When seven white swans made a home on the Chaobai river in north-east Beijing last year, it was hailed as an Olympic success story. Until a few years ago, the waterway was so exploited that the bed was cracked dry.

Now the river has been refilled and the wildlife brought back, ready for rowing events in August. For Beijing, it was a showcase of how the "green" games can improve the environment. But four months on green activists are asking whether this and other cosmetic clean-ups are depriving arid regions of water during a particularly severe drought.

Thanks to a huge diversion, the Shunyi Olympic rowing park project has turned a dry river and its banks into a lush resort with a water surface of 63 hectares (155 acres) and a green area of 53 hectares. It is not the only hydro-engineering facelift. Beijing is diverting millions of gallons of water to ensure this dry and dusty city looks its best during the Olympics. Workers are rushing to complete a huge canal that will channel water from the Yangtze and other rivers in southern China to the parched but densely populated north.

Reservoirs around Beijing are being tapped to flush out the foul, polluted waterways in the centre of the city and to fill the fountains and keep the grass green in the Olympic park. Meteorologists are even firing silver iodine crystals into the clouds to induce rain.

This work means other needy areas going dry. Last year, farmers in neighbouring Hebei were told to grow corn or wheat instead of water-intensive rice. Tens of thousands of people have been relocated for a 192-mile section of the water diversion project, which will open in April, redirecting 300m cubic metres of water from Hebei to the capital. In any year this would be a sacrifice. Hebei has one of China's lowest levels of per-capita water resources. But this year's drought is severe. This week the Hebei Daily said levels of winter rain and snow were 60% below the long-term average, leaving many reservoirs at very low levels. "The severe drought has created tense conditions for water supplies in our province, and the conflict between water supply and demand has been dramatically exacerbated," it noted.

Like many other Olympic projects, the water diversion was being planned anyway. Beijing needs more water because it has more flush toilets, more ornamental lakes, more building sites and more people. The population - soon expected to hit 18 million - has more than quadrupled since the 1960s.

But the Olympics is an excuse to accelerate development. The games are such a national priority that few dare risk being accused of lacking patriotism. Tensions are apparent. Earlier this week, a senior official in Shaanxi province - which is also being tapped for Beijing - warned of social, economic and environmental disaster because of strains on water resources. "In order to preserve the quality of Beijing's water we have to close all our factories. But we still need to live. So I say the government needs to compensate Shaanxi," An Qiyuan, chairman of the Chinese people's political consultative committee for Shaanxi, told the Financial Times.

Activists accuse Beijing of sacrificing its neighbours. "Using drinking water from Hebei and other poor provinces to provide for luxuries in Beijing is wrong," said Dai Qing, a leading environmental activist. "Beijing will ensure the city has enough clean water in August, but it will only be temporary. In the longer term, the water crisis will worsen."

She said the rowing park at Chaobai was the worst example of waste because it required filling a dry river, greening parched earth and building one of the world's biggest fountains. "This was a dry river. Why do they have to use this area for competition?" said Dai.

The water's origins are mysterious. The government insists the river is being filled from the Wenyu, a smaller Beijing waterway used for effluent, but Dai says the volume is insufficient and the quality too low. She suspects the Chaobai is being filled from already depleted groundwater supplies and reservoirs.

It is difficult to assess. Despite reports that the Olympics will push up water consumption by 30%, the Beijing city water bureau insists supplies diverted from Hebei and Shaanxi are for normal use, urban development and the increase in population. "We never said we need extra water for the Olympics," said the bureau's propaganda director, Yu Yaping. "We don't know if the total volume of water will increase this year. In fact we are trying to promote measures to save water."

Such is the sensitivity that even the scale of the drought is hard to confirm. "We can't give you any statistics. Our reservoir is too important to Beijing and to the Olympics. We can't tell you the trend," said an official of Miyun reservoir, who declined to give his name.

But the director of the rowing park, Zhang Xiangdong, insisted his project was a success. "This was dry seven years ago. From last year, 40m cubic metres of water is flowing into the Chaobai every year. We now have more than 100 kinds of trees that produce 50,000 tonnes of oxygen, which is good for the air. Last autumn, we had our first swans. Can you imagine how excited we felt? And by August, the Chaobai will be full."