The publication of the first guideline on the development of water-efficient technology marks a significant step forward in China's efforts to tackle its water shortage.

However, substantially raising public awareness and enhancing water conservation across the country requires the sound combination of technology and smart water pricing.

The guideline, jointly issued by five ministerial departments, is an attempt to cap the growth of water used for agricultural purposes and reduce the amount of water used in industrial production between 2005 and 2010 through the wide application of water-efficient technology.

For a country with the world's largest population and per capita water resources equal to only a quarter of the world average, the need to save water is self-evident.

More alarming, red-hot economic growth has put unbearable pressure on both the quality and quantity of the country's water in recent years.

China has a current water shortfall of 40 billion cubic meters a year, made worse by the pollutants pumped into the nation's waterways every day in the name of miraculous economic growth.

Keen to address this problem, the authorities have launched a series of national campaigns to urge people to save water.

Yet, increasing public awareness is one thing, making sure the measures have an effect is another, considering the cost of adopting water-efficient technology.

China has enormous water-saving potential. But, at present, water consumption per unit by domestic industries is five to 10 times that of developed countries and the efficiency of water use in irrigation is only 40 to 50 percent, far below the figure in the West.

If practical water-efficient technology is widely applied, the country's overall efficiency in the use of water could be vastly improved.

It is believed that by making water conservation a social responsibility, the new guideline will nudge the public towards the use of water-efficient technology.

But for the winds of change to blow that much harder, the policy-makers need to make better use of economic incentives.

Local authorities have raised water prices to encourage water saving in recent years. But so far, most of these price hikes have failed to deliver the desired results.

A reason for this is the current pricing mechanism does not charge the real cost of water, particularly for those big users.

Compared to their profits, water prices remain fairly cheap to many industrial users, which hardly encourages them to adopt water-saving technologies.

Another reason is that the pricing authorities are too obsessed with the bill burden on low-income families.

Such concerns are well justified. But the answer should lie in more flexible and responsive government-led transfer payments to free up the water pricing mechanism in line with the increasing scarcity of water.

Only a smarter pricing mechanism can generate the economic incentives needed to persuade all users to save water as aggressively as possible.

And then water-efficient technology can be quickly and widely adopted.

(China Daily May 25, 2005)