arpad, the problem is economic. They will have to import a massive amount of food. That food will have a cost. That will lead to a lower standard of living an a reduction in their account surplus with respect to exports. Those are economic problems. These are things that will make the country less stable and make their production costs higher too.
China's position of dominance in manufacturing is keyed on their being the low cost provider. Higher food costs means higher wages. Higher wages means higher production costs. And as this happens the Vietnams and Turkeys of the world will start nipping at their heels. This event just makes that dynamic more dramatic and it makes the whole thing happen sooner.
You can repeat "the problem is economic" all you want but if the government's in control of how much water's being pumped how's that not
a political problem?
Heck, you don't even have to go to China to see that particular type of politics in action. Water's been a political flash point here in the U.S. since the 1800s and continues to be. Subsidized water rates send water to the politically-powerful agricultural sector which squanders it. Why not? They're not paying market price for the water so it's not valuable enough to make water-conserving technologies worthwhile. Why bother with drip irrigation technology when you can just flood a field with water most of which is wasted?
The irony to which I was referring is that the Chinese, having leveraged their way out of poverty via the free market, are balking at putting the free market to use on this problem.
I can see why the Chinese are afraid of allowing the free market to perform its magic but it's an example of typical, human shortsightedness.
Putting access to water into the free market would necessarily drive lots of farmers off the land. The demands of efficiency, partly answered by the economies of scale, would result in a further migration from the country to the city and China's already struggling with the demands of that move. Free market water access would accelerate that move as marginal and too-small farming operations would be driven over the edge. So China's swapping a shortsighted, and politically pain-free solution for a long-term but more immediately uncomfortable solution. Not particularly inscrutable.
By the way, what do you think will happen to the price of labor in Vietnam and Turkey once they start nipping at China's heels? Hint: look at South Korea and Japan.