A resettlement project involving 330,000 people living in central China's Hubei and Henan provinces has started to make way for China's south-north water diversion project, according to resettlement authorities in Henan Sunday.

These people will be relocated from their homes near the Danjiangkou reservoir, where sluice will be built to divert water from the Yangtze River to thirsty north China regions including Beijing, Tianjin, Henan and Hebei.

Sources with the resettlement headquarters in Henan said the provincial government has approved new settlement areas with convenient traffic conditions and good soil quality for relocated people.

Xichuan County, Henan, will see the resettlement of 162,000 people, the largest number in a single county, in 185 villages.

Resettlement in Henan is scheduled to be completed in 2011, according to the province's resettlement authorities.

The Chinese government has issued preferential policies to help compensate for the resettlers' relocation losses. For instance, apart from compensation for unmovable property with the old home, each family to be relocated will be allotted new arable land in the newly built village according to a standard of 0.1 hectare per person, plus an annual subsidy of 600 yuan (about 88 U.S.dollars) a person for 20 years, according to Duan Shiyao, deputy chief of Hubei Provincial Resettlement Bureau.

The resettlement project is the country's second largest resettlement plan following a similar move to pave way for the Three Gorges Hydro-Power Project, the world's largest, which involves the resettlement of 1.27 million residents.