Wider Image: World's Largest Electronics Waste Dump Thomson Reuters BEIJING (Reuters) - China faces a "formidable task" to clean up its rivers and lakes and needs a fundamental change in attitudes to prioritize the environment over economic development at all cost, vice premier Wang Yang said.

China published a water pollution prevention action plan in April, promising to improve water supplies in the world's most populous country and second largest economy after years of heavy pollution caused by industrial development.

One-third of major Chinese river basins and 60 percent of its underground water is contaminated.

Speaking at a meeting to discuss the country's efforts so far, Wang said preventing water pollution remained a "formidable task".

"Not only do we need a fundamental change in thinking about development and ways of development, but we also need technological breakthroughs as well as commitment and legal support," he told the meeting on Saturday.

The new action plan aims to ban water-polluting paper mills, oil refineries, pesticide producers and other industrial plants by the end of 2016 in a bid to better protect China's scarce water supplies.

China has already blocked the approval of 163 state-level projects during the 12th five-year plan period (2011-2015), said Chen Jining, Minister for Environmental Protection.

But many companies ignore environmental impact assessments or find ways around environmental requirements, he said. Around 30,000 companies illegally constructed projects during the first half of the year, according to a nationwide MEP survey.

Enforcement of environmental rules has long been a problem in China, where state-owned enterprises routinely pay negligible fines instead of meeting regulations.

Local governments are often more focused on growth and generating tax income than environmental protection, said Chen.

He called for a revision of environmental laws to increase the penalties for violations and strengthen the legal status of EIAs.

Wang said more efforts were needed to improve accountability for water pollution, such as research into turning water-related environmental quality into binding targets.

Beijing has said it will require outgoing cadres to be assessed according to the state of the natural resource assets under their management and it wants to make local governments take full responsibility for water quality, he added.

China would accelerate the introduction of emission permits and use of other economic instruments to incentivize water protection, said Wang.

(Reporting By Dominique Patton; editing by Clelia Oziel)