By Matt Pottinger

BEIJING (Reuters) - The largest natural lake in northern China appears doomed to dry out early next year, parched by lack of rainfall and reckless use of water by factories and farmers, a water resources official said on Wednesday.

The threat to the Baiyangdian Lake in Hebei province has highlighted a water crisis in China so severe it threatens the country's economic development and social stability.

It will not be the first time the lake has been completely drained, although this time officials warn it can be rescued only by a massive water diversion program now on the drawing board.

Hundreds of thousands of people have grown dependent on its water for drinking, fishing and agriculture.

``It will dry up again next spring if there is insufficient rainfall from now,'' the official with the Water Resources Bureau in the provincial city of Baoding said.

``It will directly affect the lives of people living in surrounding villages,'' he said. ``Their daily incomes are mainly from fishing and reed products. Grain production in the lower portion of Baiyangdian will also be greatly reduced.''

The official declined to give his name.

``Bright Pearl'' Plundered

Nicknamed the ``bright pearl of northern China,'' the 360-square kilometer (135-sq mile) lake has been plundered for industrial and agricultural production and drinking water for the region's growing population.

A severe drought compounded the problem this year and the lake is unlikely to survive without a massive canal project to begin next year that will divert water from the mighty Yangtze river that meanders across central China, the official said.

``Transferring water from several nearby reservoirs can temporarily solve the water strain here, but if the current situation goes on, even the reservoirs will dry up next year,'' he said.

``We place all our hopes in the south-to-north water transfer project,'' he said.

Deadly Unrest Over Water

Lakes reduced to dust and rivers that trickle dry before reaching the sea are emblems of a water shortage that is gripping vast areas of China .

Civil unrest has erupted several times in recent months over the precious resource, including a deadly riot by villagers in July in Shandong after officials cut off water supplies from a reservoir they had used to irrigate crops.

In August, six people were accidentally killed when officials in the southern province of Guangdong blew up a water channel to prevent a neighboring county from diverting water to a new power station.

Three canal networks to bring Yangtze water to parched northern cities are expected to be completed in 2010.

The Baoding official said he was looking to the central route, which will divert water to Beijing and Hebei from the Danjiangkou Reservoir in Hubei, to save Baiyangdian.