SW China, ADB cooperate to finance watershed protection

Southwest China's Guizhou Province and the Asian Development Bank (ADB) will cooperate to finance environmental protection and sustainable development of a major watershed in the province.

Vice governor of Guizhou Mu Degui and Hamid Sharif, country director for ADB's Resident Mission in China, signed a memorandum on Friday during an environmental forum in the provincial capital of Guiyang agreeing to jointly develop a water fund and promote related environmental protection policies for the Chishui River.

The Chishui River is also known as the "vintage wine river" as it is the water source for China's national liquor, Maotai, and is a tributary on the upper stream of the Yangtze River.

It has suffered from deterioration of its ecological system in recent years.

Mu said the ADB will support a set of policies including establishing a watershed ecological compensation system and carrying out related environmental protection financing and investment.

Head of the provincial environmental protection department Xiong Dewei, said it is estimated that at least 5 billion yuan (800 million U.S. dollars) should be invested to promote long-term protection of the river.

The cooperation will help broaden the financing channel and attract more capital for protection and green development of the river.

The memorandum was signed during a session at an environmental forum that lasted from Thursday to Saturday. The session focused on public-private partnerships in financing watershed protection.

Zhang Qingfeng, water resources specialist for ADB, said the ADB has been actively engaged in water protection projects in China.

The water fund will involve investment from government, the bank and local companies, so the government should issue policies to clarify the rights and obligations of all stakeholders, he said.

Compared with other pollution control projects, watershed pollution management is more complicated since it involves such problems as water rights allocation and a large number of interested parties, said Fang Li, deputy director of the center of international cooperation of the Ministry of Environmental Protection.

She said the market has a decisive role in resources allocation, and the country's environmental management relies greatly on capital from the private sector.

However, under the current market, money tends to flow into projects that boost high profits instead of green projects, which are usually not that profitable, she said.

Therefore, she suggested the government improve the market mechanism to ease the flow of private investment into green projects and support the development of green finance.

Jia Kang, director of the Institute for Fiscal Science Research under the Ministry of Finance, said green finance should be policy-based finance.

The government should play a leading role in financing green projects and maintain positive interaction with the market mechanism.

Wang Yi, expert with the Chinese Academy of Sciences, said a major obstacle in developing government-private partnerships in environmental protection is that the boundaries of the responsibilities of local governments lack a clear definition in China.

The country should stipulate local governments' rights and obligations in environmental protection projects, he said.

Michael Bennett, senior adviser for Forest Trends, an international non-profit organization focused on forest and water conservation, said the government should respect market rules in public-private financing.

"It should set the rules of the game instead of telling others what to do," he said.