The South-North Water Diversion Project, is a 136.5 billion yuanbillion dollar) effort, part of which aims to follow the lines of the Grand Canal, a waterway that was built in ancient times to open north-south shipping lanes from China's rainy eastern provinces to Beijing.

The consortium headed by the policy-oriented State Development Bank signed a framework agreement in Beijing this week to provide some 48.8 billion yuan for the project which begins construction of a central route this year, the China Economic Times reported.

"This year the 'South-North Water Diversion Project' will enter a peak period for investment funds," the paper said.

The State Development Bank would be putting in some 20 billion yuan for the project, while China's four major state-owned commercial banks would also participate along with the privately-owned Minsheng bank and four stockholding commercial banks, the paper said.

The eastern and central lines are expected to cost some 124 billion yuan, of which the central government has guaranteed 24.8 billion yuan, while a special project fund will invest another 43.4 billion yuan, it said.

Total bank loans for the project will amount to 55.8 billion yuan.

"Following the payment of interest on loans, the total investment is expected to reach 136.5 billion yuan," the paper added.

The bank loans would not included another 7.0 billion yuan of funding needed for water pollution treatment purposes, it said.

Work begin last September on the central part of the project that will begin in the Yangtze River basin and divert water through the Danjiakou reservoir to reach the central provinces of Hubei and Henan.

Some 300,000 people will need to be relocated for the project.

TERRA.WIRE