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WATER CONSERVANCY INDUSTRIAL POLICY

    This Policy is formulated with a view to promoting the rational
development and sustainable utilization of water resources, effectively
preventing such disasters as floods and drought, and alleviating the
constraints of water conservancy on the development of the national economy.

    Formulation of this Policy is based on the Water Law of the People's
Republic of China, the Water and Soil Conservation Law of the People's
Republic of China, Law of the People's Republic of China on the Prevention and
Treatment of Water Pollution, Flood Prevention Law of the People's Republic
of China as well as the Ninth Five-Year Plan for National Economic and
Social Development and 2010 Program of Perspective Goals.

    This Policy shall be applicable to all regions within the territory of
the People's Republic of China (excluding Taiwan, Hong Kong and Macau) and
to all activities of development of water conservancy and prevention and
treatment of water-related disasters such as integrated treatment of rivers
and lakes, flood prevention and waterlogged land drainage, irrigation,
water supply, protection of water resources, hydro-power generation, water
and soil conservation, waterway dredging and construction of sea dykes.
Chapter I  General Provisions

    Article 1  The goals of this Policy are as follows: to clearly define
the nature of projects, smooth out investment channels and expand sources
of funding; rationally set the price, standardize collection of all fees
and push ahead the industrialization of water conservancy; promote economy
in water use, protect water resources and realize sustainable development.
See to it that there is marked improvement in the capability of flood
prevention and resistance against natural calamities and effective
alleviation of the contradiction in water supply in China during the
period of implementation of this Policy.

    Article 2  Water conservancy constitutes the infrastructure and basic
industry of the national economy. People's governments at all levels shall
place the strengthening of water conservancy construction in an important
position, formulate clear goals, take strong measures and implement the
leadership responsibility system. Competent departments of water
administration at all levels shall, in conjunction with the departments and
regions concerned, compile the integrated basin planning and integrated
regional planning before 2000 which shall serve as the basis for the
formulation of water conservancy construction planning and related
special-purpose planning upon approval after submission in accordance with
law and do a good job in conducting inspection and supervision on the
implementation of the planning. Any act of construction in violation of
the planning shall be strictly prohibited.

    Article 3  Overall planning of the national economy, urban planning and
the distribution of major construction projects must take into consideration
flood prevention and safety and conditions of water resources and must have
special-purpose planning or authentication of such areas as flood prevention
and waterlogged land drainage, water supply, protection of water resources,
water and soil conservation, prevention and treatment of water pollution and
economy in water use.

    Article 4  The priority in water conservancy construction during the
period of implementation of this Policy shall be: flood prevention control
harnessing projects of rivers and lakes, urban flood prevention, construction
for the safety of flood storage and detention areas, maintenance and
construction of sea dykes, renewal and transformation of existing water
conservancy installations, especially elimination of dangers and consolidation
of sick and dangerous reservoirs and embankments, drinking water for humans
and animals in drought-stricken areas, trans-regional water diversion projects
and projects of water sources in regions short of water resources, water
supply, economy in water and protection of water resources, irrigation
and drainage of farmland, water and soil conservation, integrated utilization
of water resources, hydro-power generation and research and development
projects of water conservancy technology.

    Article 5  The State steps up water resources management, carries out the
policy of comprehensive planning, rational development, integrated utilization
and ecological protection in water conservancy construction and adheres to
the combination of elimination of the evil effects of disasters with water
conservancy construction, the combination of treatment of the symptoms with
treatment of the rootcauses, the combination of new construction with
transformation and the combination of development of resources with economy
in water consumption.

    Article 6  The State implements the policy of giving priority to the
development of the water conservancy industry, encourages all walks of life
of society and foreign investors to invest in the construction of water
conservancy projects through multi-channels and in various forms. Under
the criteria of adhering to social benefits, effective ways of water
conservancy industrialization shall be actively explored to accelerate
the process of water conservancy industrialization. Efforts shall be made
to improve the economic performance of water conservancy works. Requirements
of urban and rural inhabitants for water shall be met and overall planning
for the requirements of industry and agriculture for water and shipping
shall be worked out. Importance shall be attached to water environment
protection and diversified management, gradually forming a benign operational
mechanism of input and output of the water conservancy industry.
Chapter II  Project Classification and Fund-Raising

    Article 7  Water conservancy projects are classified into two categories
according to their functions and roles: non-profit-intensive projects with
social benefits as the main purpose such as flood prevention and waterlogged
land drainage, key farmland irrigation and drainage works, urban flood
prevention, water and soil conservation and water resources protection belong
to category A; projects with economic benefits as the main purpose and certain
social benefits such as water supply, hydro-power generation, breeding in
reservoirs, water-bound tourism and water conservancy integrated management
belong to category B. Determination of a project of whether it is category A
or category B shall be made clear by the project examination and approval unit
in its official reply to the project proposal.

    Article 8  Construction funds of category A projects shall mainly be
arranged in central and local budgetary funds, water conservancy construction
funds and other budgetary funds available for water conservancy construction.
Specific government agencies or non-profit social institutions shall be
determined as the responsible main bodies of category A projects which
shall be responsible for the whole process of project construction and
bear the risks.

    Article 9  Construction funds of category B projects shall mainly be
raised through non-budgetary fund channels. Category B projects must
practise the project legal person responsibility system and capital fund
system and the capital fund rate shall follow the relevant state provisions.

    Article 10  Water conservancy construction projects are classified into
two categories of central projects and local projects according to their
roles and the beneficiary range. Central projects mean projects having
major impacts on the overall national economy such as cross-province
(autonomous region, municipality directly under the Central Government)
key harnessing works of major rivers and cross-province (autonomous region,
municipality directly under the Central Government), cross-valley water
diversion projects and projects of integrated utilization of water resources.
Local projects mean those projects which bring benefits to local areas such
as flood prevention and waterlogged land drainage, urban flood prevention,
irrigation and drainage, waterway realignment, water supply, water and soil
conservation, water resources protection and medium- and small-size
hydro-power station construction.

    Article 11  Investment of central projects shall be jointly borne by
the Central Government and the beneficiary provinces (autonomous regions,
municipalities directly under the Central Government) according to the
extent of benefit, scope of benefit and economic strength; treatment of
major water and soil erosion regions shall mainly be the responsibility of
local authorities and the Central Government shall give appropriate subsidy;
all other categories of water conservancy works of which local authorities
and departments are the beneficiaries shall be built with joint investment
by the beneficiary localities and departments according to the extent of
benefit in accordance with the principle of "he who benefits from it shall
share the burden"; the Central Government shall give appropriate subsidy
to important water conservancy construction projects in minority nationality
regions and poor areas through various channels.

    Article 12  Investment required for category A projects of flood
prevention and waterlogged land drainage and urban flood prevention in local
projects shall be arranged from within such local funds as local budgetary
funds, integrated agricultural development funds, funds of industry assisting
agriculture and special-purpose water conservancy funds and discount-interest
loans, and in the meantime importance shall be attached to the utilization of
funds of agricultural production management organizations and agricultural
labourers and input of their services.

    Article 13  People's governments at all levels shall gradually increase
input into water conservancy construction in accordance with the growth of
finance at the corresponding levels and study and formulate preferential
policies of promoting water conservancy industrialization. There shall be
an appropriate increase for water conservancy construction in policy loans
from the State Development Bank and the Agricultural Development Bank and
loans from foreign governments and international financial institutions held
by the State for use.

    Article 14  For the purpose of expanding the sources of water conservancy
construction funds, central and local water conservancy construction funds
shall be established and measures for fund utilization management shall be
perfected pursuant to the relevant provisions of the Circular of the State
Council Concerning the Transmission of Interim Measures for Water Conservancy
Construction Fund Raising and Utilization Administration (Guo Fa [1997] No. 7).

    Article 15  People's governments at the prefectural (municipal) level of
the localities of flood prevention and waterlogged land drainage and
harnessing works of important rivers where flood disasters frequently
occur may raise funds per project. The fund-raising proposal shall be
subject to the examination and approval of people's governments at the
provincial level and submitted to the competent departments of planning and
finance under the State Council for the record. Relevant laws and relevant
provisions of the State Council shall be strictly adhered to in raising funds
from peasants. Vouchers used for fund-raising shall be uniformly printed by
the competent departments of finance at or above the provincial level.
Departments of audit and supervision shall exercise strict supervision
over fund utilization.

    Article 16  The pace of renewal and transformation of water conservancy
works shall be accelerated. People's governments at all levels shall integrate
renewal and transformation of water conservancy works into plans and arrange
corresponding funds; water conservancy works depreciation fee shall only
be used for renewal and transformation of water conservancy works and
shall not be used for other purposes.
Chapter III  Price, Fee Collection and Administration

    Article 17  The State practises the system of utilization with payment
of water resources, levies and collects water resources fee in accordance
with law from units drawing water directly from underground or rivers and
lakes. Measures for the levying and collection of water resources fee and
its utilization administration shall be formulated by the State Council.
Pending its official promulgation by the State Council, relevant provisions
of provinces (autonomous regions and municipalities directly under the
Central Government) shall be observed provisionally. The water resources
fee collected shall be included in budget management as a special-purpose
fund for special use.

    Article 18  The State practises the licence system for drawing water.
The competent department of water administration under the State Council
shall be responsible for the organization for implementation and supervision
and management of the license system for drawing water nationwide.
Specifically the provisions of the Measures for the Implementation of
the Licence System for Drawing Water (Decree No. 119 of the State Council)
promulgated by the State Council shall be observed.

    Article 19  Collection of administrative fees prescribed by relevant
provisions of laws, administrative regulations and relevant state policies
such as waterway works construction and maintenance management fee, water and
soil erosion prevention and treatment fee, waterway sand collection management
fee, compensation fee for occupying water sources for agricultural irrigation
and irrigation and draining works shall be effected in full amount by the
competent departments of water administration at all levels within two years;
measures for fee collection of water conservancy works under the direct
management of valley authorities shall be formulated by the departments of
finance and planning under the State Council in conjunction with the competent
department of water administration. The above-mentioned fees collected must be
used for the maintenance, construction and operational management of water
conservancy works.

    Article 20  The price of water supply, hydro-electricity and other
water conservancy products and services shall be determined rationally
to promote water conservancy industrialization. The price of water supply
of newly-constructed water conservancy works shall be determined in accordance
with the principle of meeting the operating cost and expenses, tax payment,
loan reimbursement and gaining reasonable profit. The price of water supply
of previously-built water conservancy works shall, in accordance with the
principle of the state water pricing policy, cost compensation and
reasonable profit and in the light of different uses, be gradually
adjusted to be in place within three years, and timely readjustments made
thereafter in the light of change in water supply cost. The competent
departments of price control of people's governments at or above the
county level shall, in conjunction with the competent department of
water administration, determine and adjust water rate.

    Article 21  The competent departments of water administration at or
above the provincial level shall, in conjunction with the departments
concerned, carry out category A or category B classification with respect
to existing water conservancy construction projects. Specific measures for
classification shall be formulated separately. The maintenance and operations
management fee of category A projects shall be paid from financial budget
at various levels and the maintenance and operations management fee of
category B projects shall be paid from enterprise business revenues.

    Article 22  Upon water rate raise and collection in full amount of
water conservancy administrative charges relating to category B projects,
the managing units of category B water conservancy construction projects
shall be transformed into enterprises.

    Article 23  The department of water administration under the State
Council takes charge of supervision and management of value preservation
and value increment of state-owned water conservancy assets. A state-owned
assets management, supervision and operations system with clearly defined
powers and responsibilities shall be established in accordance with the
principle of uniform state ownership, government supervision and management at
different levels and autonomous operations by enterprises. Measures for the
management of value preservation and value increment of water conservancy
assets of collective ownership shall be formulated separately in accordance
with relevant state provisions.

    Article 24  The State encourages treatment of collectively-owned
barren mountains, barren valleys, barren hills, barren shoals and other
areas of water and soil erosion in such diverse forms as leasing, auction,
cooperative shares system and contracting and the 50-year duration for use
shall in principle be deemed as appropriate. The areas managed or treated
in the form of contracting, leasing or cooperative shares system may be
inherited or transferred in accordance with law within the prescribed duration
for use; whoever purchases the right to use has the right of inheritance,
transfer, mortgage and joint operations through equity participation.
Construction and management of small-size water conservancy works in various
forms shall be encouraged.
Chapter IV  Water Conservation, Water Resources Protection and Water
Conservancy Technology

    Article 25  Planned water use shall be stepped up, economy in water use
shall be strictly practised and water resources shall be allocated rationally.
All trades of national economy and all regions must implement various rules
for the management of water use prescribed by the State, make great
efforts to popularize water-saving technology and economize in various types
of water use.

    Article 26  Water-saving irrigation in agriculture shall be pushed in a
big way. Dry agricultural cropping technology and such water-saving
technologies as lining and brick laying of canals, pipeline water
transmission, spray irrigation, drip irrigation and seepage irrigation
shall be researched and extended and such mode of irrigation of waste of
water resources as flooding irrigation shall be changed as soon as possible.
Project examination and approval units at all levels shall give priority to
project listing and increase input in water-saving projects in agriculture.
The State Development Bank and the Agricultural Development Bank shall give
priority to arrange loans for water-saving projects which meet the terms
for loans and have the ability to pay back the loans. People's governments
at all levels shall, in the light of circumstances, arrange discount interest
from finance for loans for water-saving projects in agriculture.

    Article 27  Provisions relating to economy in water use and quota
management of water consumption shall be strictly observed. Water user
units shall adopt such water-saving measures as water recycling and multiple
uses of water and make big efforts to develop and extend water-saving
technology. Regions short of water resources shall strictly restrict the
development of industries of heavy water consumption. Proposal for the
new construction of projects of heavy water consumption must include
special-purpose authentication on water use, or else the project must not
be listed or constructed. Whoever consumes water exceeding the fixed quota
shall pay the bill at a higher rate. Specific measures shall be formulated by
the people's governments of provinces (autonomous regions and municipalities
directly under the Central Government).

    Article 28  Water resources protection shall be stepped up. The
departments of water administration at or above the provincial level shall,
in conjunction with the departments concerned, compile special river basin
water resources protection planning and submit them for approval in accordance
with law. Local people's governments at or above the county level shall,
pursuant to the river basin water resources protection planning approved
in accordance with law, organize the formulation of the water resources
protection planning of their respective administrative areas, integrate it
into the medium- and long-term plan and annual plan for national economic and
social development of the government at the corresponding level and
conscientiously carry out organizational work for their implementation.

    Article 29  The competent departments of water administration and other
departments concerned shall in the development, utilization and control of
water resources, make overall plans and take all factors into consideration,
maintain rational flow of rivers and rational water levels of lakes,
reservoirs and underground water bodies. People's governments at
the provincial level shall delimit in accordance with law surface and
underground water sources for livelihood and drinking water, water bodies in
scenic spots and historical sites, important water bodies for fishery and
other water bodies of special economic and cultural value as protected areas
and take strict measures to guarantee that the water quality of the protected
areas conforms to the standards for use for prescribed uses.

    Article 30  People's governments at all levels shall, pursuant to the
provisions of the Law of the People's Republic of China on the Prevention
and Treatment of Water Pollution, step up the prevention and treatment of
water pollution. Enterprises causing water pollution shall undergo
consolidation and technical transformation, and take integrated measures
of prevention and treatment, utilize water resources rationally and reduce
the discharge of waste water and pollutants.

    Article 31  Economic compensation mechanism for the protection of water
resources and restoration of the ecological environment shall be established.
Any activity relating to livelihood and production and construction projects
must take precaution against water and soil erosion and water pollution.
Any unit causing water and soil erosion and water pollution shall be
responsible for the treatment and bear all expenses for the treatment.
Installation or reconstruction and expansion of pollutant discharge outlets
within the limits of canals, ditches and reservoirs shall be subject
to the approval of the competent departments of water administration.

    Article 32  The State encourages the research and development,
introduction and digestion and popularization and extension of water
conservancy technologies and water pollution prevention and treatment
technologies, with focuses on technologies of flood prevention, drought
fighting and disaster reduction, the technology of river course realignment,
the technology of silt clearing, key technologies of large-size water
conservancy works, water-saving technology, the technology of biological
treatment of water pollution, the technology of integrated utilization and
treatment of high-density organic waste water, the technology of scientific
discharge of polluted water, the technology of turning polluted water into
resources, and new materials, new structures and new techniques for water
conservancy construction. The levels of modernization in water conservancy
survey and design, project management and technical installations and
equipment shall be constantly improved and the water conservancy information
network shall be gradually established.
Chapter V  Implementation

    Article 33  The State Planning Commission shall be responsible for the
interpretation of this Policy. The competent department of water
administration under the State Council shall, in conjunction with the
departments concerned, formulate the rules for implementation and organize
its implementation. The rules of implementation shall be submitted to the
State Planning Commission for the record. The State Planning Commission
shall be responsible for the coordination of the problems encountered in
implementation.

    Article 34  The planning departments at the provincial level shall,
in conjunction with the departments of water administration at the provincial
level, work out specific schemes for implementation which shall be carried
out upon approval of people's governments at the provincial level and
submitted to the State Planning Commission for the record.

    Article 35  This Policy shall enter into force as of the date of
promulgation and terminate by 2010.