"An integration of economic development and environmental protection has already become a major concern in China, where the rapid economic growth has had some environmental costs," said Bruce Murray, resident representative of the bank's China Resident Mission.

About 70 percent of the total funds, which amounts to US$2 billion, will be poured into the hinterland areas in compliance with the country's western development programme. That will be a highlight of China's economic growth in the coming decades, according to Murray.

He said the cash would be mainly invested in two areas: construction of infrastructural facilities and measures to curb the increasing desertification in the western part of the country, a growing headache for the central government as it is blocking the region's economic growth.

"The remaining 30 percent will also go to environmental protection programmes in the coastal areas," said Murray.

Before the latest loans agreement, the bank had already provided 18 loans totalling US$2.3 billion to encourage the country's environmental improvement over the last decade, said Peter King, a senior project specialist with the bank.

He believes that a combination of government-backed regulations and market-orientated moves should be taken to bolster the country's healthy economic growth.

The bank is also planning to provide another two US$150 million loans to fund water management in the Yellow River and the Songhua River before the end of the year.

China should take urgent measures to cope with rising environmental degradation in a move to foster an integrated growth between economic development and environmental protection, said Murray.

The measure assumes increasing importance as the country pays a heavier price for the region's environmental degradation.

"China has been the world's fastest-growing economy in the past two decades, and we expect the trend will continue to be at about 7 percent in the next five years," said Murray.

"But the rapid economic growth has had environmental costs of as high as 3 to 5 percent of the total gross domestic product," said Murray.

He estimated that China has increased its environmental investment from 0.73 percent of its total GDP to a peak of 1.3 percent of its GDP during the 10th Five-Year Plan (2001-05) period. That is close to the 1.5 percent of total GDP devoted to the sector in Europe and the 2 percent in the United States.

(China Daily 06/19/2001)