Chinese police have detained a man for spreading rumours that a lake near the city of Wuxi, where green algae sparked a drinking water crisis last week, contained alarming levels of cancer-causing pollutants, state media said on Wednesday.

Taihu Lake, China's third largest, in the eastern province of Jiangsu, was struck by a foul-smelling canopy of algae that left tap water undrinkable for more than 2.3 million Wuxi residents and prompted a run on bottled water.

The man, surnamed Ding, was found to have sent cell phone text messages to more than 130 people since Thursday of last week, saying: "Carcinogens in Taihu are 200 times the acceptable levels," Xinhua news agency said.

Many of the messages were passed on to others.

The messages caused panic among some residents and police swiftly traced them to Ding, Xinhua said.

Ding was suspected of disrupting public order and would be held for 10 days, Xinhua said.

A vice minister of the State Administration of Environmental Protection said on Tuesday the Taihu crisis was both a natural and manmade disaster, blaming chronic pollution from chemical plants near the lake.

Algae blooms can develop in water that is rich in nutrients, often because of run-off from heavy fertiliser use, industrial waste and untreated sewage.

Tap water returned to normal in Wuxi after emergency measures such as diverting water into the lake from the Yangtze River and seeding clouds to provoke rainfall.