China admitted Friday it faced "difficulties and challenges" in cleaning up its environment, with pollution from toxic metals aggravating the public and a severe drought further damaging waterways.

Vice Environment Minister Li Ganjie reiterated a government pledge to punish mining firms found guilty of environmental violations in Inner Mongolia, where protests fuelled by concerns over mining industry practices erupted last month.

China's "overall environmental situation is still very grave and is facing many difficulties and challenges," Li told reporters as his ministry issued its annual report ahead of World Environment Day on Sunday.

The nation was scrambling to clean up badly polluted waterways, curb industrial pollutants, reduce the degradation of rural lands and strike a better balance between economic growth and environmental protection, he said.

"We have entered a period where sudden incidents impacting the environment or pollution accidents are occurring frequently and where environmental pollution is daily causing social contradictions," Li said.

Protests erupted in Inner Mongolia last month after a Mongol herder was killed by a Han Chinese coal truck driver on May 10, but demonstrators also demanded action on charges of resource exploitation and environmental damage.

China swiftly tightened security in the northern region and announced an overhaul of a mining sector accused of encroaching on grasslands where Mongol herders have raised animals for centuries.

"If we confirm that relevant (mining) enterprises have been violating laws and regulations, I believe our local government and environmental protection agencies will seriously punish them," Li said.

He further vowed to crack down on heavy metal pollution from mines and other factories, acknowledging that incidents of lead poisoning -- sometimes affecting entire villages -- were occurring nationwide.

"The incidents of heavy metal pollution which are seriously threatening the health of the people and impacting social stability are quite severe," Li said.

Last year, China witnessed 14 major heavy metal pollution incidents, including nine involving lead poisoning, Li said. In the first five months of 2011, seven such incidents occurred.

The drought affecting the middle and lower reaches of the Yangtze, China's longest waterway, was exacerbating pollution in the lakes and tributaries in the river basin, many of which were already badly polluted, he said.

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