The situation, complicated by a drought that has gripped northern China for years, will steadily worsen by 2010, when another three million people are expected to have joined the city's permanent population, it said.

To deal with the problem, the city may have to slash water consumption to levels "that would result in water rationing and higher prices that would affect the quality of the average resident's life," Xinhua said, citing a study in the China Economic Weekly.

The city government is pinning its remaining hopes on central government polices aimed at producing more geographically balanced growth throughout the country.

Like many cities leading China's economic boom, Beijing has become a beacon to vast numbers of migrant workers from rural areas, with the prospect of work on 2008 Olympic Games construction projects serving as an added lure.

Water has become one of the major evironmental problems in China in recent years.

More than 70 percent of rivers and lakes are polluted, while underground water supplies in 90 percent of Chinese cities are contaminated, previous state press reports have said.

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