Its nose-curling stench hits you even before you see the floating carpet of green algae and a dense matting of water hyacinth. Once a beauty spot praised by poets, Dianchi Lake, around Kunming, the capital of subtropical Yunnan province, shows the cost to China of its frantic growth.

“There are fewer fish and they keep getting smaller. They don’t taste good either,” complains fisherman Zhong Gaoling. When he was growing up, he said, the waters were crystal clear and there were 57 types of fish and shrimp to catch. Now, half of the species have vanished altogether and just six are worth catching.

“When I was young you could swim in it and see the stones at the bottom,” he said. Now the bottom has poisonous sediment of cadmium, arsenic and lead three feet thick, which can only be removed by dredging.

Wherever you go in this beautiful landscape that borders Burma, Thailand and Vietnam, you find a heartbreaking legacy of environmental mismanagement and the prospect of worse damage to come. Kunming has spent over US$2 billion on efforts to clean up the lake but it is still too toxic to drink, and nowhere near meeting the country's minimum quality standards.

The industrial hub of a poor province with 42 million people, Kunming has around 5,000 industrial plants pouring effluent into the lake. For years, the municipal government would order, time after time, the worst polluters to shut down.

“They just pretend, I can hear them when they secretly open again, sometimes at night,” Mr. Zhong scoffed. Many factories are still using machinery dating from the 1950s to produce chemical fertilizers or to process tine and phosphorous.

And until the first wastewater plant was built in 1990, Kunming pumped ninety percent of the city's waste water directly into the lake untreated. Around 254 million cubic meters of wastewater is discharged into Dianchi Lake every year.

“Even after treatment you still can't drink this water,” admits Wu Yihui, who manages a second plant which was built in 1996.

Liang Congjie, the founder of Friends of Nature, a rare Chinese NGO, recalls swimming in Dianchi Lake as a student in the 1950s and speaks bitterly about the failure to clean up it up. “It is awful, they just made a kind of show,” he said.

Liang said the authorities even poured chemicals into the lake to kill the algae and then filter it before Kunming staged an international horticultural exposition in 1999. To manipulate scientific data on the lake’s effluent levels and to make them match claims of success, local officials would resort to tricks like moving a monitoring station from one end of the lake to the other, cleaner, end to get better readings.

Dianchi was once one of Asia’s biggest freshwater lakes but over the past fifty years, it has shrunk to a third of its former size and silted up. “Our per-capita supply of water is just one ninth of the national average,” says Mrs. Lin Kuang, spokeswoman for Dianchi Lake Regulatory Commission. “Without the water we can't grow our economy.”

In its search to find drinking water, Kunming has had to build reservoirs and dams on rivers ever further away. Since the 1980s, the city has relied on water channelled from the Songhua Dam reservoir in the mountains some 50 miles away. Now as the city prepares to expand, it simultaneously been forced to invest in an even bigger engineering project to divert water from other rivers like the Golden Sands River 120 miles to the north.

Major cities across the country are grappling with the same threats as Kunming and water is only one facet of a crisis which, if unchecked, could overwhelm the whole modernization project. Its origins can be traced to a mixture of inherited problems and new ones but in both cases the root causes are political. The environment poses one of the gravest threats to the political stability of the country because it lays bare for all to see the failure of the political system.

The environmental protest movements and failures like the accident at the Chernobyl nuclear plant spurred the downfall of the Soviet system in the 1980s. It is remarkable that so far nothing similar has happened in China because the failures are as painfully evident here. Disputes over pollution are one of the chief reasons for the rapid growth of grass-roots protests in China.

In Yunnan it all started in the early 1950s when the state sent logging companies to fell the forests and settle hundreds of thousands of newcomers. Virgin tropical forest still covered most of the mountains and plains. The great rivers -- the Yangtze, Mekong, Salween, rise in the high Himalayan Plateau and flow in parallel through some magnificent steep gorges which had been so remote that Western explorers only saw them at the turn of the last century.

One of them was the explorer Joseph Rock, whose travels in the 1930s, published in the National Geographic, made Yunnan’s flora and fauna internationally famous. As Rock revealed, Yunnan is one of the most biologically diverse areas in the world, with half the nation’s animal species and a quarter of its plants species. It was still largely untouched by the modern world in 1949. Rock traveled everywhere on foot and horse, and sometimes had to be carried by porters.

More than anywhere in China, the blame for what has gone wrong cannot be laid anywhere but on the post-1949 government. In a short few decades Yunnan’s rivers and lakes including Dianchi have all silted up. Even the more recently built dams have begun suffer as the sediment accumulated in the reservoirs and industrial and agricultural effluents have poisoned the water in them.

In this chapter my journey starts in Kunming at a meeting of environmental NGOs and end at the Tiger Leaping Gorge, a chasm through which the Golden Sands River hurtles beneath the snow-capped Jade Dragon Mountain. A dam may soon be built across the gorge and may soon block all of Yunnan’s great rivers, the last pristine rivers left in China. If the dams are not stopped, the rich diversity which Joseph Rock marveled at will be doomed.

It is an easy call to make because one by one all of China’s great rivers have already been ruined. The dire state of the country's rivers is the most visible evidence of the ecological mismanagement which began during the Mao era and has continued in the market economy that followed.

The Chinese Communists borrowed from Stalin the philosophy that “man must conquer nature” rather than live in harmony with it. Stalin’s economic policies required rapid electrification. This in turn depended on the construction of large-scale hydro-electric schemes and nuclear power stations which could demonstrate man’s technological mastery of one of the great forces of nature.

Under Mao, China paid no attention at all to the principles of sustainable growth. In fact people actually felt proud of pollution because it was a sign of progress. The more chimneys belching out dirty smoke, the more successful and developed a place could claim to be.

Mao had cultural and historical reasons to be even more eager to conquer China’s rivers. China’s civilization developed in river valleys and each dynasty depended on its ability to mobilize large numbers to prevent floods and irrigate fields to ensure its prosperity. Mao was especially eager to tame the Yellow River, whose frequent devastating floods gave it the name “China’s sorrow.”

Soviet engineers arrived soon after 1950 and started planning the construction of 46 giant dams across the Yellow River. Before 1949, China had built just 40 small hydropower projects and only a handful of larger ones. At the same time Chinese students were sent to the Soviet Union to study hydro-electrical engineering. Among them was the future prime minister Li Peng, who began to harbor the ambition to erect a dam bigger even than any Stalin had built, a dam across the Yangtze at the Three Gorges. Nothing less would do to demonstrate China’s maturity as a great power.

The Soviet experts with drew in 1959 in the midst of a great ideological dispute between Moscow and Beijing, before the first of these Yellow River dams could be completed. The Chinese decided to press on themselves regardless but the Sanmen Xia dam proved to be a disastrous mistake because, for one thing, the reservoir quickly silted up. Some 300,000 peasants were pushed off their land and many died of starvation during the Great Leap Forward. Later engineering efforts have not managed to make it a success and 40 years on locals have petitioned the government to dismantle the dam.

Even so China continued during the Great Leap Forward with an ambitious dam-building program. Like latter-day Pharaohs, the Communist Party mobilized huge resources and manpower to build dams, big and small. They were built everywhere at a furious pace and often without any proper planning or tools, and sometimes in defiance of basic engineering principles. By now China has more dams than any other country in the world.

Some 3,500 have collapsed and even now nearly 40 percent of the 84,000 existing dams are at risk of collapsing. China kept hidden for decades news of the world’s worst dam disaster. It took place along the Huai River when in August 1975, the Shimantan and Bangqiao dams suddenly collapsed and drowned 240,000 people.

China’s dams are to blame for other problems, above all for the worsening shortage of water. Some 500 cities are now dangerously short of water. Even by official accounts, 70 percent of rivers and lakes across the country are so polluted they fail to meet government standards and the water in one in seven major reservoirs is undrinkable.

The rivers and reservoirs around two of the country’s most important cities, Beijing and Tianjin, have either run dry or are poisoned. The aquifer below the two cities is being steadily drained and the water table is now 300 feet below the surface and dropping by ten and sometimes twenty feet a year. This means that in Tianjin, some 60 percent of the land is plagued by subsidence

If there is no solution to the water shortage in northern China, 20 million peasants and perhaps one day many times that number will be forced to abandon irrigation or will leave marginal farmlands. Some fear that China’s water deficit has already become so serious (the shortfall in the north alone is more than ten trillion gallons a year) that the nation’s entire prosperity is in jeopardy

China is spending US$30 billion to ship water all the way from the Yangtze along the South-North Water Diversion Project to keep Beijing and Tianjin going. Tianjin tries to disguise the lack of water in the Tai river which runs through the centre by importing water diverted from the Yellow River and keeping a stretch of water dammed at either end just for show.

If one takes the night train from Beijing through the Loess plateau to Taiyuan, the capital of Shanxi province, one glimpses factories in steep valleys emitting a grand yellowish glow amid billowing clouds of black and yellow smoke. In daylight, you can see streams and rivers, where effluents - matte black, ochre red, yellow and even a Day-Glo green, gently bubble and simmer like a witch's cauldron.

The Fenhe River, a tributary of the Yellow River, is now just a ghostly presence in Taiyuan. Not long ago, it was wide and deep enough to carry fleets of barges. Huge bridges span a bare river bed along which flows a trickle of dirty water. The Taiyuan Iron and Steel Works, the city’s largest employer and polluter, continues to pump out a steady stream of black, foul-smelling water directly into the Fenhe. As in Tianjin, a few hundred yards of deep water has been imprisoned and kept for show.

Like Beijing and Tianjin, Taiyuan has been forced to import water from far away. Yet another dam has been flung across the Yellow River at Wanjiazhai in Pianguang county, from where 1.2 billion cubic meters of water is being pumped 250 miles to Taiyuan. It is a stupendous engineering feat because the water crosses rough mountainous country so the engineers had to bore tunnels longer than the Channel Tunnel and build dozens of aqueducts.

The fate of the Yellow River, which runs through the Loess Plateau, is a warning of what might yet happen to other rivers, even the Yangtze, the third longest in the world. For all but two months of the year, the Yellow River ceases to flow entirely. It is a dry bed along 600 miles.

The Huai River basin in central China, home to 150 million people, has fared no better than the Yellow River. In all China built 36 large dams, 150 smaller dams and 4,000 locks and barrages along its length yet instead of preventing disasters or improving the management of water resources, the problems have multiplied. Residents along the Huai River are plagued by constant water shortages. In 1999, for instance, the Huai River basin suffered a drought for 247 days. Cities and towns had to frantically start digging deeper wells to chase the shrinking aquifers hundreds of feet deeper underground. Even in the best of times, the dams and barrages trap the pollution released by thousands of factories in the basin, creating undrinkable and toxic reservoirs of water.

The grandiose dam building mania of the Mao era had other repercussions which became clear in 1998 with deadly floods along the Yangtze. To create more arable land to grow grain, the Communists drained many of the lakes along the middle Yangtze which held the overflow of the summer floods. From 1949 onwards two thirds of the Yangtze lakes disappeared. The total surface area of the lakes in the middle and lower Yangtze shrank from 18,000 square kilometers to 7,000 in just 50 years. In China as a whole, wetlands have shrunk by nearly two-thirds since 1949.

The lakes were reclaimed but those that survived silted up. The storage volume of these lakes fell by eight billion cubic meters. Dongting Lake, the second largest in China, was cut by half and become very shallow as 100 million cubic meters of silt sank to the bottom, raising the bed by 3.7 centimeters a year.

When the Yangtze flooded, there was nowhere for the water to go and the resulting damage cost US36 billion. If the floodwaters had risen a few more inches over the emergency levees, the loss of life and property would have been far greater. The authorities were poised to dynamite the levees in order to protect the great industrial cities like Wuhan.

Mao’s insistence on raising grain production led to the drainage of lakes and wetlands downstream. It also led to phenomena unique to China, a backbreaking effort to terrace steep hillsides after destroying the natural vegetation. Since much of China is mountainous, nowhere more so than Yunnan, the policy accelerated the rate at which silt washed off steep slopes and filled the rivers. Every year in Yunnan some 500 people die in floods that wash away not just houses but entire sections of roads and railroads. The silt is not just raising the levels of lake beds but rivers too, forcing the local population to keep raising the levees ever higher. The Yellow River now flows nearly a hundred feet above the surrounding countryside.

As the reservoirs silted up, the dams become progressively less useful at controlling floods or even providing reliable flows of electricity. The costs of maintaining the dams and building ever higher flood barriers often outweighed the economic benefits.

For the Chinese, crowded together in river valleys and relying on farming limited land, the consequences of these errors were felt far more keenly than in the Soviet Union. The Russians are after all far fewer and scattered over a much bigger territory. The dam building had a direct human cost. To make way for the dam reservoirs, the party forcibly relocated some 16 million people from their farms in fertile valleys and exiled them to poorer lands.

The Mao era had other features peculiar to China. His rush to industrialize led him to order that all major cities nvest in heavy industry and that new factories should be built in the heart of ancient walled cities. Even Beijing, which had no industry to speak off before 1949 soon had 6,000 factories operating inside the old imperial capital. Many were small but Beijing ended up with its own steel works, machine tool plants and a power plant.

In most cities little or nothing was invested in water treatment plants after 1949. Some 20 billion tonnes of urban wastewater is dumped each year straight into rivers and lakes. Later the peasants switched from using human waste (“night soil”) to fertilize their fields to applying nitrogen and phosphorus fertilizers. The result is that this chemically charged runoff brews thick films of algae in rivers, lakes, and canals or dense coverings of water hyacinth. Some scientists are convinced there is a direct link between China’s water pollution and the country’s high rates of Hepatitis A, diarrhea, and liver, stomach, and esophageal cancers.

In the end China did not get a large share of its electricity from the hydropower schemes nor did it invest in a civilian nuclear industry. Instead it relied on its plentiful supplies of coal for heating and electrical power so all Chinese cities soon suffered from a suffocating pall of industrial air pollution that was worst in winter.

On the World Bank's list of 20 cities with the worst air, 16 are Chinese and the capital is perhaps the most polluted of all. People in two thirds of the 338 monitored cities in China breathe air that fails to meet national air quality goals and these are set at well below those used by the World Health Organization. Air pollution related to the burning of coal is believed to kill more than 700,000 people a year. A World Bank report estimates that air pollution costs the Chinese economy $25 billion a year in health expenditure and lost labor productivity alone Deaths from respiratory disease have increased by more than a quarter in the 1990s.

After 1979, the new government led by Deng Xiaoping began to take environmental issues more seriously and slowly began admitting the scale of the problem. The first environmental legislation was approved and new bodies were set up to monitor and enforce legislation. Errors like the Sanmen Xia dam on the Yellow river came to light for the first time. The dam building program slowed. The government admitted that of the 16 million displaced by reservoirs, some ten million were still living in poverty. A fresh effort was launched to help those relocated find new ways of earning a living and to provide better compensation to new relocatees.

Deng’s new agricultural policies helped redress the ecological mistakes of the Mao era. As grain production rose, the state encouraged farmers to abandon the terraces or to grow other crops including fruit and nut trees, tea bushes, trees, and drought-resistant grasses. Ambitious reforestation programs were unveiled. To combat the growing desertification of northwest China and to protect Beijing from the spring dust storms, it announced plans to build a “giant great green wall” and plant a belt of a billion trees.

Then in the 1990s the government began addressing the problems of urban China and spending massively on building new housing. It began the complex process of relocating factories from the centers of Shanghai, Beijing, Tianjin, Shenyang and other major cities. The urban redevelopment allowed a cleanup of polluted waterways like Suzhou Creek, which runs through Shanghai. As China’s leading cities were rebuilt, natural gas pipelines arrived and helped replace the old coal-fired heating systems. Households started cooking with clean gas instead of the noxious coal briquettes, the cause of so much lung disease.

China’s response to the 1998 Yangtze floods was another milestone in Chinese thinking about the environment. Then-premier Zhu Rongji ordered a national ban on the logging of old-growth forests and commissioned a massive Yangtze watershed reforestation project. The terraces on all hillsides steeper than 25 degrees were to be replanted with grasses, bushes, and trees. The ten-year program, affecting 200 million peasants, aimed to convert fields back to pasture, forests, lakes, and wetlands. In particular, he put in motion a plan to re-flood the middle Yangtze wetlands—an integral part of the Asian flyway for swans, herons, storks, duck, geese, cormorants, egrets, and Siberian white cranes—which has involved moving about 2.5 million people onto higher ground or into small rural townships.

The project reversed the Maoist scheme to drain Dongting Lake and called into question the philosophy behind China’s water management. After 1989, the Soviet-trained hydropower engineer pushed through the plan to dam the Yangtze at the Three Gorges against considerable domestic and international opposition. One of the avowed purposes of the dam was to control the dangerous summer floods but it became clear that even if the dam had by then been completed it could not have prevented the floods or even reduced their threat.

Dam opponents put forward many other objections to the scheme ranging from the engineering difficulties, the economic cost, and most of all the difficulty of relocating up to two million residents, many of whom lived in cities and towns along the banks. As the project got under way, it became clear that the original proposal had vastly underestimated the number of urban residents who would have to be re-housed and found employment, and the amount of farming land available to resettle the farmers who lost their land. It also become clear the forecast electricity demand was not materializing and when in 1998, China’s economy seemed to be contracting during the Asian Financial crisis, the project looked like a white elephant in the making.

The ‘trillion dollar’ infrastructure spending program launched in response to the Asian financial crisis and the foreign investment that flooded after China joined the World Trade Organization saved the Three Gorges Dam. Energy demand shot up, far ahead of even the most optimistic predictions. China’s accelerating growth has justified the need for hydro-electric schemes as the best way of diversify away from coal. China sits on massive reserves of coal, accounting for 75 percent of its energy output.

Since 1998 China doubled its coal production to 1.8 billion tonnes, mining almost twice as much coal as the United States, the world’s second largest coal producer. If China’s economy keeps roaring along, it will overtake the U.S. as the world’s largest source of greenhouse gases within a decade, contributing mightily to acid rain and global warming. China has overtaken the United States as the world’s largest emitter of sulfur dioxide and about 30% of China's total land area and over 60% of cities in southern China are damaged by acid rain. In 2004, acid rain is reckoned to cost China over 110 billion yuan (US$13.4 billion) a year.

Chinese coal is cheap to buy but the human cost is high. Officially, China has three million coal miners who mostly work in 580 big state mines. But in reality, China probably has 6.6 million miners. The rest work in 70,000 mines run by villages and local governments where equipment and working conditions are extremely primitive. Most are local peasants who earn low wages and whose lives are worth little. As a result, about six thousand die every year, a death rate that is 100 times the rate in America or Australia. China, which produces a third of the world’s coal, therefore accounts for 80 percent of the mining industry’s fatalities. In addition, some 600,000 miners suffer from pneumoconiosis, a number grows by 70,000 a year. Some estimate that perhaps the real death toll from mining, if the deaths from lung diseases are included, is around 20,000 lives a year.

Before 1998, Chinese economic planners had been trying to close these small mines, suspend new dam projects and shelve an ambitious nuclear power plan. A surplus of electricity, plus the disastrous Yangtze floods, had opened a window to pursue more environmentally friendly policies. Yet this window soon closed as economic growth raced ahead and on world markets the price of oil and other commodities rose higher and higher. Between 1998 and 2006, the price of a barrel of oil went from US$14 to over US$70. As China became the world’s second largest oil exporter after the United States, its energy policies had to be drastically revised.

The drive to close small, efficient coal mines stopped and every part of Chinese industry began a frantic effort to build new coal-fired power stations to keep up with the demand. As most coal is shipped by rail, the railways and harbours quickly jammed up, leading to coal shortages as 60 percent of rail transport. Across the country, 500 new coal-burning power stations were under construction in 2005 and planners now assume that over the next 30 years half the world’s new power capacity will be built in China.

Hydro-power engineers took off the shelves all the dam projects they could find and began a new drive to build new dams in every possible site. The engineers could now safely argue that hydro-power is cheaper, safer and more ecologically sound than coal or anything else. As most of the untapped rivers lie in the west, areas like the mountains of Yunnan, China also began to invest in a new nationwide electricity grid to transport electricity to the east coast. It is also starting to establish a functioning market for electricity that allows different suppliers to compete on price.

China ranks second globally in installed electricity capacity (338 gigawatts in 2000) but its use of electricity is just 38 percent of the world’s average. When you consider that China has 1.3 billion people—more than four times the population of the United States—the implications of the country’s gallop towards a Western-style consumer society are sobering. If per capita energy use were to reach the world average, China will have to add the generating capacity of Canada every four years. And even if the lower predictions of per capita energy use are realized, then China is likely to add an extra two or three hundred million gigawatts before 2050 when the population will peak.

China is rapidly trying to exploit its natural gas reserves and is building a network of pipelines to serve the growing urban population. By 2030, natural gas could account for eight percent of China’s energy needs. Over time, China’s cities should enjoy cleaner air as natural gas is used for heating and power generation instead of coal. China is beginning to ship liquefied natural gas from Australia, Indonesia and eventually Iran. Also planned are pipe lines to bring natural gas from Siberia and Kazakhstan.

There are ambitious plans to build a range of nuclear power stations. A handful of plants were built with French help in the 1990s but China’s energy shortages could mean a bonanza for the whole nuclear power industry.

End part 1. Next: China’s search for energy and the wreckage of its environment.