China is facing severe problem of water scarcity.Agricultural sector,the main consumer of water resource has remarkably changed its institutions on water resource deployment,due to heavy environmental pressure.As a new and spontaneous institution,groundwater market has developed rapidly in northern China,and has impacts on water using behaviors and benefits of farmers.Using household survey data from Hebei and Henan in 2007,this paper at tempts to pin down the development and operating of groundwater market in rural China.We focus on the monopoly and competition in the market.Empirical analysis reveals that Chinese farmers are trying to make rational decision when they compete with others in groundwater market.In general,monopoly is not fierce in Chinese rural ground water market,with great variations among different villages and even different tubewells within one village.Tubewell costs,regulation and the density of tubewells are the main determinants that affect monopoly level of groundwater market.To make water market benefit more and more farmers of low income,corresponding policies are needed to modify its development in the future.