Trade-related water scarcity risk under the Belt and Road Initiative

Increasing trade cooperation under the Belt and Road (B&R) Initiative has promoted economic development and intensified the water scarcity risk transmission between China and countries along the route (B&R countries). Local water scarcity risk (LWSR, the potential direct production losses induced by local water scarcity) can transcend geographical boundaries through global supply chains and influence production activities in downstream economies. To understand the vulnerability of the Initiative to water scarcity, we investigated the impacts of LWSR in China and B&R countries on each other's economies during 2001-2013, using a global environmentally extended multi-regional input-output model. Results reveal that more than 80% of China's trade-related water scarcity risk imports (TWSR imports, the vulnerability to foreign water scarcity risk through imports) originates from B&R countries. The share of TWSR from China in total imports of B&R countries has steadily increased. In particular, India, Thailand, Iran, Pakistan and Kazakhstan have the largest TWSR exports (LWSR in each nation transmitted to other nations through its exports) to China, while South Korea, Thailand, Malaysia, Singapore and Indonesia have the largest imports from China. Water scarcity to their Agriculture sectors is responsible for TWSR transmission between them. Our study can contribute to the policy-making of governments and firms involved in mitigating the supply chain wide water scarcity risk. It also reveals the need for nations to collectively manage water resources to achieve sustainable development.