Turning Waste into Resource: Water Quality Impacts of Manure Utilization Policies in China

China generates more than 3.8 billion tons of livestock and poultry manure annually, making manure one of the most important sources of agricultural nonpoint-source pollution. Since 2017, China has implemented a county-wide manure resource utilization pilot program, supported by substantial central fiscal transfers, to promote crop-livestock recycling, manure treatment facilities, and water-quality improvement. Yet water quality has not improved uniformly in key river basins, and several indicators have increased rather than declined. This paper treats the county-wide manure utilization pilot in Sichuan Province as a quasi-natural experiment and combines county-level panel data on lake and reservoir water quality from 2014 to 2023 with staggered difference-in-differences estimators. To separate local treatment effects from basin-level spillovers, we construct directed hydrological spatial weights from high-resolution digital elevation model (DEM) analysis of upstream-downstream runoff relationships. The results show strong indicator-specific heterogeneity. The policy significantly reduces total phosphorus (TP) and the permanganate index (PI), but increases total nitrogen (TN) and conductivity (Cond) in both lakes and reservoirs. Mechanism tests suggest that treatment facilities generate abatement benefits, while pilot counties also experience a substantial expansion in livestock scale, offsetting part of the environmental gains through additional nitrogen and dissolved-ion loads. Heterogeneity tests show larger nitrogen and ion-migration risks in areas with weaker cultivated-land carrying capacity, stronger precipitation-driven runoff, and better irrigation conditions. DEM-based spillover estimates further show that upstream pilots improve downstream composite water quality while increasing downstream TN, turbidity, and conductivity, consistent with selective abatement and pollution shifting. The paper contributes a hydrologically directed policy-evaluation framework for agricultural environmental regulation and provides evidence for basin-scale coordination in manure management.