Guangdong Province is looking to protect its vital drinking water resources by setting up two joint funds worth 1 billion yuan ($153 million) with its neighbors.

The populous economic hub has signed agreements with Fujian Province and the Guangxi Zhuang Autonomous Region to build an eco-compensation system to manage transprovincial waters.

At a news conference jointly held by the Finance Ministry and Environmental Protection Ministry in Fujian last week, it was agreed that Guangdong and Guangxi would each put 300 million yuan into one joint fund, while Guangdong and Fujian will each put 200 million yuan into a second.

The funds will be used to improve water quality in the headwaters of Jiuzhoujiang River in Guangxi and the Tingjiang River, a tributary of the Hanjiang River, in Fujian through 2017.

Both are important sources of drinking water for the more than 14 million people who live downstream in Guangdong's western and eastern cities including Zhanjiang, Meizhou, Chaozhou, Shantou and Jieyang.

Xu Songjun, a professor from the School of Geography at South China Normal University, applauded the joint effort between governments to control water pollution.

"Water flows across the country. We can't address the issues affecting it if everyone only protects their own interests," he said.

"Polluted headwaters directly harm water safety in downstream areas. It is reasonable to compensate upstream areas for their economic losses due to ecological restoration. For example, a factory may be shut down or restricted from expansion in order to restore its surrounding environment.

"Also, most rural areas in China have a shortage of sewage treatment plants. It costs a lot to build these facilities and they are a heavy financial burden for less-developed provinces and regions," he said.

"However, the cost of improving the water environment shouldn't fall on downstream areas only. The eco-compensation system requires both upstream and downstream areas to share the responsibility, and there must be a strict assessment to ensure the funds are used effectively."

In 2012, Anhui and Zhejiang provinces launched the country's first trans-provincial eco-compensation system to control pollution in the Xin'anjiang River.

Yet that system assesses its outcomes based on pollutant concentration only, while Guangdong's agreements with Guangxi and Fujian have specific requirements for water quality to improve year-on-year, in addition to controlling pollutant concentration.

Both of the latter agreements require water quality on all sections of the rivers on provincial boundaries to meet the standard of being a source of centralized drinking water by 2017. If they accomplish this task, the central government will financially reward Guangxi and Fujian.

About 70 percent of the water resources in Guangdong come from rivers in other provinces and regions, according to Deng Jiyong, director of the provincial environmental protection department's emergency office.