But achieving this goal requires the government to quickly implement new management measures, the report said.

"It (the government) must act with firm determination and with recognition that doing so will disturb many existing practices and will require the establishment of new practices,'' said Daniel Gunaratnam, the bank's principal water resources specialist who has been engaged in water projects in China for years.

"Resistance to such changes must be overcome,'' he added.

The study is a cooperation project between the bank and the Ministry of Water Resources. It focused on the situation in northern China, especially the basins of the Yellow, Haihe and Huaihe rivers.

The basins produce 31 percent of China's gross industrial output, but only have about 10 percent of China's water resources and face severe water shortages.

"The lack of water resources will be a serious limitation to economic and social development in China, especially in north China,'' the report said.

According to Gunaratnam, the present cost to the economy due to water shortages is about 60 billion yuan (US$7.2 billion) per year. This cost will rise to 110 billion yuan (US$13 billion) per year if China continues carrying on as usual.

Water shortages and pollution are new problems in China, ones hardly thought of half a century ago.

However, the Chinese government has fully realized the importance of this issue and is exploring solutions.

Premier Zhu Rongji said earlier this year that management in water conservation and intorduction of a rational pricing system, should be high on the government's agenda.

"Traditional and conventional ways of managing water resources must be markedly modified in order to support continuing sustainable growth in the 21st century,'' Gunaratnam said.

The report also recommended an 25-year action plan, with a cost of 1,350 billion yuan (US$162.65 billion), to help solve the water shortage problem.

The money will be used to increase water supplies, tackle water pollution, and improve irrigation and flood control.

The plan recommends two key measures to reduce water demands to minimum levels. One is to raise water prices for all users so that revenues will reflect the cost of water supply and its scarcity. The other one is to adopt a series of measures to increase water use efficiency in all sectors.

These measures alone, however, will not reduce demands sufficiently to match available supply.

The plan also recommends two key measures for augmenting supply, including a systematic increase in the re-use of treated waste water and inter-basin, south-north water transfers.

"With these measures, the risks of social and economic distress due to water shortages will be averted in the basins,'' the report said.

(China Daily 05/21/2001)