Impact of “Three Red Lines” Water Policy (2011) on Water Usage Efficiency, Production Technology Heterogeneity, and Determinant of Water Productivity Change in China

This research evaluates the effects of the Three Red Lines policy on water usage efficiency (WUE), production technology heterogeneity, and water productivity change in 31 Chinese provinces between 2006 and 2020. SMB-DEA, Meta-frontier analysis, and Malmquist–Luenberger index (MLI) techniques were employed for estimation. Results revealed that the mean WUE (2006–2020) in all Chinese provinces was 0.52, with an improvement potential of 48%. Shanghai, Beijing, Shaanxi, and Tianjin were the best performers. The WUE scores before (2006–2011) and after (2012–2020) water policy implementation were 0.58 and 0.48, respectively; on average, there was more than a 9% decline in WUE after the implementation of the water policy. The eastern region has the most advanced water utilization technology as its technology gap ratio (TGR) is nearly 1. The average MLI (2006–2020) score was 1.13, suggesting that the MLI has increased by 12.57% over the study period. Further technology change (TC) is the key predictor of MLI growth, whereas efficiency change (EC) diminished from 2006 to 2020. The mean MLI score for 2006–2011 was 1.16, whereas the MLI Score for the period 2012–2020 was 1.10, indicating a modest decline following the implementation of the water policy. All three Chinese regions experienced MLI growth during 2006–2020, with TC the main change factor.