1. Introduction
With swift population increase and economic growth, the increasing water demand placed immense pressure on the water system [
1,
2]. Over the last several decades, China’s Gross Domestic Product (GDP) has experienced significant growth, with a staggering increase of more than 330% at constant prices from 1978 (CNY 365 billion) to 2022 (CNY 1210.20 billion) [
3]. This tremendous growth has led to resource security challenges, positioning China as one of the largest economies and resource consumers in the world [
4]. However, this growth also exacerbates the issue of water scarcity, with total water use surging from 103 trillion liters in 1950 to 599.82 trillion liters in 2022. Meanwhile, the total available water resources remain relatively stable and unevenly distributed, with the south accounting for more than 80% of the total, while the north only accounted for around 20%. Therefore, China is classified as a ’water-scarce’ country according to the United Nations Environment Programme [
5].
Statistics reveal that China’s per capita water consumption is expected to reach only 425 m
3 in 2022, less than half of the global average [
6]. Moreover, an estimated 440 out of 669 Chinese cities experience water shortages, with 110 of them facing ‘serious’ scarcity [
7]. Additionally, a nationwide survey of 1935 sampling sites at China’s rivers, lakes, and reservoirs in 2018 revealed that 29% of them had poor water quality [
8]. And around 300 million rural inhabitants lack access to safe drinking water [
9]. These water shortages and related environmental issues are becoming a significant impediment to China’s economic sustainable development [
7,
10].
Understanding the relationship between water resources and economic growth is crucial for exploring pathways to achieve sustainable water utilization and sustainable economic development [
11,
12,
13]. Sustainable water utilization represents water consumption practices that do not deplete water stocks and impair water ecosystems [
14]. It has been discovered that the interaction between water resources and economic growth is bidirectional: On one hand, economic growth is paired with a rise in water consumption. However, when economic growth surpasses a certain critical value, and with advancements in technology, the optimization of industrial structure, and changes in economic growth patterns, the speed of increase in water usage starts to decline [
15,
16]. On the other hand, water usage also affects economic growth, as the limited nature of water resources inevitably impacts investment and the economic growth speed in subsequent stages [
17,
18]. Many scholars have concurred that economic growth led to a rise in total water use [
19,
20,
21]. Similarly, studies have indicated that water resources played a crucial role in driving economic growth. For instance, Alrwis et al. [
22] assessed the effect of water scarcity on Saudi Arabia’s national economic growth and concluded that water scarcity affected GDP by reducing crop areas and agricultural output.
Furthermore, researchers have explored the implications of economic growth on water resources. Zhao et al. [
23] found a significant inverted U-shaped relationship between water consumption and economic growth across different regions in China for the period 2003 to 2014. Zhang et al. [
24] demonstrated a curved, inverted U-shaped correlation between per capita industrial water usage and GDP across different regions in China using the triple reduction model. Using a simultaneous equation model, Hao et al. [
25] analyzed the correlation between water consumption and economic growth in 29 Chinese provinces from 1999 to 2014 and discovered an N-shaped relationship between per capita water use and per capita GDP in China.
The vector autoregression (VAR) model, introduced by Sims [
26], provides a new macro-econometric framework to capture complex dynamic interrelationships among macroeconomic variables over flexible time series. Traditional univariate autoregression is characterized by a linear model with single equation and single variable, whereas the VAR model is a linear model with multiple equations and variables. In the VAR model, each variable is explained both by its lagged values and by the current and past values of the other variables. This provides a methodical approach of capturing the diverse dynamics across multiple time series. VAR models allow for the analysis of interactions between several variables through impulse response. Scholars have utilized the VAR model in various studies related to renewable energy consumption, greenhouse gases emission, economic growth, and other factors influencing economies and environmental outcomes [
27,
28,
29].
The prediction and warning of the overloading status of the water environment carrying capacity involves assessing the deviation of water quality and quantity from the ideal state. It comprises three main components: water use assessment, water use change prediction, and regulation. An effective approach to water use assessment is the comprehensive warning index system [
5,
30]. When constructing the early warning indicator system, it is beneficial to refer to the evaluation index system for the water environment carrying capacity [
31]. This system incorporates the general principles of water environment assessment while considering the complex characteristics of regional water resources systems. A comprehensive regional early warning indicator system for sustainable water resource utilization encompasses not only indicators related to the water resources system but also social, economic, and ecological indicators.
In this paper, we employed water and economic data from the 2001–2022 period and utilized the VAR model to explore the dynamic correlation of economic growth and water consumption. Based on the relationship results, we have predicted China’s water use changes during 2023–2050. Additionally, we proposed an early warning system to assess water utilization sustainability for analyzing the overloading status of water resources carrying capacity during 2023–2050. By analyzing the internal dependence and causal relationship between water consumption and economic growth, the paper aims to offer guidance for assessing the sustainability of water resources and early warning for potential water overload in the future, serving as a foundation for policymaking to ensure water sustainability.
4. Conclusions and Recommendations
Using the time series data of GDP and water consumption from 2001 to 2022, a VAR model was established between GDP and TWC, and their co-integration relationship was tested. The dynamic interaction between GDP and TWC was analyzed using the generalized impulse response function and predictive variance, and the VAR model was applied to forecast the water consumption trends from 2023 to 2050.
The findings are as follows: (1) Over the study period, there existed a cointegration between China’s economic growth and TWC. However, TWC continued to demonstrate a notable increasing trend. The impact of GDP growth in curbing water resource consumption was not sufficiently evident. (2) The aggregated effect of GDP to TWC per capita was positive, and likewise, the aggregated effect of TWC to GDP was also positive. (3) GDP is a significant factor for predicting the variance of water resource use, whereas water use contributed less to the forecasted variance of economic growth. It is crucial to address the increase in TWC triggered by economic development and carefully consider the potential adverse effects of water shortages on economic growth. (4) According to the GCT results, the p-value of GDP to TWC was 0.0989. GDP did not serve as the granger cause of TWC, and the rapid growth of GDP significantly promoted the utilization of water resources, resulting in an increasing quantity of water use. (5) The water overload state index showed a declining trend between 2023 and 2050, implying a sustained improvement in China’s water overload condition.
Based on the research findings, we recommend that the government adopt the following policy measures to achieve the sustainable management of water resources and the sustained economic prosperity.
Develop a comprehensive plan for the sustainable development of water resources: The government should carry out a comprehensive water resource management plan, with clear objectives and measures to ensure efficient use and equitable distribution of water resources.
Encourage the promotion of water-saving technologies and awareness: The government should encourage businesses and individuals to adopt water-saving technologies and measures while also raising public awareness about the importance of water conservation through education and campaigns.
Enhance water resource regulation and enforcement: The government ought to enhance water resources regulation and establish a sound enforcement system to crack down on illegal water extraction and water pollution.
In conclusion, prioritizing water resource management will lead to a win–win situation for both ecological balance and economic development. This approach will have a positive and extensive effects on China’s environmental protection and economic growth.