Authorities have closed schools in two townships in east China's Zhejiang Province after industrial waste contaminated the water supply for 200,000 residents, officials said on Tuesday.

People rush to buy mineral water in a super market of Hangzhou, Zhejiang Province, on July 6 after a chemical spillage threatened the city's water supply.

This is the second water pollution incident after carbolic acid spilled into a river that supplies drinking water to east China's scenic city of Hangzhou, knocking out supplies to more than half a million people in the suburbs and creating a run on bottled water in the city of 9 million.

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Calls from local residents nearly jammed the complaint line of the Hangzhou Yuhang Water Company after they smelled something strange in their tap water on Sunday.

Local environment authorities soon found that water in the South Tiaoxi River was contaminated with benzene and alkene.

An industrial park upstream is suspected of dumping the organic chemicals and it has been ordered to stop releasing waste.

The water supply has been shut off in parts of northern Hangzhou, including Pingyao and Liangzhu townships.

"It is the first time that the local authorities have found these organic compounds in the water. So we aren't sure what harm these things will cause to the human body. Besides, things like benzene and alkene are not included in the drinking water testing standards of the Ministry of Health," said Li Bingshi, head of Hangzhou Yuhang Water Company, at a press conference on Monday.

But the water supply in Yuhang district, with a population of nearly 850,000, is largely dependent on water from the river.

The Yuhang Water Company halted its supply on Sunday night. Part of the district is now supplied by Hangzhou Water Group Company and the other is supplied by a local reservoir.

Water trucks were being sent in and schools were closed for three days starting Tuesday as regulators sought to dilute the contamination by shutting down the polluting factories and releasing water from an upstream reservoir, the district government said.

Although the odor was reduced on Monday night, local authorities still forbid restaurants and food companies in Yuhang district from using tap water. Local residents are advised to stock bottled drinking water.

"The tap water quality has improved a little bit. The district government has invited experts to further investigate what caused the contamination and what harm it will cause to the human body. But it will take some time to get the results," said Qi Jinhai, deputy director of the publicity department of the district Party committee.

The property management department of Liangzhu New Town immediately informed their residents on Sunday night of the contamination.

"Starting Monday night, we began selling 19-liter jugs of water for 10 yuan ($1.5) each in the community square," said a clerk surnamed Zhang at the property management department.

Wang Jianling lives in the Forte Invaluable City of Yuhang district.

"It was obvious that the tap water smelled," said Wang.

"I have lived in other districts of Hangzhou. I could tell that the tap water in Yuhang was not as good as in other districts long before the odor problem broke out," added Wang.

Despite assurances that drinking water in Hangzhou itself was safe, residents rushed to buy bottled water, leaving shelves in some supermarkets empty. Local reports showed shoppers hauling away crates of water.

Hangzhou is famed for its scenic West Lake district, its tea plantations and for picturesque surrounding mountains. City officials are said to be planning to apply for it to be designated a UN World Heritage site.

Hangzhou is also a major textile manufacturing center in Zhejiang, one of China's most affluent and industrial regions.

This is the second environmental incident to hit Zhejiang in the past few days after a truck accident on Saturday resulted in a chemical leak into a river that provides water to many parts of the province.

The truck was carrying phenol - used in the manufacture of nylon and other synthetic fibers - when it broke down, the Hangzhou Daily newspaper reported.

As it was being repaired, another truck crashed into it, breaking the chemical tank and causing 20 tons of the chemical to seep into the nearby Xin'an River.

One repairman was killed in the accident, said a report posted on the Hangzhou government website.