The size of drought-stricken areas in China is shrinking, but dry weather continues to create drought-like conditions. Reports say that farms spread over about 121,300 hectares near Dongting Lake, Hunan province, are under a dry spell and Baohu Lake in Yinchuan, Ningxia Hui autonomous region, has almost dried up.

Balancing urban, rural, industrial, and environmental use of water is a great challenge for China. Rural water conservancy programs are crucial not only for food security, but also to supply safe drinking water to rural residents and keep them healthy. They are linked to flood and drought prevention, rural development, the economy and social stability.

In China, total water use increased from 549.8 billion cubic meters in 2000 to 599 billion cubic meters in 2010, while the share of water used in agriculture decreased from 68.8 percent to 62 percent. Given the rising urban and industrial demand for water and the impact of climate change, the share of water used in farming is likely to decrease further. Because of the political and social importance of food security in China, adequate investment to ensure that rural areas and farms get enough water has been a priority for the government.

China has been hugely successful in managing its scare water resources, and in achieving food security and rapid economic development. But its inadequate water conservancy infrastructure could compromise economic development and social stability, especially because the inadequate water infrastructure in rural areas has affected the growth of agricultural production and thus food security.

Investments by the central and local governments in these areas have been insufficient over the past decades. Extreme weather, which causes floods, mudslides and drought, has become more frequent, and the lack of necessary water infrastructure has aggravated the loss.

China's eight wheat-growing provinces were under a four-month dry spell in 2010-2011, the longest in decades, affecting 35 percent of wheat crops, 2.81 million people and 2.57 million heads of livestock. About 100 million people in rural areas still don't have access to safe drinking water. Rural non-point source pollution, caused by fertilizer and pesticide runoffs, has become a major environmental issue in the country according to the first National General Survey of Pollution Sources, conducted by the Ministry of Environment Protection between 2007 and 2010.

Noticeably, the central government's No 1 document this year was on water conservancy reform and development. The central government is set to invest 4 trillion yuan ($612.23 billion) in water conservancy over the next 10 years and has requested local governments to set aside 10 percent of their revenue from land sale for water conservancy projects.

But the implementation will require the participation of people from all works of life, including government agencies at central and local levels, researchers, private sector players, and rural workers and farmers.

First, a strategy and action plans have to be formulated and implemented at the central and provincial levels. The emphasis of the strategy and action plans should be on a program-based, not crisis-oriented, decision-making and fund-releasing process. A responsibility mechanism, too, is needed for centralized and decentralized implementation. This is to allow better adaptation of program components to suit local circumstances and ensure that the implementation is accountable to the public. And coordination is needed between relevant agriculture and energy policies while formulating the strategy and action plans, for that is necessary for the reform and development of water management in rural areas.

Second, the government is changing its traditional engineering-focused approach to water resources management to a more holistic and resources-oriented approach. Hence, more balanced structural and non-structural measures to solve rural water development problems should be promoted during actual formulation and execution of water conservancy programs. Non-structural measures may include establishment of forecast and warning systems, effective management measures, eco-compensation, and emergency preparedness and response plans. There is scope to test and scale up green infrastructure technology, too.

Third, greater use should be made of innovative and market-based instruments in water resources management and rural infrastructure development. Market-based instruments can provide incentives to encourage stakeholders, including local governments, enterprises and farmers, to participate in the management and development of rural water supply and irrigation systems.

Fourth, governments at all levels should consider an effective mechanism to operate and maintain the completed water conservancy projects. They should explore different cost recovery mechanisms to decide how much of the cost needs to be recovered, how much subsidies should they give, and how much the users, including farmers, should contribute.

Fifth, a practical management information system and results-based performance evaluation system has to be established. The central and local governments are likely to make huge investments in rural water conservancy projects in drought-prone areas. Timely information will be needed on cost-sharing arrangements among the central government, local governments and beneficiaries; the financial and physical progress of the projects; the water supply and irrigation systems and their functioning; and more importantly their impact (contribution to local economies, different groups of beneficiaries including the poor, and water savings and productivity gains). Such a database is necessary for adequate monitoring, planning, implementation and performance evaluation.

The Asian Development Bank is pleased to be associated with the Chinese government's water reform and development agenda over the past decades and will continue this relationship. It will finance several projects in China from 2011 to 2013, too, to support water reform and development.