8-4 © OECD 2006 5. THE IMPACTS OF CHANGE ON THE LONG-TERM FUTURE DEMAND FOR WATER SECTOR INFRASTRUCTURE number of wastewater treatment works, only a third are functioning well. This is due to a combination of low funding and fee collection and insufficient government monitoring and law enforcement (Turner et al., 2003; McGill, 1999). Pollution monitoring and law enforcement are poor due to weak institutional capacity at all levels. There are also problems in raising the required finances, mainly through the use of enterprise bonds and other mechanisms such as public-private financing partnerships (Turner et al., 2003; McGill, 1999). Although government policies have contained levels of pollution generally, water pollution remains high and the extensive use of resources such as water is beginning to pose problems for economic development (OECD, 2005). One-third of the major water basins are classed as highly polluted and 75% of the water flowing in urban areas is unsuitable for drinking. At the same time there is considerable scope for improving efficiency in the use of irrigation water (OECD, 2005). China it is still a politically centralised system, although there is now a considerable degree of decentralisation of power at national, provincial, prefectural, county and community levels. Legislative and regulatory powers as well as planning and development are the responsibility of national government but the management and maintenance of water systems are the responsibility of the various lower tiers. Municipal governments are primarily responsible for providing water and wastewater services; they own and manage more than 60% of water capacity. Responsibility for the water sector is split between the Ministry of Water Resources and the Ministry of Environmental Protection. Although the administration is vertically integrated there remains a substantial degree of functional specialisation and management decentralisation across government layers. This decentralisation causes conflict across government and is furth