Beijing ? Fast-spreading, foul-smelling blue-green algae smothered a lake in eastern China, contaminating the drinking water for millions of people and sparking panic-buying of bottled water, state media said Thursday.

The algae bloom in Lake Tai, a famous but long-polluted tourist attraction in Jiangsu province, formed because water levels are at their lowest in 50 years, leading to excess nutrients in the water, Xinhua said.

Officials in Wuxi, a city along the banks of the lake, called an emergency meeting Wednesday to discuss measures to deal with the situation and allay public fears, said a posting on the local government’s Web site.

Residents swarmed stores in Wuxi, a city of 5 million, to buy bottled water Wednesday and prices skyrocketed from $1 to $6.50 for a 2-gallon bottle, Xinhua said.

The city has placed a ban on price increases and threatened hefty fines to violators, the report said. A Wal-Mart store imposed rations of 24 bottles per person, Xinhua said.