Effect of Variation of Water-Use Efficiency on Structure of Virtual Water Trade - Analysis Based on Input-Output Model

Using input-output table of China in 2007, this paper built an input-output model and tested the effect of variation of water-use efficiency on the structure of virtual water trade. As the final water consumption coefficient increases (i.e., water-use efficiency decreases) in some department, the proportion of this department's virtual water outflow/inflow increases while those of all the other departments decrease. As the direct water consumption coefficient increases (i.e., water-use efficiency decreases), the proportion of this department's virtual water outflow/inflow increases while the sum but not each of the other departments' proportions decreases. The final water consumption coefficient of any department is bigger than the direct one, implying indirect water consumption exists and final water consumption coefficient is a better indicator for water-use efficiency. The paper shows that China is a net exporter of virtual water, but the departments of agriculture, mining, petrochemical are the net importers of virtual water. According to the results, China should use the strategy of virtual water trade to alleviate water shortage. Also, China should adopt water-saving technology in production, and improve the level of self-sufficiency of products in order to reduce reliance on foreign trade correspondingly.