Residents of Dachuan district in Sichuan province's Dazhou city are now receiving water from Liangping district in neighboring Chongqing municipality, about 100 kilometers away, marking China's first cross-provincial water rights trading agreement.

The deal addresses Dachuan's growing water scarcity, driven by economic development and increased industrial demand.

"The overall water consumption control indicator in Dachuan has been nearing its maximum limit for several consecutive years," said Zhou Jiying, head of the water resources division at the Dachuan water affairs bureau. He cited expanded production at a local water plant and coal preparation plant as further straining the supply.

Under the agreement, reached on Dec 24, Liangping will deliver 1 million cubic meters of water to Dachuan over the next two years. The transaction is valued at 150,000 yuan ($20,583), with a price of 0.15 yuan per cubic meter.

Experts say this deal demonstrates the potential of market-based mechanisms in national water resource management.

"The successful practice demonstrates the potential of market-based mechanisms in national water resource management, and sets a valuable example for guiding water reforms and management in the country," said Qing Yun, a professor at Chongqing Water Resources and Electric Engineering College, according to Chongqing Daily.

In China, water resources are State-owned, and water rights primarily focus on usage. These rights typically fall into four categories: cross-region water usage rights, rights to access water from the natural environment, irrigation water rights and public water supply network usage rights.

China is pushing to establish a unified national water rights trading market.

The Ministry of Water Resources, the National Development and Reform Commission, and the Ministry of Finance jointly issued guidelines in August 2022 aiming to create a complete water rights distribution system by 2025 and a comprehensive water rights system by 2035.

The Sichuan-Chongqing deal reflects a broader effort to optimize water resource distribution.

"Water rights trading refers to the process in which individuals holding surplus water rights transfer a portion of their rights to other water users in need, facilitated through market mechanisms," said Wang Xiaorong, deputy director of the water resources division of the Chongqing Water Resources Bureau.

Liangping has improved water efficiency in recent years, while Dachuan faces rising demand. The interconnected water systems of local reservoirs facilitated the cross-provincial transaction.

"Cross-provincial water rights transactions represent a specific advancement within the contemporary water resource management model of 'rigid constraints, market incentives and technological empowerment,' playing a demonstrative role in fostering the efficient and intensive utilization of water resources," said Long Xunjian, an associate professor of hydrology and water resources at Southwest University.

Chongqing has seen a surge in water rights transactions. Last year, 62 transactions were completed, including a 1.05 million yuan deal involving 21 million cubic meters of groundwater between Nan'an and Changshou districts, the country's largest cross-regional groundwater rights transaction.

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