997 input-output table with 40 sectors, which was compiled by
Input-Output Division under National Bureau of Statistics and Shaanxi and Henan Statistical
Bureaus on the basis of special input-output surveys. We used modified R. A. S. method to
construct the update input-output tables of 1997.
Second Step. Constructing water conservancy input-output table for 1999. The main work in
this step is to collect data and estimate the amounts of 12 water conservancy sectors. For example,
in 1999 input-output table of first step there are only 40 sectors. We divide construction sectors
into four sectors: common construction, flood and drought control construction, water supply and
comprehensive use construction, and water ecological environment construction. At the end of this
step we have water conservancy input-output table for 1999 with 51 sectors.
Third Step. Collect water use data and estimate the amounts of water, used by each sector.
This part is in physical units. The main trouble is we have only total water use amount of China
and each province, but we haven’t water amount used by each sector. In order to estimate the
amount we collect data in 12 provinces.
Fourth Step. Constructing occupancy part of the table. There are three sub-parts in the
occupancy part; fixed assets, circulating capital and labour force. In order to estimate the amounts
of above three occupancy parts, we used some data from Department of National Accounts under
National Bureau of Statistics. At the end of this part we get water conservancy economy
input-occupancy-output tables for China or two provinces.
Constructing water conservancy economy input-occupancy-output tables
for drainage areas of nine big rivers
China could be divided into 9 big rivers basins. They are Yellow River, Yangtze River,
Songhuajiang River and Liaohe River, Haihe River and Luanhe River, Huaihe River, Zhujiang
River, Southeast Rivers, Southwest Rivers, and Inland Rivers (Graph 1).
It is a great systems engineering work. Under the efforts of our research team, we constructed
the tables. There are seven steps to construct water conservancy economy input-occupancyoutput tables for drainage areas of nine big rivers.
First Step. Constructing 1999 input-output tables with 40 sectors for 31 provinces,
autonomous regions and municipalities of China. We have already 1997 input-output tables with
40 sectors for 29 provinces, autonomous regions and municipalities, excluding Tibet and Hainan. It
is a labour consuming work. We have to collect a lot of data. Under the efforts of input-output
workers in provinces and National Bureau of Statistics, we used modified R. A. S. method to
construct these update tables.
Second Step. Divide province input-output table into basin input-output tables of each
province. Usually, each province belongs to 1-4 rivers basins. For example, Inner Mongolia
belongs to 4 rivers basins, they are: Inland Rivers, Yellow River, Haihe River and Luanhe River,
and Songhuajiang River and Liaohe River (from west to east, please look at graph 1).
Third Step. Constructing 9 basin input-output tables on the basis of basin input-output tables
in each province.
Graph 1 China’s drainage areas of nine big rivers
Graph 1 China’s drainage areas of nine big rivers
Song and Liao River Basin
Inland River Basin
Haihe and Luanhe
Basin
Yellow River
Huaihe River Basin
Southwest Rivers
Yantze River
Basin
Southeast Rivers
Zhujiang River
Fourth Step. Constructing 1999 basin input-output tables with 12 water conservancy sectors.
In this step we have to collect data on water conservancy and determine the gross output value and
value added amounts of water conservancy sectors in every basin.
Fifth Step. Collect water use data and estimate the amounts of water, used by each sector in
every basin. The water amount is in physical units.
Sixth Step. Constructing occupancy part of the basin table. There are three sub-parts in the
occupancy part; fixed assets, circulating capital and labour force. Then, we have 9 basin
input-occupancy-output tables
Seven Step. Revision work. It is important that the sum of GDP in 9 basin
input-occupancy-output tables is equal to the GDP of China in national input-occupancy-output
table. The problem is the sum of GDP in 31 provinces, autonomous regions and municipalities is
greater by 7% than the GDP of China in China Statistical Yearbook (National Bureau of Statistics,
China Statistical Yearbook 2000, China Statistics Press, 2000, pp.53-61). The figures of GDP in
each province, published in province yearbook, is greater than the figures published in national
statistical yearbook. It is a hard work to maintain the balance between national
input-occupancy-output table and 9 basin input-occupancy- output tables.
Some Applications
Water Input-Occupancy-Output Table can be used in many issues; the following is its main
applications:
1. Changing the structure of economy and reducing output of sectors with high
direct and total water input coefficients.
In the next five and fifteen years Chinese government will do structure change both in national
level and regional level. Up to the present Chinese government adjust the industrial structure
mainly according to the principle of benefit and profits, but did not consider the resource factors,
especially water resource. We suggested to the government for creating a water resource-saving
national economy system, including water resource-saving production system and water
resource-saving consumption system. For example, in agriculture rice is water-consuming crop,
It’s necessary to stop and reduce the paddy production in water shortage regions. From our
calculation, we find that non-hydropower, chemicals and paper manufacturing in industry are
sectors with highest water input coefficient. To reduce and move these sectors from water shortage
regions to the water rich regions is an urgent work to do.
2. Using translog production function method to calculate marginal effect of
water in industry
Translog Production Function is created by L. R. Christensen, D. W. Jorgenson and
[3]
Lawrence J. Lau in 1973 . We used following Translog Production Function with 3 variables
to calculate marginal effect of industrial water on industrial value added.and on gross industrial
output
LnY=β0+βk LnK+βl LnL+βw LnW+βkk (LnK)2 +βll (LnL)2+βww (LnW)2 +βkl
LnK*LnL+βkw LnK*LnW+βlw LnL*LnW+βklw LnK*LnL*LnW
The estimated regression equations are as follows:
(1). LnY=1.92654*LnK-1.44373*LnW+0.25504*(LnW)2-0.16130*LnK*LnW
(24.0743)
R2=0.9996
(-10.3248)
(9.2047)
(-9.9523)
F=30002
(2).LnVA=-2.00082+2.02325*LnK-1.12535*LnW+0.27186*(LnW)2-0.20379*LnK*LnW
(-4.6685) (7.3456)
R2=0.9999
(-3.2045)
(3.6779)
(-4.1141)
F=6530
(3). Y=-7222.38775+0.83560*K+26.54450*W+5896.28324*D
(-1.4039) (10.7798)
R2=0.99931
F=1920
(2.3258)
(1.3328)
D=Dummy Viable (before 1978 D equals to 1)
(4). LnY=1.37066*LnK+0.07223*(LnW)2-0.12945*LnK*LnW-0.04533*LnL*lnW+
(112.3331)
(13.2584)
+0.00755*Lnk*LnL*LnW
(-22.2316)
(-17.4803)
(23.5399)
R2=0.9999
F=113771
(5). Y=0.92288*K+11.63484*W
(20.1702)
(2.7658)
R2=0.9990
F=5779
(6). VA=0.21362*K+7.68832*W
(18.8280)
R2=0.9992
(7.3702)
F=7117
(7). LnVA=-1.01377+1.16570*LnK+.03776*(LnW)2 - 0.04900*LnK*LnW
(-1.8679) (9.8193)
R2=0.9995
(1.8398)
(-2.4523)
F=2624
(8). LnY=0.38950*LnT+0.84976*LnK-0.04604*(LnW)2+0.00305*Lnk*LnL*LnW
(9.1247)
(29.3790) (-10.0460)
(8.6759)
2
R =0.99995 F=2657
(9). LnY=0.23391*LnT+1.05559*LnK-0.05435*LnW*LnK-0.01537*LnL*LnW
(9.6494)
(54.7166) (-15.1190)
(-8.6000)
+0.00501*Lnk*LnL*LnW
(16.3241)
2
R =0.99999 F=61050
Where VA represents industrial value added. Y represents industrial gross output value. W
represents amount of water used in industry. K represents capital occupied by industry. L
represents employed labour force. T represents time (for example, 99).
From above equations we calculate derivatives of first order of water on industrial value added
or industrial gross output value and get following results (table 3):
Table 3 Marginal Effect of Water in China from 1949 to 1999
Unit: yuan per ton of water
Marginal effect of water on
industrial value added
Marginal effect of water on
industrial output value
1949
0.48
1.39
1959
0.11
0.30
1965
2.01
5.14
1980
2.89
7.56
1993
3.46
11.82
1994
3.57
12.31
1995
3.69
12.79
1996
3.80
13.27
1997
3.92
13.75
1998
3.79
13.50
1999
3.85
13.88
Average
(1993-1999)
3.72
13.05
From above table we can find that the marginal effect of water is going up. In 1949 the
marginal industrial value added per ton of water is 0.48 yuan. It is 2.01 yuan in 1965, 2.89 yuan in
1980, 3.46 yuan in 1993 and 3.85 yuan in 1999. With the increase of population and economic
development of China the water demands will increase very quickly. The water shortage is getting
more serious, and the marginal effect of water will be higher.
3. Calculating gross effect and net effect of water conservancy fixed assets
investment
There are two effects of water conservancy investment on the output. First one is backward
linkage effect. Backward linkage effect is the effect of water conservancy investment on the output
of upper sectors, which supply input products to the water conservancy sector.
We use following equations to calculate gross backward linkage effect of investment on gross
output value and value added
X  ( I  AD ) 1 I
(8)
V  AV ( I  AD ) 1 I
(9)
where  I ,  X and  V represent increment of investment vector, increment of gross output
vector and increment of value added vector, respectively.
AD represents matrix of domestic
technical coefficient.
We use following equations to calculate net backward linkage effect of investment on gross
output value and value added

X  ( I   AD ) 1 I
(10)

V  AV ( I   AD ) 1 I
(11)

where

represents diagonal matrix of ratio of gross output increment which produced by
current capacity on total gross output increment. We could divide total gross output increment into
two parts. The first is produced by current capacity. The second one is produced by new capacity.
The total gross effect and total net effect consist in two parts: backward linkage effect and
forward linkage effect. In the above part we describe the calculating formula of backward linkage
effect. For investment of water conservancy fixed assets there are following 5 forward linkage
effects:
(1). Effect of flood and drought control
(2). Effect of water supply to industry and household
(3). Effect of water supply to irrigation
(4). Effect of hydropower
(5). Effect of water and soil conservancy investment, etc.
The total effect is equal to the sum of backward linkage effect and all forward linkage effects.
The results are as follows (table 4 and table 5):
Table 4 Net effect of per yuan of investment of water conservancy fixed assets on GDP
(1991-2000)
Unit: yuan / yuan
Flood and drought control investment
Water supply to industry and household
investment
Water supply for irrigation investment
Hydropower investment
Water and soil conservancy investment and etc.
Net Effect of Water Conservancy Investment
on GDP
2.447
2.265
1.227
1.399
1.176
4. Study on the optimal ratio of water conservancy expenditure on total
government expenditure and optimal ratio of water conservancy investment on total
government investment in capital construction
In period 1991-1995 the ratio of water conservancy expenditure on total government
expenditure is 4.4 % on average, and ratio of water conservancy investment in capital construction
on total government investment in capital construction is 2.8 % on average. In 1996 the first ratio
is 3.8 % and the second one is 2.8 %. In 1997 the first ratio is 3.9 % and the second one is 3.2 %.
In 1998 the ratios are rising very quickly the second one is 3.9 %.
Using input-output techniques and other methods, including mathematical programming
methods we calculate these two ratios. The ratios will go up in recent years. It is because that
China is poor in water resource and water demands are increasing very quickly. In order to meet
the water demands, firstly, China has to do water capital investment to increase water supply in the
North part. Secondly China has to expand pipe transmit water techniques and water-saving
irrigation techniques for decreasing the water lose rate in agriculture. Finally, China has to raise
water recycle rate in industry and service. It is informed that Chinese government decided to
construct a magnificent project to move about 50 billion CM water from the South to the North.
5. Study the effect of water conservancy investment on the employment of China.
This is an interesting issue to the Ministry of Water of China and we use input-output
techniques to study it. We used following formula to calculate the total backward linkage effect of
one billion yuan of water conservancy on employment:

L  AL ( I   AD ) 1 I
where L is the backward employment effect vector and
(12)
AL is a diagonal matrix of direct
employment coefficients. The element in the main diagonal is direct employment coefficient,
which is equal to the quotient of amount of employment on the gross output. According to our
calculation by 1999 data, the total employment effect of one billion yuan of water conservancy is
32 thousand persons, of which manufacturing 13.88 thousand persons, construction 3.57,
commerce 4.01, mining 3.27, transport 2.28, etc.
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