Abstract: The reform in water pricing plays a critical role in agricultural production, which is believed to have great water savings potential. We consider eliminating irrigation subsidies as a simulation and conduct a comparative evaluation between the water parallel pricing system (WPPS) and the water pricing system (WPS), which are incorporated into two computable general equilibrium (CGE) models, respectively. The results prove that, compared with WPPS, WPS would contribute higher capacities for water savings with more farming imports and less loss in farming output; households in rural and urban areas would benefit from more income and food consumption, which would be matched by increasing farming imports. A policy recommendation is that eliminating the irrigation subsidy should pay more concerns on alleviating the negative effects on farming outputs. Moreover, improvements in agricultural labor mobility and water demand elasticity are needed to enable more focus on the water conservation policy, particularly in WPS.

Key words: computable general equilibrium model, eliminating irrigation subsidy, factor mobility, farming production sectors, water pricing reform in China