BEIJING, May 31 (Reuters) - Residents of a city in eastern China rushed to buy bottled water after tap supplies became putrid from an algae outbreak in a nearby lake, state media said on Thursday.

The lake in Jiangsu province is at its lowest level in 50 years and blue-green algae has been spreading, leaving the water that usually supplies Wuxi smelly and undrinkable, Xinhua news agency said.

Panicked residents picked supermarkets clean of bottled water and small shops hiked prices, local papers reported, as an expert warned the problem could last for months.

The volatile mix of pollution, thirsty citizens and health worries echoed a panic in late 2005, when millions of residents of Harbin in northeast China had tap water cut off for weeks after a toxic spill in the Songhua River affected drinking water.

China's leaders have promised to clean the country's air and water, but decades of unchecked growth and rickety enforcement leave many places vulnerable to pollution outbreaks.

Officials in Wuxi, a thriving industrial centre with an urban population of over 2.3 million, quickly sought to ward off panic.

Yang Weize, party secretary of Wuxi, vowed on Wednesday to guarantee safe drinking water "at all costs," Xinhua said.

An unnamed spokesman for the city government told a local newspaper that about one-third of residents still had tap water untainted by algae. Officials have been constantly monitoring the lake and ensuring bottled water is available, he said.

Many of China's lakes and rivers are threatened by run-off from fertilizers, dumped industrial waste and untreated sewage. Algae blooms can burst out in water rich in nutrients from farm and domestic runoff, and Xinhua cited experts as saying low water levels this year encouraged the outbreak.

Wuxi will try to artificially induce rain to swell the lake, and the province government has agreed to divert more water from the Yangtze River, Xinhua said.

But the Shanghai Morning Post quoted one water expert as warning the outbreak could stretch through summer.

"As temperatures rise in coming months, the spread of algae on the lake will expand," it cited Hu Weiping of the Chinese Academy of Sciences as saying.

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