"The south-to-north water diversion project will alleviate shortages in China's northern plain, but it won't come close to solving them," said Ma Jun. "We should give priority to conservation because there is now inefficient use of water in agriculture, in the cities, in the urban and industrial uses along the river."

China has been a production marvel when it comes to labor costs, but not for water costs. To produce a unit of GDP, China uses approximately six times more water than the Republic of Korea and ten times more than Japan, according to Zhai Haohui, vice minister of water resources.

"What China needs most is a dependable and safe internal water supply and a clean environment to act as a stable platform for sustainable economic growth," he said.

So far the government has adopted a multi-faceted strategy to the water issue, he said. Water conservation and recycling programs have been introduced and the water price in major cities including Beijing raised as part of an attempt to stem demand.

In addition, steps are being taken to curb rapid deforestation and soil erosion across the country. More innovative forms of water creation, including artificially seeding clouds with dry ice, are introduced, and hydropower, which creates large evaporating reservoirs, is increasingly being replaced with wind power.

"A better management of water resources is also required to reduce the number of regional fights over water from the Yellow River," Ma Jun said. "Local officials should be judged not just by how fast their local economies grow, but also by how well they protect the environment."

"Water is the lifeline of a country's economy and a regional economy. Economic growth cannot be allowed to come at a steep environmental cost. It is time for the government to cope with the realities of declining water stocks and their implications for the whole society," he said.

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