The Yellow River (Huang He) has been deservedly cast as a source of great prosperity and great despair in the annals of Chinese history. Droughts have been a part of the struggles of the Yellow River basin’s population and, in an arguably less dramatic fashion, exacted an even more crippling toll than floods. In recent years, a lack of water has once again reawakened the anxiety caused by droughts, attracting the attention of Chinese policymakers and the Chinese media. In 18 out of the past 26 summers the Yellow River has run dry further and further upstream for longer and longer periods of time. During the summer of 1998, the river failed to reach its mouth at Bohai Bay for over 250 days.

Water managers in China cite a combination of unique characteristics or tedian as factors that contribute to the basin’s water shortages. The most obvious of these tedian is the yellow soil or huang tu from which the Yellow River gets its name. The Yellow River is the most heavily sediment-laden river in the world, holding nine-times as much sediment as the Ganges River, the closest standard for comparison. Less often mentioned as a factor contributing to water shortages in China is growth in agricultural, municipal and industrial rates of water usage that followed the liberalizing of the Chinese economy in the late 1970s and early 1980s. The least frequently mentioned reason for water shortages, however, is the system that manages the Yellow River. Over the past two decades, economic reforms have been sporadic and uneven, creating gaps between subsidized input prices for items such as water and marketized output prices for items that water helps to produce. The optimal long-term strategy for remedying the basin’s current water shortages is neither a demand-side nor a supply-side measure; instead, the most effective approach to resolving water problems is reforming the river’s management system.