Construction has begun on the Jiping Canal, a key part of China's giant South-North Water Diversion Project in the eastern province of Shandong.

The provincial construction headquarters said the initial project would be the construction of a 46-km section of the Jiping Canal, which would be divided into nine sub-sections within the counties and district of Dongping, Pingyin and Changqing.

The central government plans to invest 740 million yuan (US$89 million) in the initial project.

The 89.8-km Jiping Canal constitutes the main part of the South- North Water Diversion Project, which is expected to supply water to the provincial capital Jinan, the eastern part of Shandong, Hebei Province and Tianjin city.

To ensure water quality of the project, the province has shut down 41 paper production plants which took straw pulp as the raw material and have production capacities of less than 20,000 tons.

The provincial authorities also decided at the beginning of this year to close paper production lines with capacities of less than 50,000 tons which cannot reach desired pollution-control standards.

The province has stepped up efforts to develop waste water treatment plants which could effectively improved water quality in nearby lakes.

A source with the project construction headquarters said the Jiping Canal would be completed by the end of 2004.

The South-North Water Diversion Project, with investment exceeding that of the Three Gorges Hydropower Project, aims to improve water resources in north and northwest China and ease long- term water shortages.