Water rights trading is an effective way to optimize the allocation of water resources. However, the existing practice of water rights trading in China lacks any consideration of the practical value of the exchanged water. This deficiency may lead to disputes between transferor and transferee during the implementation of the water rights trading contract. This paper puts forward the concept of Standard Water (SW). First, getting the original value of exchanged water by the shadow price model based on input-output table; Second, based on the original value, building the economic profits or costs model to obtain the practical value of exchanged water; Third, establishing SW quantity measurement model according to the principle of rewarding excellence and punishing inferiority, so as to convert the water quantity of exchanged water into SW quantity. With the standardization method, this paper takes the water rights transaction between Dongyang City and Yiwu City in 2000 as an example to carry out case study, and provides policy recommendations. The results show that when the contract requires the provision of 49.999 million m3 water of Class I the quality, if the exchanged water quality provided is in Class II-V, the corresponding SW will be decreased to 48.699-37.399 million m3. The application of this research will be conducive to ensuring the fairness and durability of the water rights trading processes.
Keywords: rewarding excellence and punishing inferiority; standard water (SW); water rights trading.