Why local Chinese officials ordered one town's residents to use more water

Sometimes you wonder how China has transformed itself into a global economic miracle when you hear what local planners here do.

The latest piece of puzzling authoritarian economics comes from the town of Chibi in the southern province of Hunan. Residents there are being forced to consume five tons of water per household per month in the middle of one of the worst droughts to hit China for decades.

The local water company (owned by the government) has complained that it costs 1.67 renminbi (about 25 US cents) to produce a ton of water, but that it is allowed to sell it for only 16 cents a ton.

The answer to this conundrum? Decree that every household must drink, bathe, and wash up more wastefully so as to consume (and pay for) more water. Residents complained to the Beijing Times that they are being made to pay for five tons a month regardless of their real consumption.

It does not appear to have occurred to the water company that if it is losing money on every ton of water it sells, it will only lose even more money if customers are forced to consume more. It would make more sense to limit water usage if the idea is to limit losses.

The last time we heard of similar nuttiness in economic thinking was toward the end of last year, when the local authorities in many municipalities ordered power cuts in order to try to meet government-ordered reduction targets for electricity usage.

The trouble was that the government goal was to limit energy use per unit of economic output. By depriving local factories of electricity the local governments reduced their towns’ economic output as much as it reduced their energy consumption.

Net benefit? Zero.

Books have been written with titles such as “When China Rules the World.” Perish the thought, at least if local officials in Chibi and elsewhere spread their influence.