Forest ecosystems in the watersheds of the Yangtze river regulate water flo
w in the rivers. The value of water flow regulation by ecosystems is usuall
y not realized in situ but may transfer spatially through rivers to another
spot out of watersheds where conditions are suitable to realize it. To tak
e into account the transfer of value of biological resources spatially, we
developed a process-based simulation model to estimate the capacity of wate
r flow regulation by terrestrial ecosystems, taking into account such major
processes as canopy interception, litter absorption, and soil/ground water
conservation. In this study we combined models and a GIS-embodied spatial
database to assess the capacity and benefits of water flow regulation by ec
osystems in Xingshan County, Hubei Province, China. The capacity of water f
low regulation differs substantially among the 90 types of vegetation-soil-
slope complexes in the watersheds. The simulation model estimates that in a
wet season the watershed can retain similar to 868.07 X 10(6) m(3) water,
which may result in a decrease of water flow by similar to 111.63 m(3)/s in
the Yangtze River. The model also estimates that in a dry season the water
shed can discharge similar to 80.74 X 10(6) m(3) water, resulting in an inc
rease of water flow by similar to 10.38 m(3)/s. As the result of water flow
regulation, the Gezhouba hydroelectric power plant increases its electrici
ty production by up to 40.37 X 10(6) kWh in a year and generates an additio
nal economic value of similar to 5.05 x 10(6) RMB/yr (1 US$ = 8.3 RMB, Chin
ese currency). This value is 0.42 times the annual income from forestry in
the county in 1994 and may reach 2.2 times the annual income from forestry
when Three Gorges Hydroelectric Power Plant runs. We also proposed a model
of economic compensation for the region.