More than 400 of 669 Chinese cities are facing water shortages, among which the situation in 110 cities was described as "serious", said Xinhua news agency, quoting Wang Shucheng, Minister of Water Resources.

Some 20 million hectares (49 million acres) of farmland were affected by drought, reducing grain production by 28 million tons, Wang told the Standing Committee of the National People's Congress, China's top legislature.

Severe water pollution in China made water shortages even worse and threatened the safety of drinking water.

"China's water pollution is very serious," Wang said, adding that just 38.1 percent of China's river water was drinkable.

China pumped out 68 billion tons of sewage in 2003, double the amount in 1980, Xinhua said.

In some regions, high levels of metal and organic pollutants caused cancer and deformity in humans, Wang was quoted as saying.

According to an earlier Xinhua report last week, more than 70 percent of China's rivers and lakes were polluted to different degrees.

"Currently, 300 million Chinese people are drinking unsafe water", Wang said in the report.

More than 63 million peasants living in the plains of northern and eastern China were drinking water with fluorine above acceptable standards and 60 million people in central, eastern and southwestern China were suffering from illnesses related to poor water quality, Xinhua said.

China was also facing severe ecological challenges - the total area of wetlands has fallen by 26 percent, while the total area of lakes has fallen by 15 percent since the 1950s, it said.

China has set the ambitious goal of providing safe drinking water to every rural family by 2020, as part of government goals declared to the United Nations.

Officials said they were ready to launch a long-term project to deal with the lack of clean water, aiming to cut down the number of people without access to clean drinking water by one third by 2010.