By 2010, the capital's residents may start receiving water from the Yangtze River.

A massive water diversion project is expected to start supplying water to Shandong Province by 2007 and Beijing by 2010, an official said on Tuesday.

The worsening water shortage in the two areas, caused by decades of drought, may be alleviated with water from the mighty Yangtze River in the south, he said.

The water diversion project consists of three 1,300-kilometer canals that will carry water from the Yangtze along the eastern, middle and western parts of the country.

Zhang Jiyao, director of the State Council's office in charge of the South-to-North Project, told a national conference that ground will be broken in more places along two of the lines of the ambitious water diversion scheme, the largest of its kind in the world.

Before next year's flood season, construction of four new sections along the two lines will advance the project further.

That will bring the total number of sections being built to 13. Construction started in 2002 with an estimated investment of 124 billion yuan (US$15 billion).

When finished, the first two canals will be capable of transferring 13.4 billion cubic meters of water a year.

Zhang urged local governments to control water pollution along the eastern line and protect water resources along the middle line, two formidable issues that may endanger the project.

"Water security on the eastern line, plagued by many chronic sources of contamination, is vital to the diversion project," Zhang said, calling for a "clean water corridor."

Local governments are required to ensure the water in their section meets minimum drinking standards by 2007.

China has launched 260 projects to curb water pollution along the eastern line of the scheme. Hundreds and possibly thousands of polluting enterprises along it will be forced to close if they fail to meet standards within five years, environmental experts said.

Another problem is cost, since to date the project is in the red.

Zhang said actual costs of the first phase along the two lines have exceeded estimates and hit 21.7 billion yuan (US$2.6 billion) over budget so far.

In this year alone, the central government earmarked 10.2 billion yuan (US$1.2 billion) for construction and raised the rest through bank loans.

To find a stable source of funds, Zhang said, next year the "central government will begin to raise a special funds."

Under the existing investment policy, the government pays 30 percent of the total cost with 40 percent provided by bank loans. The remaining 25 percent comes from beneficiary provinces.

Local governments will have to raise the money using public revenues, water fees or surcharges.

To regulate fundraising and management, planning authorities will draft special rules to set ceilings for fundraising and reasonable pricing of water supply for the target areas along the two canals.

When completed, up to 44.8 billion cubic meters of water will be diverted through the three channels annually. That's about the same volume of water that flows every year through the Yellow River, China's second longest.

The middle line will take water from the Danjiangkou Reservoir in central China's Hubei Province to large cities including Beijing, Tianjin, Shijiazhuang in Hebei Province and Zhengzhou in Henan Province.

The eastern line is designed to transfer water from east China's Jiangsu Province to Tianjin while work on the western line continues.

To be built in three phases section by section, the three canals will link the country's four major rivers: the Yangtze, Yellow, Huaihe and Haihe.

(China Daily November 17, 2004)