Chinese officials said water quality was improving in the country's third-largest lake, choked by a polluted slick of algae, but experts warned that tap water in the area was still not safe, state media reported on Saturday.

Taihu Lake, in the southern province of Jiangsu, has been struck by a foul-smelling canopy of algae that left tap water undrinkable for more than 2.3 million residents of nearby Wuxi and prompted a run on bottled water at local supermarkets.

Residents said the government was telling them it was safe to drink boiled water, but complained that it still had an unappealing green film on top.

Environment experts said it was unlikely to be fit to drink.

"Although quality of the water supply has improved significantly on Friday and now it is safe for washing hands or clothes, it still takes some time to become drinkable," the Zhang Xiaojian, an environment specialist at Tsinghua University in Beijing said.

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.

Officials have invoked emergency measures, diverting the Yangtze river and seeding clouds to provoke rainfall, to try to flush out the algae. Heavy rainfall is also expected in the area in the next few days.

Residents of Wuxi said the algae, which they said smelt like rotten meat, was driving a roaring trade at McDonald's and KFC fast-food outlets in the city.

"Here they fry food," said a company manager named Zhao as he queued at KFC. "I can't eat dumplings or noodles because they would be cooked in water and it's too expensive to use bottled water."