The overall aim of this paper is to attempt to discover the true facts in order to ascertain whether or not there is a water crisis in China, and if there is, to identify the responses of the different stakeholders—government water officials, community leaders and farmers. In order to achieve this goal, several specific objectives are pursued. First, the paper evaluates the status of China's groundwater economy, examining whether or not the groundwater table is systematically falling. Second, in the parts of China that face a water crisis (or potential crisis), the paper documents the regulations and policies that the government—both local and regional—have implemented and discusses whether they have been successfully implemented. Third, it describes how farmers have responded to the water crisis and tries to assess whether or not their roles have helped alleviate the water scarcities or exacerbated the crisis. To meet these objectives, two large field surveys are used that cover seven provinces in northern China. The findings demonstrate that, although the water table is not falling everywhere in northern China, there are still a substantial number of communities that appear to be facing a water crisis. When there is a water crisis, the data show that the government in China has begun to make a number of policy responses, but the implementation is not always effective. Where water is becoming scarce, farmers and community leaders have also responded in numerous ways. However, farmers do not necessarily respond in ways that effectively save water, mostly because they do not always have incentives to do so. With good incentives, the research shows that they do save water. Hence, the government cannot ignore the way that farmers respond. Indeed, good policy needs to use this responsiveness to reduce the adverse effects of water scarcities and encourage conservation. [ABSTRACT FROM AUTHOR]