Beijing, for example, discharges 1.2 billion tons of sewage, almost half of which are untreated, into the city's waterways each year, the report said.

With higher living standards, however, urban dwellers are demanding a cleaner environment, and local governments are beginning to invest in protecting their local water resources.

By 2008, Beijing will have built 30 sewage treatment plants to process over 90 percent of sewage before discharge, according to Liu Hangui, director of the Urban Committee of China Hydraulic Engineering Society.

Elsewhere, in Shanghai, over seven billion yuan (846 million US dollars) has been spent cleaning up Suzhou Creek and other waterways, the report said.

"The city still faces a great challenge in improving its water quality and we hope to treat 80 percent of sewage by 2010," said Wang Songnian, deputy director of Shanghai Water Authority.

He was speaking at the annual nationwide meeting of the Urban Committee of the China Hydraulic Engineering Society, which focused on city water supplies.

Drought and water pollution are the two major problems in urban water supply, according to Zhang Jusheng and Wan Yi of the Huaihe River Committee of the Ministry of Water Resources.

Statistics show that more than 400 of China's 672 cities are short of water and 160 cities are so severely affected that they are forced to impose water restrictions.

Water shortages cost 200 billion yuan (24.2 billion US dollars) in industrial output every year in the country, the report said.

Meanwhile, over 90 percent of surface water and 50 percent of underground water in cities nationwide have deteriorated, it said.

Due to excessive consumption, underground water levels in coastal cities such as Dalian, Qingdao, Ningbo and Haikou are dropping.

Experts urged the government to invest more in waste-water treatment and called for a unified approach to addressing the problem.

TERRA.WIRE