China will give foreign companies more access to invest in large water projects as Beijing looks for ways to finance a massive infrastructure programme aimed at tackling chronic shortages.

China, desperate to maintain basic self-sufficiency in food and energy, is trying to make better use of its scarce and heavily polluted water. To do so it needs to recruit private capital to finance several multibillion-yuan spending plans to clean up lakes and rivers and improve pipeline infrastructure.

China's National Development and Reform Commission (NDRC) said on its website (www.ndrc.gov.cn) on Thursday that it will allow qualified investors, including foreign and international joint ventures, to bid for and construct water projects.

However, China will continue to place limits on foreign investment, with the NDRC saying the nation would favour Chinese private investors as partners when it came to running joint projects with local governments. The construction of urban water supply and drainage networks will also be limited to majority-owned Chinese enterprises, it said.

To help finance water projects, debt-ridden local authorities are being encouraged to use a government-backed business model known as "public-private partnership", which will allow stakes in state assets to be transferred to private firms.

China also plans to make local water prices more market-oriented in a bid to improve profitability in the sector. Prices have long been low, encouraging waste and deterring investment.

"Price reform will increase competitiveness in the market, and competent bidders could win more contracts if the market mechanism is set properly," said He Yuanping, executive vice president of Originwater, a private clean water technology company.

The NDRC statement also said China would continue with its plans to establish a trading platform for water usage permits, which it hopes will improve the way scarce water resources are allocated among industrial, urban and agricultural users.

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