HONG KONG, March 22 (Reuters) - The World Bank has approved a $96 million loan for China to help improve the environment in cities in the factory-filled Pearl River Delta, a region near Hong Kong that is a source of heavy pollution.

The money will help fund a project to reduce water pollution in the Pearl River system through wastewater treatment, sludge disposal, industrial pollution control, water quality monitoring, sediment removal and flood protection, the bank said in a statement.

The Pearl River Delta is one of China's main engines of growth and a hub for export processing, but its economic prowess has come largely at the expense of the environment. China's leaders have only recently begun to come to grips with the need to improve the environment nationwide.

Smoke-belching Delta factories are the main source of air pollution in the neighbouring Asian financial hub Hong Kong, and some companies are reporting difficulties attracting talent due to the worsening problem.

In 2004, the World Bank helped fund its first Pearl River Delta project focused on wastewater treatment facilities and other investments in the provincial capital of Guangzhou, which it said was the biggest single source of pollution.

This new project would cover projects in Foshan and Jiangmen, which the World Bank said together generate about 15 percent of the pollution going into the Pearl River and its tributaries. The total cost of the project is $188 million.

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