BEIJING, Sep 13 (Reuters) China's bid to tackle widespread pollution and a shortage of water treatment facilities could make it a leader in waste management, experts said.

But its rivers and lakes may need years to recover from chronic misuse, they said.

More than two-fifths of cities, and tens of millions of rural dwellers pump used water directly into rivers, which risks damaging the heath of downstream users and the ecosystems of lakes where the water ends up.

Beijing plans to spend more than 330 billion yuan (41.5 billion dollar) by 2010 to provide sewage treatment plants to all cities. If it invests in next-generation plants that effectively reprocess water, it could tackle waste and water scarcity while boosting its own economy.

''China, if it is going to remedy pollution, has to put in wastewater treatment. But that process constitutes an opportunity, because it can leapfrog to the latest technology,'' Paul Reiter, Executive Director of the International Water Association, told Reuters at a conference his group organised.

''It would be good for the environment, but its companies could also manufacture and market these systems.'' Instead of shipping waste water away from city centres to treat it before discharge into a river, the smaller modern plants clean the water for just one neighbourhood to a quality where it can be recycled back into an urban supply system.

Reiter said the new plants, some no larger than an office building, are already economically competitive with old-fashioned treatment systems. Chinese firms are already manufacturing some components, mostly for export.

Such systems will face challenges in a country where many treatment plants are not connected to sewage systems and where it is common for local governments to ignore new technologies because they are too costly or too complicated to use.

FUTURISTIC SOLUTIONS China has around one fifth of the world's population but only seven percent of its water supply.

The country is investing billions in a project to transfer water from the river systems of the south to the arid north, but the scarcity of its resources means that ultimately China will have to focus on more efficient management.

Among the new systems being tested is one that would power treatment systems with the very waste they are filtering, by using bacteria to create biofuel cells.

''We have already got cells which can power lightbulbs and we believe that in five to 10 years we could be in commercial production,'' said David Garman, President-elect of IWA.

But at present, the lack of working treatment systems is storing up problems that could take decades to correct.

The impact of wastewater run-off, including nutrient rich sewage, is compounded by careless and excessive application of fertilisers.

More than half of Chinese lakes are suffering from eutrophication, said IWA president Laszlo Somlyody, meaning their waters are so nutrient rich that they feed excess growth of algae, which can choke out other aquatic life.

Even when nutrient flows are cut back, the nitrogen and phosphorus that settles to the bottom of the lake at times of heavy pollution may keep on nourishing algae for years.

Scientists have noted cases in which it has taken 15 years for lakes to begin to recover.

''This is the inertia of the ecosystem, the memory of the pollution,'' Somlyody said.

REUTERS PDM MIR KP0925