Water quality measured in 203 cities across the country last year rated "very poor" or "relatively poor" in an annual survey released by the Ministry of Land and Resources, the official Xinhua news agency said yesterday.
Water rated "relatively" poor quality cannot be used for drinking without prior treatment, while water of "very" poor quality cannot be used as a source of drinking water, the report said.
The proportion of water not suitable for direct drinking rose from 57.4 percent from 2012, it said.
Pollution has emerged as a driver of discontent with the government, sparking occasional protests.
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China's environment ministry last week estimated that 16 percent of the country's land area was polluted, with nearly one fifth of farmland tainted by inorganic elements such as cadmium.
Premier Li Keqiang announced in March that Beijing was "declaring war" on pollution as he sought to address public concerns, but experts warn that vested interests will make it difficult to take action.
Residents of the western city of Lanzhou rushed to buy mineral water earlier this month after local tap water was found to contain excessive levels of the toxic chemical benzene, state media reported at the time.
A subsidiary of the country's largest oil company, China National Petroleum Company, was blamed for the incident after oil from one if its pipelines leaked into the water supply.
The Lanzhou government also came under fire for reportedly failing to notify locals of the pollution for several days after becoming aware of it.