(sometimes called "districts") 41,636 township-level (乡级; xiāngjí) divisions for details: administrative divisions of china china also has 661 designated cities, which do not constitute separate administrative units. each municipality, prefecture, and county includes urban and rural areas. 4 cities are capitals of municipalities, 283 cities are capitals of prefectures, and 374 are capitals of counties. in 2005, 340 million people, or about 25% of china's population, lived in designated cities, each of which had a population of at least 200,000. the remaining urban population of about 200 million, or about 15% of the total population, lives in smaller towns that are either among the smaller prefecture-level capitals (96 million) that are not formally designated as cities or in townships (100 million). in an article on rural china, the economist magazine wrote that many chinese experts believe that basic infrastructure should be funded by provinces or the central government: "that done, prefecture and township governments could be massively trimmed or eliminated altogether." urban areas shanghai, like many other chinese cities, depends on surface water that is heavily polluted, such as the huangpu river shown here whose water comes through suzhou creek from the heavily polluted lake tai. overview urban water supply in china is the responsibility of "cities" under complex arrangements that differ substantially from one city to the other. the term "city" has a dual and confusing meaning in china. it is used here to refer to the main urban area of a municipality, prefecture, or county. cities are governed by a "leading group" under the leadership of a mayor, who is assisted by various "bureaus", or departments. services are usually provided by municipally owned water bureaus and wastewater bureaus (sometimes referred to as utilities despite the relatively limited autonomy that these companies enjoy). water and wastewater bureaus are typically separate from each other. in larger cities, services are further unbundled: there may be a separate raw water bureau that transports water from far-away sources and sells it to the municipal water bureau for distribution. likewise on the wastewater side, larger cities may have several district drainage bureaus in charge of parts of the city, a wastewater bureau in charge of the main collectors, and a third bureau in charge of wastewater treatment. in some cities, the various companies are under the same "parent bureau", which may be the construction bureau or a water bureau, while in other cities the water bureau and the wastewater bureau report to different parent bureaus. especially in smaller cities the county administration provides services directly. examples in shanghai, the water division of the shanghai urban construction investment development corporation provides services. the water division includes a raw water bureau, five water bureaus, one sewage management bureau, three engineering bureaus and two construction bureaus. it serves 12 million people. in beijing, a water parent bureau was established in 2004, integrating the functions of formerly separate bureaus for water supply, sewerage, wastewater treatment, and water resources management. in tianjin, the tianjin water supply group provides services. it recently divested itself from numerous side businesses to focus on its core business. since 1997, it has cooperated with international companies such as vivendi in a bulk water supply build-operate-transfer (bot) contract. private sector participation private sector participation in financing infrastructure and managing services is widespread. in 2007, there are over 50 water projects and well over 100 wastewater projects in china with private sector participation. the french firm veolia alone has contracts that involve a total population of over 43 million inhabitants of whom over 27 million are served through full service concessions, among which the concession in shenzhen is the largest. the company holds manages 22 municipal contracts and nine industrial contracts. the israeli-chinese kardan water international group is also a major player in the chinese water market. notable chinese companies engaged in the provision of water supply and sanitation services include the majority state-owned wastewater company beijing enterprises water group ltd, china water affairs group, everbright international (now everbright water), and the beijing-based engineering and construction company sound global limited. an econometric study by chinese economists on the impact of private sector participation on the performance of urban water supply in 35 major cities over the period 1998 to 2008 found that " the participation of foreign companies, but not domestic private companies, significantly improves water industry performance". shenzhen concession. according to a study by the asian development bank, the city of shenzhen is leading the reform of local water management in china. inspired by the experience of the water utility in nearby hong kong, it was one of the first cities in the country that has combined all water-related government functions into one government agency in 2001. furthermore, regulatory and operative functions were separated. in 2003, the first concession for municipal public utilities in china was bid out in shenzhen. the 30-year concession was won by the french firm veolia and its chinese partner capital water. together with the state council committee for the regulation and management of state owned property, which holds 55% of the shares of a newly created joint venture called shenzhen water, veolia holds 25% and capital water 20% of the shares. the joint venture was approved at the national level by the ministry of commerce. in 2009, shenzhen water was the largest water supply and sanitation enterprise in the country. the wastewater treatment sector in shenzhen has developed rapidly since the reform of 2001. the sewage treatment rate in the shenzhen special economic zone has increased from 56% during pre-integration to over 88% in 2008, ranking first among large and medium-sized cities in china. the asian development bank called the shenzhen case "a model for market-oriented reform in the urban water sector". in 2008 the shenzhen water group had expanded and invested in 17 water projects in 7 provinces. the $40 million equity stake of veolia is covered by a 15-year miga guarantee to protect against the risk of expropriation. bot contracts. the most common form of private sector participation in water supply and sanitation in china is through build-operate-transfer (bot) contracts where the private sector is in charge of large upstream or downstream infrastructure without being directly involved in serving users. experience with bot contracts has been mixed. for example, the local government of lianjiang had the 100,000 m3/day tangshan water treatment plant built by suez under a bot contract in 1999. however, the water demand had been grossly overestimated, so that the plant lay idle while the local government had to pay for substantial minimum volumes without using them, which evidently pushed up tariffs. after lengthy negotiations, the local government finally bought back the plant in 2009. rural areas in rural areas, village committees which are community-based organizations, provide services. its members operate the systems without remuneration. in terms of rural sanitation, human excreta are systematically used as manure for fertilising crops and vegetables. in many houses, the excreta of all family members are collected in buckets over the course of five to seven days, and then taken to the field and applied raw in the crops. the practice is an age old tradition and of enormous economic value in terms of agricultural production. ngos there is little information on activities by ngos in water supply and sanitation in china. an association for rural water supply and sanitation provides training, information exchange, technical assistance, and undertakes research. in terms of foreign ngos, the ngo plan, for example, works in china. it is known for having introduced for the first time the concept of community led total sanitation in china in puchang county in shaanxi in 2005. history and current developments a designated "source water protection area" on the three gorges reservoir, near maoping, hubei massive investment program for wastewater treatment over the past 20 years, china has engaged in what is possibly the largest program to build wastewater treatment plants in history. despite the substantial achievements of this program, many challenges remain. achievements until the early 1980s, there was not a single municipal wastewater treatment plant in china. in that year, the country's first municipal wastewater treatment plant was built in the city of nanjing. subsequently, china engaged in what is possibly the largest wastewater treatment investment program in history. it has been estimated that in 2006 there was sufficient capacity to treat 52% of municipal residential wastewater. according to the state environmental protection agency the rate of urban wastewater treatment reached 57% in that year. the government's goal to achieve a level of 60% for treatment of municipal wastewater by 2010 was surpassed. by 2010, 77.5% of domestic waste water was treated. between 2001 and 2004, the number of cities that charge wastewater tariffs has increased from 300 to 475 out of 661 cities. according to the notice on the construction plan for the nation's urban waste water treatment and recycling facilities presented in the 12th five-year plan by the general office of the state council, which was promulgated on may 4, 2012, the waste water treatment rate in the prc will further improve by 2015. by the end of 2015, the waste water treatment rate should increase to 100% for municipalities, provincial capital cities and cities specifically designated in the state plan, 85% for other cities, 70% for counties, and 30% for towns. remaining challenges however, in the rush to construct planning mistakes were made. demand was overestimated, the construction of sewerage lagged behind the construction of treatment plants, designs were sometimes inappropriate, there was no requirement for pre-treatment of industrial effluents thus affecting the effectiveness of treatment processes, and the sites chosen for the first priority investments within a river basin were not always those where the highest impact could have been achieved in terms of improving river water quality. as a result, many plants are underutilized or poorly functioning. according to the ministry of construction, more than 50 wastewater treatment plants in more than 30 cities operated at only 30 percent of their capacity or did not even come into operation. consequently, the impact of the investment program on the water quality in rivers and coastal waters has been limited. during the 1990s, municipal and industrial water use actually declined because of low increases of connection rates to utilities because of underestimation of the importance of small-scale water providers, increased tariffs, increased metering, industrial restructuring, measures to increase the efficiency of water use in industries, as well as due to water scarcity and drought. many chinese water and wastewater companies have overcapacities and are in financial difficulties because the revenues are insufficient to cover the servicing of the debt contracted to build the oversized infrastructure. transition to commercial utilities in 2002, the ministry of construction issued a policy paper on the commercialization of public utilities. subsequently, in october 2003, the central government decided that state-owned enterprises had to be separated from ministries and/or provincial governments and had to be commercialized. competitive bidding for contracts, private sector participation and commercial financing are important element in the transition to a market economy. in the 1990s, the first bot contracts were signed for wastewater treatment plants. more than 200 wastewater treatment plants were built with some form of private sector participation in their financing and/or management, usually using the bot formula. early bots saw governments implementing the process without the benefit of financial, legal, and technical advisers, finding to their chagrin that the process becomes more complex in the absence of expert knowledge. learning from the experience of past bots in the sector, local governments sought expert advice on bidding and public tender. in about 2000 for the first time, a bot water project (chengdu no. 6 water supply plant) was awarded on the basis of transparent international competitive bidding, with support from the adb. in 2004, a landmark international competitive bid for the entire water supply and sanitation system of shenzhen was won by a joint venture including the french firm veolia. efficiency there are many different indicators for utility efficiency. in the case of china, some indicators, such as labor productivity, suggest a low level of operational efficiency, while other indicators - such as non-revenue water - suggest a high level of operational efficiency. labor productivity most water and sanitation utilities in china have a low labor productivity and are overstaffed. for example,