The mainland's water problems shave off at least 5.5 per cent of its gross domestic product and the already severe water shortage may rise fivefold in 20 years, the Asia Development Bank (ADB) says.
More than two-thirds of the mainland's 660 cities already suffer water shortages, which has led to a 2 per cent loss in GDP, the ADB's East Asia director Amy Leung said.
The GDP was affected because water shortages crimped industrial production, agriculture and other business activities.
Some 43 per cent of the water in the seven major river basins had not been meeting the quality standard of drinking water, Leung said.
'Water quality in major lakes and reservoirs is also very poor due to untreated wastewater.'
Floods, which had been occurring more frequently of late, had led to a 1 per cent GDP loss, Leung said.
'Lack of awareness and inadequate measures to protect watersheds have contributed to environmental problems in many river basins in China.'
The northeastern mainland used to have lots of forests and rivers prior to the Great Leap Forward in the late 1950s but much of the forests had disappeared and the rivers had dried up, a foreign water executive based in Beijing, said.
'Local government officials tell me that there is acute water shortage in northeast China.'
The mainland is one of the world's biggest consumers of water and is considered by the United Nations as one of the 13 countries with a water shortage. Its per capita water usage is a quarter lower than the world average.
'It is alarming, because it means that the water crisis that Beijing faces today, with an estimated supply deficit of 400 million cubic metres, will be afflicting China's major cities in 20 years, and millions of urban Chinese citizens will suffer,' Patricia Adams, an executive director of Probe International, an independent environmental protection advocacy group, said.
'Having said that, 20 years is a long way off and enormous strides could be made in that time to improve water policy, technologies and infrastructure, and thus avert a countrywide crisis.
At a meeting last month, Water Resources Minister Chen Lei said frequent droughts this year had severely damaged water systems, affecting the available drinking water and the water needed for agriculture, according to the ministry's website.
Chen called for a repair of damaged water supply systems and the construction of agricultural irrigation systems. He said flood control must be strengthened and water supply in rural areas increased.
At a Manila water conference this month, the ADB developed a draft framework for its water operations that called for efficiency improvements and greater public-private partnerships to address the Asia-Pacific's water crisis.
Although the ADB's water framework for 2011 to 2020 was similar to its 2001 water policy, the framework contained new areas of emphasis, Arjun Thapan, an ADB special senior adviser in infrastructure and water, said. The ADB's new focus includes water usage efficiency in agriculture and industry, as well as more partnership with the private sector.
The Beijing-based foreign water executive, who did not want to be named, said: 'The private sector needs to come in, because it will be difficult for the state to pay for it all.
'It's costly to build all these water treatment plants to supply clean drinking water. Then to run all these plants, you need the knowledge. So you need foreign and Chinese private investors.'
Foreign investment accounted for less than 10 per cent of the mainland's water sector, the executive said.
'There need to be policy adjustments so the utility sector can offer competitive returns on investment and ensure the safety and stability of long-term investments.'
But Adams said it was easier to list the ingredients of a sound water policy, which the ADB has done, than set one up. The latter required transparency in government, pricing that was fair to consumers and suppliers, and the elimination of subsidies.
'The problem with the ADB, and indeed all multilateral development banks, is that they are government institutions that operate top-down. These government-to-government schemes have high failure rates because their implementation gets diverted by political interests.
'That is why the public has to have control, with transparency and the power to hold their governments accountable.'
More than two thirds of the mainland's cities are short of water
Water shortages in the 660 cities have led to this percentage drop in GDP: 2%
This percentage of water in the seven major river basins is not fit to drink: 43%