China will invest approximately 90 billion yuan to fight water pollution in the next two or three years, said Wu Xiaoqing, vice minister of environmental protection.

The money will be spent in building wastewater treatment plants, water distribution systems and facilities to collect and recycle rain water in a bid to expand the nation's sewage treatment capability, he said in Beijing on Monday.

Despite a large amount of money already funneled into the treatment of polluted major rivers and lakes, not much headway has been achieved, he added.

"Water pollution has become a bottleneck for economic development in China, and a key environmental issue that threatens people's health," Wu said.

Approximately 90 percent of rivers in Chinese cities are polluted, while 270 million people living in the countryside still do not have access to safe drinking water source, he said.

Wu also said the central government will encourage banks and financial institutes to channel more funds into projects that fight water pollution. The current collection system of a fee for pollution discharges needs to be improved, the official said.

Public investment is necessary to encourage and stimulate more funding from private sectors in both clean water distribution and sewage treatment industries, said Fu Tao, director of the Water Policy Research Center at Tsinghua University.

Government investment is needed to control the price of public services, he said, adding that China should put in place clear-cut regulations to ensure public funding in these sectors.

"Currently some local governments are not taking full responsibility in funding public services as a result of limited budgets. Meanwhile, there is no mechanism in China that secures stable and regular investment from the central government," Fu said.

China has become the world's second-biggest market for wastewater treatment. By the end of 2008, it has invested more than 200 billion yuan in around 1,550 sewage treatment plants, which handle 86 million tons of wastewater every day, according to Ministry of Environmental Protection.

A National Audit Office report published in October found that between 2001 and 2007, 3.65 billion yuan that should have been used in wastewater treatment and pollution discharge was embezzled, intercepted or not levied, while 10 provinces had unused assets for water pollution projects worth 806 million yuan.

In addition, 206 wastewater treatment plants were found to be substandard.