Droughts have plagued China over recent years, with significant economic consequences. According to Zhang Jiatuan of China’s State Flood Control and Drought Relief agency, “Since the 1990s, losses from drought have been equivalent to 1.1 percent of China’s average annual gross domestic product, or about 300 billion yuan ($41 billion)” (China Daily 2007c).

Even the relatively water-rich regions of the country appear to experience more and more natural shortages of water. In the year 2007, a drought left approximately over a million people short of water for consumption in southern China, and this was spreading throughout the country. During the drought, decreased rainfall between 20 and 35 per cent from normal in the region was experienced, drying up hundreds of water supply reservoirs, and also thousands of wells, according to the Guangdong Provincial Hydraulics Bureau. Even the major rivers of the Yangtze, Yellow and Zhujiang were low. The year 2007 also saw a decrease in the water level of China’s largest freshwater lake, the Poyang Lake, to the lowest level in recorded history, due to a combination of low rainfall and excessive human withdrawal of water. The low water levels led to shortages of drinking water for local residents, and cutbacks in industrial production. China is also prone to severe flooding because of a combination of large rivers, varying climates, and vast populations situated in floodplains. In 2005 more than 1,000 people were killed in China’s annual flood season, while in 1998, 4,185 people lost their lives in the deadliest rainy season of the past decade. In just a few weeks of heavy rainstorms in central China in 2007, almost 200 people died from flooding. By the end of 2007, floods nationwide had affected 180 million people, causing over 1,200 deaths. The 2007 floods also ruined 12 million hectares of crops, and destroyed more than one million houses, leading to a direct economic loss of over 100 billion yuan in China.

The economic impact of floods on China’s economy is greater than that felt by most industrialised countries, and the Chinese Minister of Water Resources, Chen Lei, said in 2007 that China’s annual direct economic losses from floods since the 1990s averaged 110 billion yuan or nearly 2 percent of national GDP. These figures, if correct, are substantially higher than flood losses in the United States which have been pegged at an average of less than 0.25 percent of GDP annually.

Part of the problem is that so many people live in areas prone to flooding, and these numbers are growing. Minister Chen projected that by 2020, forty-one percent of China’s population will be exposed to flood risks because of their living conditions. Almost 67 percent of the country’s gross domestic product (GDP) also comes from these vulnerable regions.