China yesterday issued its annual report on the state of environment last year, saying the ecological situation was "still not optimistic" even though the total amount of pollution was reduced.

　　Millions of people in the north face water shortages this summer as the giant but overused Yellow River falls to its lowest level in 50 years. Supplies elsewhere are heavily polluted, environmental officials said yesterday.

　　More than half the watersheds of China's seven main rivers are contaminated by industrial, farm and household waste.

　　"China is a country that lacks water resources, and the problem of water pollution remains severe," said Xie Zhenhua, director of the State Environmental Protection Administration.

　　The report on China's environmental condition showed that in 2002, 29.1 percent of the water in the country's seven major river basins met the water quality standard for Grade I to III, 30 percent was in the categories of Grade IV and V and 40.9 percent was worse.

　　"This year, our top priority is to ensure clean drinking water for our people," Xie said.

　　Despite improvements, two-thirds of China's cities still had air quality considered polluted by official standards, the environmental report said.Only one-quarter of the 21 billion tons of China's annual output of household sewage is treated, Xie said at a news conference in Beijing to mark the World Environment Day.

　　Treatment plants are being built, but will still handle only half of all city sewage, leaving rural waste water to run off untreated.

　　The government has forecast an annual water shortfall of 200 billion tons by 2030 - more than the amount that China currently consumes in a year.

　　In the north, drought and overuse have left the Yellow River so drained that in recent summer low seasons, it has dried up before reaching the sea.

　　This spring, oil spills and water shortages on the river forced the government to suspend work on a project to divert some of its water further northward, said Wang Jirong, a deputy director of the environ-mental agency.

　　Monitoring of 185 sections of the Yellow River last year showed that the water quality of the river was poor, with nearly half of the stations registering water quality lower than Grade V, the lowest grade.

　　According to the report, the Haihe River, running through the densely populated Beijing-Tianjin region, was still the dirtiest river, while the Yangtze River suffered the least pollution.

　　Excessive discharges of nitrogen and phosphor into the water, mainly because of overuse of fertilizers by farmers, and improper handling of waste produced by livestock and poultry farms, were still leading causes of pollution in the lakes of Dianchi, Taihu and Chaohu.