The history of groundwater in China is one of extremes, or apparent extremes. Before the 1960s, the story was one of neglect; only a small fraction of China's water supply came from groundwater (Nickum, 1988). Almost none of the Ministry of Water Resource's investment funds were allocated to the groundwater sector until the late 1960s. Certainly, to the extent that underground water resources were valuable, China was ignoring a valuable resource. Since the mid-1970s, however, the prominence of the groundwater sector has risen dramatically. Over the last 30 years, agricultural producers, factory managers and city officials, far from ignoring groundwater resources, have entered an era of exploitation (Smil, 1993; Brown and Halweil, 1998). Arguably, there have been more tube wells sunk in China over the last quarter century than anywhere else in the world. As a share of total water supply, ground water has risen from a negligible amount across most of China to being a primary source of water for agriculture, industry and domestic use in many of the nation's most productive regions. Unfortunately, the resulting fall in groundwater tables has been one of China's most serious environmental problems.

Although genetically modified crops are being grown on increasing larger areas in both developed and developing countries, with few minor exceptions, there has been almost no country that has commercialized a genetically modified major food crop. One reason may be that is unclear how the commercialization of genetically modified crops will help poor, small farmers. The objective of this paper is to report on the results of an economic analysis that uses three years of data from a series of quasiexperimental areas in China's GM rice program that were carried out in the fields of small and relative poor producers in two provinces in China. The paper attempts to answer two key questions: Does GM rice help reduce pesticides in the fields of farmers? Do the new varieties of GM rice increase the yields of farmers? Based on the results, the paper shows that the use of GM rice by farmers in pre-production trials allows farmers to reduce pesticide use and labor input, increase yields and improve their health. The paper concludes by arguing that the commercialization of GM rice in China could have consequences that exceed the direct impacts on China's farmers and could be a key step in breaking the world's current plant biotechnology logjam.

The farmers in China's northern and central provinces began adopting Bt cotton in 1997 and in recent years almost exclusively plant Bt cotton. Adopted largely because traditional means of controlling bollworms by spraying insecticides were largely ineffective, the initial large gains in productivity from adopting Bt cotton, which expresses a toxin that can control bollworms, came mostly from sharply reduced levels of insecticide use. Despite the successes during the first years after adoption, there are uncertainties about the future of Bt cotton. On the one hand, the absence of refuges raises the question about whether or not the gains be sustained in the future. On the other hand, it also is a possibility that as Bt cotton acreage spreads, there may be positive externalities that can increase the gains. The overall goal of this research is to examine whether or not the gains from reduced spraying for bollworms that characterized the initial spread of Bt cotton is being sustained almost one decade after its initial adoption. Based on farm level data collected by the authors in 1999, 2000, 2001 and 2004 in 16 villages in Hebei, Shangdong, Henan, and Anhui provinces, our analyses show that insecticides applied to control bollworms instead of increasing as some expected in fact have declined. While the study's results, which are based on socio-economic data from Bt and non-Bt cotton farmers, are not able to pinpoint the exact mechanism that has allowed Bt to maintain or increase its productivity-enhancing effects, they are consistent with a story that suggests farmers, both those cultivating Bt cotton and non-Bt cotton, have been able to continue to reduce their use of insecticides due to lower populations of bollworm that have fallen as a result of Bt cotton area expansion. Moreover, our results are also consistent with the findings that at least eight years of commercialization, if there is any rise in the inherent resistance of bollworms to the Bt toxin, it still has not induced farmers to increase their use of insecticides to control bollworms. The findings from this study have important implications not only for refuge management policy in agricultural sectors of developing countries that are dominated by small, poor farmers that plant a diversified set of crops, but also for those that are interested in the methodologies that have been used to measure the direct and indirect impacts (or externalities) of insect-resistant GM technologies on crop production decisions.