By David Stanway and Sue-Lin Wong

SHANGHAI/BEIJING (Reuters) - China is making progress in battling the damaging smog that can shroud its big cities, but in many areas - from parts of the giant Yangtze river to the coalfields of Inner Mongolia - its water pollution is getting worse.

Despite commitments to crack down on polluters, the quality of water in rivers, lakes and reservoirs in several regions has deteriorated significantly, according to inspection teams reporting back to the Ministry of Environmental Protection (MEP).

In documents published this week, inspectors found that a fifth of the water in the Yangtze's feeder rivers in one province was unusable, and thousands of tonnes of raw sewage were being deposited into one river in northeastern Ningxia each day.

Worried about unrest, China launched its war on pollution in 2014, vowing to reverse the damage done to its skies, rivers and soil by more than three decades of breakneck industrial growth.

"We still have a lot of work to do," vice-minister Zhao Yingmin said at a press briefing on Friday.

"First, I'd say the point of inspections is to discover problems, and indeed we discovered in some places water quality has gotten significantly worse," he said, noting, though, that the overall situation was improving.

Over the first nine months of this year, 70.3 percent of samples taken from 1,922 surface water sites around China could be used as drinking water, up 4 percentage points from a year ago, Zhao said.

TIGHT SUPPLY

China has long been worried about a water supply bottleneck that could jeopardize future economic development. Per capita supplies are less than a third of the global average.

A survey published by the MEP last year showed that nearly two thirds of underground water and a third of surface water was unsuitable for human contact, with much of it contaminated by fertilizer run-offs, heavy metals and untreated sewage.

China's priority, though, has been air pollution, especially in industrialized regions like Beijing and Hebei, and it said this week that concentrations of harmful small particles, known as PM2.5, fell 12.5 percent in January-October.

"With air, you stop pollution at the source, and the blue skies come back instantly," said Ma Jun, director of the Institute of Public and Environmental Affairs, which monitors Chinese water pollution.

"For water, you can stop pollution at the source, but you still have the polluted sediment and the soil that is going to leech into the water, and it's going to take much longer."

"BELOW GRADE 5"

China grades its water in five categories. Grade three and above is deemed safe for direct human contact, while grades four and five can only be used in industry and agriculture. Water "below grade five" has "lost all functionality".

In an action plan published last year, the government vowed to improve water quality nationwide by 2030, and it aims to bring large volumes of unusable "below grade five" water back into the economy.

While improvements have been made in the past five years, China's growing demand for water has put increasing pressure on its limited resources, and sources of pollution have not been put under adequate control, said vice-minister Zhao.

This week, the top coal producing province of Shanxi revealed that 29 of the 100 surface water sites tested between January and September were found to be "below grade five", with water in the city of Datong deteriorating sharply over the period.

In the manufacturing powerhouse of Jiangsu near Shanghai on the eastern coast, inspectors found that the Yangtze, China's longest river, wasn't being protected. They said 20.5 percent of water samples taken from feeder rivers were "below grade five" last year, an increase of 11.4 percentage points in a year.

The number of surface water monitoring sites meting state standards in the coal producing region of Inner Mongolia fell by 7.7 percentage points, and the number categorized as "below grade five" rose by more than three percentage points.

In Ningxia in the northwest, another growing coal producer, water at two lakes had deteriorated from grade three to "below grade five", and inspectors found that 6,400 tonnes of raw sewage was being deposited into one river each day.

Ammonia and phosphate concentrations in one reservoir in rural Guangxi in the southwest, doubled last year as a result of pollution from farming and fishing, the ministry said.

China said this year it would spend 430 billion yuan ($62.4 billion) on around 4,800 separate projects aimed at improving the quality of its water supplies, though it did not give a timeframe.

"You need infrastructure, and there is a deficit that we have to catch up ... but the problem is how to find the motivation to clean up and behave properly, and stop pollution at the source," said Ma at the Institute of Public and Environmental Affairs.

(Reporting by David Stanway and Sue-Lin Wong; Editing by Ian Geoghegan)