The expected adjustment of water fees will work better than government regulation in pushing the country's enterprises to finally take steps to conserve water, the chairman of Aluminum Corp. of China (Chinalco) said.

      Water is relatively cheap in China, leaving little incentive for companies to conserve it. Meanwhile, although central and local governments are starting to pay attention to water pollution, the penalties for dumping tainted waste water are still relatively low.

      Water prices are expected to be adjusted upward as part of a national price reform that could also extend to fuel and energy. Some localities have already started raising prices.

      "As the water price is adjusted, the pressure on companies will increase. It won't be just a social obligation any more, it will become a financial obligation," Xiao Yaqing told reporters.

      Xiao did not give a timetable for when he expected prices to rise, noting that the government also had to consider the impact on citizens. Some economists have said that the government has little room to act this year, since food price rises have already driven inflation to the upper end of the Central Government's target.

      He expected prices to rise incrementally, rather than in a one-off adjustment. The amount of the rise would depend on the region, he said.

      Chinalco is China's largest aluminum producer and its largest alumina producer.

      The company has spent "billions of yuan" installing water recycling systems in its operations in 20 provinces and regions, Xiao said.

      It targets zero waste water release by next year, compared to 30 million tons this year. Most of the 2.8 billion tons of water a year it requires are already recycled, Xiao said.

      "If you do it well, it is not a money-loser. But you need to spend at first," he said.

      "At the moment it requires a certain investment but once the water prices are adjusted it will be much more costly," he said.