The authorities charged with managing construction of China's Three Gorges Dam have reported difficulties in financing the next stage of the massive hydro-electric project.

The dam has been surrounded in controversy since building began in 1993 and the report will give further ammunition to the project's many critics who say it is a waste of money and will do untold damage to the environment around the Yangtse River.

The official Xinhua news agency reported that only ¥55bn ($6.6bn) of the ¥80bn required for the second phase has been found.

The roughly $3bn shortfall will have to be raised through commercial bank loans and the issue of corporate bonds.

Chinese revolutionary hero Dr Sun Yat Sen dreamt up the project 80 years ago

Work on the second phase of the Three Gorges project from 1998 to the year 2003 now looks set to cost almost double the amount of the first phase, and some estimates put the final cost of the dam - due to be completed in the year 2009 - at roughly three times the original official estimate.

When completed, the dam will be the largest hydro-electric project in the world. The Chinese Government also hopes that it will prevent the kind of flooding which has plagued the Yangtse for centuries and just last year caused the loss of thousands of lives.

Controversy

Chairman Mao supported the idea of damming the Yangtse in the 1950s, but it was not until the 1990s under the guidance of then prime minister Li Peng that the first real work began.

The project has not been short of critics, some of whom question the need for a dam at all. Others say that energy and flood control could have been provided by building lots of smaller dams along the Yangtse.

Not only would this have cost less they say, but it would not have required the relocation of 1.2 million people to make way for the 600km long reservoir that the dam will create.