A group of seven Chinese banks agreed Tuesday to grant a combined 48.8 billion yuan (US$5.9 billion) in loans to finance the eastern and central sections of the country's ambitious south-to-north water diversion project.

According to an agreement signed jointly by the banks, China Development Bank will be the key provider, targeting an issuance of 21.3 billion yuan (US$2.6 billion) in loans.

The remaining loans will come from the China Construction Bank, Bank of China, Agricultural Bank of China, Industrial and Commercial bank of China, Shanghai Pudong Development Bank and CITIC Industrial Bank.

This will be the largest sum of group loans from banks for any project in the country.

The massive water project to relieve the country's drought-ridden north by diverting water from the Yangtze River, is larger even than the Three Gorges hydro-power and conservancy project. Up to 44.8 billion cubic meters of water will be diverted through three canals to the north, about the annual volume of the Yellow River in a normal year.

The first-phase eastern section of the project began at the end of 2002 with the long-term goal of providing water for east China's Jiangsu and Shandong provinces. Construction began one year later on the project's central section. The western section is scheduled to begin in 2010.

China plans to invest nearly 60 billion yuan (US$7.2 billion) in the water project in 2005, earlier sources said.

(Xinhua News Agency March 30, 2005)