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WUXI, Jiangsu Province -- China has ordered all towns around Taihu, the lake that was covered with a foul-smelling algae last month, to establish sewage treatment plants and insisted that chemical factories meet a new water emission standard by the end of June 2008.

The plan was announced at a meeting here on Monday, after freshwater was shut off for more than 2 million people in Wuxi due to the blue-algae infestation of the lake.

Towns must set up sewage treatment plants and are forbidden from discharging untreated sewage to Taihu Lake and to rivers in the Taihu valley. Existing plants must install nitrogen and phosphorus removal facilities before the deadline, according to the plan.

Chemical factories that fail to meet the new water emission standard risk suspension. They will be shut down permanently if they still fail to meet the standard by the end of next June.

The new Chinese water emission standard for the Taihu valley will raise the bar for sulfur dioxide emissions and chemical oxygen demand.

The 20,000 chemical plants that cluster in the Taihu valley have had a drastic effect on the water quality of the lake.

The Taihu Lake crisis started last month, as the low water level and the accumulation of waste and untreated sewage triggered the rapid growth of blue algae, turning the water putrid and cutting freshwater supply to more than 2 million residents.

Authorities diverted water from the Yangtze River to flush out the pollution, and used chemicals to treat the algae.

Workers have collected 6,000 tons of blue-algae from the lake, and local health authorities say that tap water once again meets drinking standards.

Five officials in Yixing city were accused of dereliction of duty and received demerits and demotions in the wake of the Taihu Lake pollution crisis, local government sources said Monday.