It boasts the mainland's largest inland salt lake, Qinghai Lake, and other abundant water resources which form the origins of the mainland's three mightiest rivers, the Yangtze, Yellow and Lancang.

Since 2000, the province has increasingly become a favourite destination for adventurous mainlanders because of its sheer natural beauty and the increasing number of new rich who want to escape from the summer heat.

With the controversial Qinghai-Tibet railway scheduled to start operations in 2007, the province is bracing for an influx of more domestic and overseas tourists. Qinghai's tourism revenues are expected to reach 2.3 billion yuan this year, equivalent to half of the province's total fiscal revenue of 5.12 billion yuan last year.

Qinghai is also facing a great struggle to preserve its natural beauty and prevent further environmental deterioration. The balance is delicate, and officials have vowed not to repeat the disastrous mistakes of the past.

The first wave of man-made degradation of Qinghai's delicate environment started in the 1950s and 1960s, and its adverse impact is still being felt today.

Fanned by the late chairman Mao Zedong's fanatical slogan 'Man is bound to conquer nature', Qinghai - like the rest of the country - launched massive campaigns to strip the greenery from the mountains and claim the wetlands around Qinghai Lake to grow wheat, despite the unsuitably harsh climate.

The province has reaped a bitter harvest ever since. In recent years, coupled with global warming, it has witnessed an acceleration of desertification.

Any visitor driving from Xining , the provincial capital, to Tibet will be struck by the rapid change of scenery from lush green to barren rocks and sand in just 200km.

Another example of the environmental balancing act is Qinghai Lake. While tourists are awestruck by its sheer beauty and expanse - it covers 4,400 sq km (about four times the size of Hong Kong) - top mainland environmental experts are unsure how long it will remain in one piece.

In the past 30 years, the lake's water level has dropped by 3.7 metres and its surface has shrunk by 312 sq km. The average depth is 19 metres.

In a survey earlier this month, scientists from various central government departments expressed serious concerns about the environmental deterioration around the lake, the premier defence against desertification approaching from the west.

They said there was a real danger that the lake could turn into several smaller lakes. The main reason is man-made, with the intensive efforts to turn wetlands into farm land reducing flows into the lake. Desertification is expanding rapidly in the lake area.

Now both the central and provincial governments will have to pay dearly for their mistakes.

Xinhua has reported that 6.88 billion yuan will have to be spent in the next 10 years to return the farmland to its natural state, relocate farmers and ban fishing in an effort to nurture the lake back to its former glory.

To their credit, top Qinghai officials appear to be dealing with the environmental issues in a forthright manner.

Su Sen, a deputy provincial governor, admitted candidly that the environment was deteriorating, but said the provincial leadership had made environmental protection a top priority and was taking concrete steps to correct its mistakes.

In addition to the efforts to protect Qinghai Lake, the central and local authorities will spend 7.5 billion yuan over the next seven to 10 years to preserve the natural water reserves which are the sources for the Yangtze, Yellow and Lancang rivers. The programme will be launched this month and the money will be used to protect the wetlands and relocate residents.

Mr Su, a native of Zhejiang province who has worked in Qinghai for more than 30 years, said some of the provincial policies in the past were misguided.

'For instance, we did not grow cotton and tobacco here, but we had textile and cigarette factories. Our automobile assembly plant also failed,' he said.

'Despite our efforts to boost farming, we have to import half of our grain from other provinces because our weather is not suitable for growing wheat.'