Wang Fuguo, a 63-year-old cotton farmer, does not know when his ancestors began tilling the land in the dusty village of Weijie.

But he is fairly sure he will be the last of his family to do so. “They’ve all fled,” he says, looking out from his gate at the abandoned houses that line the village’s only street.

The reason is simple. “There’s just no water here,” he says. “If you don’t have water you can’t survive.” His household gets running water for one hour every five days, barely enough to feed a tiny patch of aubergines and supply his family and their dozen sheep.

In the face of China’s rapid economic expansion and growing presence on the global stage, it is often forgotten that the country is running out of water. In per capita terms, China’s water resources are just a quarter of the world average. Eight of China’s 28 provinces are as parched as countries in the Middle East such as Jordan and Syria, according to China Water Risk, a consultancy based in Hong Kong.

In the area where Mr Wang lives, Minqin county, a former oasis in Gansu sandwiched between the vast deserts of Inner Mongolia, the problem is particularly severe. Mr Wang’s neighbours are not the only ones who have moved away. More than 10,000 people have left the area and have become shengtai yimin, “ecological migrants”.

Chinese officials identify water scarcity as one of the nation’s most pressing difficulties. The problems are social, political and economic. This year Beijing for the first time issued water quotas to every province, setting targets for annual consumption by 2015.

The water shortage is made even more urgent by China’s rapid urbanisation, as expanding cities have greater water needs. More than 300m people are expected to move into cities between now and 2030.

This transformation comes as the Chinese are becoming far more critical and vocal about the way they are governed. Weibo, a Twitter-like social network, is routinely filled with users sharing information about pollution violations. Some users even dare officials to take a dip in the rivers they are supposed to be in charge of keeping clean. At times the government’s inability to control its waterways has made it the object of public ridicule, such as when more than 16,000 dead pig carcases floated down Shanghai’s main waterway this year.

The economic problems are formidable, with the water shortage threatening to slam a brake on growth. According to a World Bank report in 2007, water problems cost China economic losses of 2.3 per cent of gross domestic product. Executives say that water shortages are already starting to reshape their industries.

“Serious water scarcity is one of the big problems that has slowed down social and economic development in the north,” says Jiang Liping, water specialist at the World Bank in Beijing.

China’s lack of water is itself partly a result of economic growth. As people grow wealthier and move to cities, they eat more water-intensive foods, buy more water-intensive products and use more water at home. Changing climate also plays a role, as rainfall patterns and river flows shift. All this is exacerbated by a strained agricultural sector – which accounts for 60 per cent of China’s water use. Farmers are digging ever deeper to access water supplies and irrigate more of their land.

The water scarcity is also worsened by the heavy pollution that accompanies China’s economic growth. “Controlling pollution is the most difficult aspect of China’s water policies,” says Xia Jun, director of the centre for water resources research at the Chinese Academy of Social Sciences. “Even in places that have water, it is so polluted that you might not be able to use it.” Already, 39 per cent of the water in China’s major rivers is too toxic to be fit for any contact with humans.

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In a sign of the gravity of the problem, Beijing is planning to pour Rmb1.8tn ($291bn) into water-related infrastructure projects such as irrigation and dams under the current five year plan – a sum that is greater than the annual gross domestic product of economies such as Egypt and Chile.

Loss of livelihood for farmers such as Mr Wang in Minqin is just one example of the huge pressure that water scarcity is putting on China’s whole commercial landscape. The country’s growth and political stability are increasingly threatened by the widespread degradation of its air and soil.

China’s energy sector is particularly threatened by water shortages. Promising new technologies will be constrained in some areas. Projects to develop shale gas, for example, require large amounts of water for hydraulic fracking. Even as Beijing builds new nuclear power plants at a record rate, the government has also announced a moratorium on inland nuclear plants because of concerns over water supply and safety.

“All uses of energy are connected with water,” says Lin Boqiang, an energy economist at the University of Xiamen. “In the past, when there was not a shortage of water resources, people would only think about how much water they needed on the site where they wanted to build a project. Now it’s the other way around. The volume of water available determines how much energy can be developed in a certain place.”

The state’s deep concern about water has resulted in some of the toughest laws on water use and water pollution anywhere in the world, although corruption and weak rule of law mean implementation is patchy. “You have to build the most sophisticated water treatment plants in the world to fulfil the law,” says an executive in the chemicals industry. “The water laws are sometimes causing investors to rethink, given the amount of investment needed.”

However, many question whether these tough laws and the billions spent on water infrastructure will really ease the water crisis. Some Chinese scientists have lambasted the expensive projects at the core of Beijing’s water strategy, including the giant diversion system that will carry water thousands of kilometres from southern to northern China to alleviate shortages there.

That project, known as the South-North Water Transfer, will cost at least $41bn and has forced more than 300,000 people to relocate, with engineers cutting new canals and reservoirs. Other efforts to ease the water shortages in northern China, such as the desalination plants springing up on the coast near Tianjin, are also expensive and consume large amounts of energy.

Minqin county, where Mr Wang lives, is a good example of how China’s obsession with water infrastructure has backfired. Mega-projects have been a hallmark of communist rule. When Mao Zedong was in power, a giant dam was built across Minqin’s only water source, the Shiyang river, in 1958, by students eager to show their devotion to their leader. But soon after the reservoir was filled, Qingtu lake, the body of water downstream that had been at the heart of the Minqin oasis, dried up.

With no more water in the lake and diminished flows in the Shiyang river, farmers in Minqin started pumping water from the ground to feed their crops. As a result the water table fell. Trees and shrubs that had kept the desert at bay for centuries died during the 1980s and 1990s. With the vegetation gone, the desert started to encroach on the once-lush area. In some places, sand dunes engulfed entire houses.

Minqin’s plight eventually started to attract national attention. In 2007, Premier Wen Jiabao visited, declaring: “We should win the fight for Minqin, and not let it vanish from the map.” The government allocated Rmb4.7bn to make sure that did not happen. This was a colossal amount for one of China’s poorest provinces but the move mirrored China’s huge outlays on water projects across the country.

However, China’s approach to water management has changed little since Mao. Instead of improving the situation, the multibillion yuan programme has infuriated many in Minqin over what they consider to be useless vanity projects.

At the top of their list is Qingtu lake. It dried up several decades ago but the government has “restored” it by building a new canal network. When water started flowing through the canals towards the lake, farmers gathered to watch it go by, shocked that so much of the precious resource could be expended to build an artificial lake when their parched fields lay nearby. The lake today resembles a small wetland among the dunes, supported by dykes, pipes and underground sealants to help keep the water in place.

“It is totally unsustainable,” says Kuoray Mao, a researcher with the University of Kansas who lived in Minqin for 18 months, referring to the new lake. “All this money is really just going to feed the bureaucracy, not to improve farmers’ lives.”

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While Minqin has its artificial lake, other parts of China are similarly grappling with the impact of water projects gone wrong. The Three Gorges Dam, completed in 2006 at a cost of Rmb254bn, has been plagued by silting, landslides, pollution and ecological degradation. Last year, the State Council, China’s cabinet, warned that the dam had “urgent problems”. Across northern and central China, the rapid expansion of irrigation infrastructure thanks to government funding has hastened the depletion of underground aquifers.

Few places have more cause for public anger than Minqin, however. “The people here are very unhappy with the government,” says one former farmer who asked not to be named. “They spent all this money to build a lake but our lives have only gotten harder.”

As part of the multimillion-dollar restoration programme, farmers’ private wells were closed and water prices were raised, making it difficult to get by. The government provides enough water to each farmer to cultivate 2.5 mu of land per person (slightly less than half an acre), but no more than that.

It is hard to see how areas such as Minqin can realise the vision outlined by China’s leaders, who are promising a “China dream” with higher incomes and better standards of living.

Although thousands of farmers have moved out of Minqin, suicide and depression are common among those who remain. Mr Wang, the cotton farmer, says he and his wife have thought about moving but decided against it. “No one wants us,” he says.

Additional reporting by Li Wan in Beijing

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Three Gorges Dam: A vanity project with dire consequences

When the main structure of the Three Gorges Dam, the world’s largest hydropower project, was completed in 2006 it was hailed in China as a triumph of man over nature and a shining example of the Communist party’s ability to mobilise advanced technology to build grand projects, writes Jamil Anderlini.

But by May 2011, China’s state council was referring to the dam’s “urgent problems” of environmental degradation, resettlement of about 1.3m people and serious erosion throughout the dam’s reservoir area.

A project that was supposed to reduce reliance on fossil fuels and end centuries of devastating floods has become mired in controversy and been blamed for the extinction of species, contributing to climate change, exacerbating droughts downstream and seismic instability.

The dam was envisioned by the early revolutionary Sun Yat-sen but it was Chairman Mao Zedong who was its main champion and who had engineers thrown in prison in the late 1950s when they criticised the proposed project.

Mao did not live to see his vision poured in concrete but the plan was revived in the 1980s and approved in 1992 despite opposition from nascent environmentalists and even many officials who saw it as a ludicrously expensive and environmentally devastating vanity project.

About 1.3m people were moved from their ancestral homes, many of them unwillingly and some of them in the face of violent threats as the 660km-long reservoir was gradually filled. Official corruption was rife throughout the compensation and resettlement process.

But it was only when the dam was completed that the scale of the environmental problems became clear.

“The environmental impacts of the project are profound and are likely to get worse as time goes on,” according to International Rivers, a US-based environmental group. “The submergence of hundreds of factories, mines and waste dumps and the presence of massive industrial centres upstream are creating a festering bog of effluent, silt, industrial pollutants and rubbish in the reservoir.”

This article has been amended since original publication to reflect the fact that Minqin county is in Gansu province