The country's economy is often threatened by flooding in the south and droughts in the north.

Zhang Jiyao, vice-minister of water resources, said that, for the rest of the period of the 10th Five-Year Plan (2001-05), China will keep increasing investment in the water sector, including flood control, water supplies and soil-erosion control.

"Over 400 billion yuan, with half of that coming from State revenue, will be needed for China's ongoing massive construction and renovation of water-conservation projects," Zhang told a press conference in Beijing Thursday.

Of the funds, 130 billion yuan (US$15.6 billion) will be investment left over from the previous five-year plan period (1996-2000).

Priority for investment will be given to reinforcing the key levees of China's major flood-prone rivers such as the Yangtze and the Yellow River, renovating large reservoirs with potential problems throughout the country and improving western China's fragile ecosystems, particularly chronic water loss and soil erosion - the root cause of poverty for millions of rural people.

In 1998, there was havoc when the Yangtze River in the south and the Songhua River in Northeast China both flooded. The country was forced to pour a record 136.4 billion yuan (US$16.5 billion) into water projects, with 68 per cent of the total raised by issuing national bonds.

But Zhang said that, instead of the State simply issuing bonds as in past years, "water-project funding will be increasingly dependent on fiscal revenue and bank loans in the next five-year period to widen fund-raising channels."

In 1999 and 2000, such investment rose so much that annual investment each year was 4.8 times that during the Eighth Five-Year Plan (1991-95) and about three times that in the first two years of the Ninth Five-Year Plan (1996-2000).

This year, the central government has invested 40 billion yuan (US$4.8 billion) in the water sector, with 75 per cent of that coming from national bonds. This lifted State investment to an unprecedented level and ensured the start-up and smooth construction of some key water projects.

Zhang said that, to date, the State's investment in the water sector has paid off, with "funds used well and investment scale under proper control."

(China Daily December 21, 2001)