BEIJING (Reuters) - Residents in the western Chinese city of Lanzhou rushed to buy bottled water on Friday after authorities said the city's drinking water contained levels of benzene, a cancer-inducing chemical, standing at 20 times above national safety levels.

With Beijing having identified the environment as one of its top priorities after years of unchecked economic growth, the government has struggled to make local governments and industries comply with laws.

Lanzhou, a heavily-industrialized city of 3.6 million people in Gansu province, ranks among China's most polluted centers.

The government found 200 micrograms of benzene per litre of water, it said, triggering the rush to stock up on bottled water. The national safety standard is 10 micrograms per litre.

The water supply was turned off in one district, and the government warned citizens not to drink the city's water for the next 24 hours.

"Lanzhou has shut down the contaminated water supply pipe and deployed activated carbon to absorb the benzene," the government said in a statement.

Activated carbon has small pores that enable it to absorb chemicals.

Preliminary inspection showed the benzene came from nearby chemical factories, the local government said on its website, although no culprit was named. The environmental bureau is carrying out further investigations.

The official Xinhua news agency said an initial probe found unspecified problems in a 3-km (two-mile) channel which links a plant that pre-processes the water and the plant that supplies the city's water.

Closure of that channel will halve Lanzhou's water supply, the report quoted Tian Hong, head of Lanzhou's water quality monitoring station, as saying.

Fire engines will carry water to affected areas, it added.

Pictures circulating widely on Chinese Internet sites showed long lines at grocery stores where people were loading up on almost anything drinkable. Other images showed barren shelves cleared of bottled water.

"It's not just bottled water that is gone. Even all the beer and milk has been snatched up," one resident wrote on the popular Twitter-like service Weibo.

However, the Yellow River, a major river which runs through Lanzhou, has not been contaminated, Xinhua said.

The water supply company is majority-owned by the local city government, with British firm Veolia Water, a unit of French firm Veolia Environnement, holding a 45-percent stake.

Xinhua said this was the second water-related incident in Lanzhou in as many months.

In March, residents reported a strange odor when they turned on their taps, later confirmed to be a high concentration of ammonia, though still within national limits, it said.

China is no stranger to drinking water crises.

In 2005, water supplies to the northeastern city of Harbin had to be cut off after an explosion at a chemical plant on the Songhua River spilled benzene into the water, pushing levels to more than 100 times safe limits.

Separately, state media reported China's first pilot projects, subsidized by the finance ministry, to treat metal pollution in soil and prevent farmland from contamination. But a professor said government efforts to protect agricultural and urban soil fall considerably short of what is needed.

(Reporting by Stian Reklev and Kathy Chen; Additional reporting by Ben Blanchard and Michael Martina; Editing by Clarence Fernandez and Rpo)