Beijing has now made balanced growth and greater respect for the environment a key element of a five-year development plan that was approved by parliament in early March.

Between 2001 and 2003, local governments had misused some 2.4 billion yuan (US$299 million) allocated for water treatment, the National Audit Office said in a report on its Web site (www.audit.gov.cn).

"Of that, 1.6 billion yuan was embezzled to fund other projects, set up businesses, build offices or buy cars," the office said."

Pollution is so severe that the Ministry of Water Resources estimates 40 percent of water in the country's 1,300 or so major rivers is fit only for industrial or agricultural use.

Last November, a chemical plant blast poured 100 tonnes of benzene compound into the Songhua River in the northeast, forcing a cut-off of water supplies to Harbin, a city of four million, for four days.

The government approved a five-year plan on Wednesday costing more than 10 billion yuan (US$1.25 billion) to clean it up, the China Youth Daily said.

The money would be spent on projects to reduce industrial discharges, waste water treatment and environmental monitoring in the chronically polluted Songhua, the newspaper said.

The northwestern province of Gansu, on the upper reaches of the Yellow River, is to invest nearly 5 billion yuan to improve water quality in the river -- China's second longest -- by 2010, Xinhua news agency said on Thursday.