The official, An Qiyuan, from Shaanxi province, told the UK's Financial Times newspaper that people in north-western provinces should be compensated.
He warned of social upheaval and environmental harm because of the strain put on local water supplies.
China is building a huge network to divert water to the north.
The project will divert water from rivers in the south via tunnels, dams and canals to cities in the north where consumption is at an all-time high.
Part of the massive project was brought forward to provide water for the Olympics in the summer.
Mr An, a member of the Chinese People's Political Consultative Committee in Shaanxi, said the diversion of water supplies would have a severe effect.
Factories closed
"In order to preserve the quality of Beijing's water we have to close all our factories," he said.
"But we still need to live. So I say the government needs to compensate Shaanxi."
Mr An, formerly Communist Party chief in Shaanxi, was also critical of the huge Sanmexia Dam, constructed in the 1950s.
The project is blamed for the Yellow River silting up and causing flooding - something it was meant to avoid.
"It was so stupid, stupid," said Mr An.
Correspondents say it is unusual for a leading communist official to be so openly critical of government policy.
National network
Shaanxi and Hebei province are being required to pump clean water to Beijing in time for the Olympics.
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They are on the northern stretch of a much larger water transfer project designed to bring supplies from the Yangtze River in the south to thirsty northern industrial areas, including Beijing.
The entire project, costing tens of billions of dollars, is due for completion by 2010, but the authorities in the capital are hoping the northern leg of the network will be ready in time for the Olympics.
Experts say water demand could rise to 30% above average in the city as thousands of visitors arrive for the games.
Hebei
Hebei province, which lies next to Beijing and supplies most of its water, is suffering from severe drought, the official Hebei Daily reported on Tuesday.
Officials in the province were quoted as saying the drought, caused by a lack of rain and snow, meant the "conflict between water supply and demand has been dramatically exacerbated".
Hebei province is being asked to provide an extra 300m cubic metres of back-up supplies to Beijing's 16 million residents as the Games approach.
Several hundred kilometres of pipe and channels are being constructed in the province to supply the capital. But farmers complain that lack of water is already severely undermining agricultural land.
The Hebei Daily reported that 33,000 sq km (12,740 sq miles) of farmland was now affected by drought, while a quarter of a million residents were facing problems with drinking water.
Most members want to issue a strong statement ahead of next month's UN talks on a new deal to cut CO2 gases - replacing the Kyoto protocol.
But the 53-member group is yet to reach a consensus on the issue, amid reported opposition from Canada and Australia.
Meanwhile, India's Kamalesh Sharma has been appointed secretary general. He will replace Don McKinnon.
Mr McKinnon, a New Zealander, is stepping down at the end of his four-year term.
The first day of the summit was marred by violent clashes between protesters and police in Uganda's capital, Kampala.
Protesters denounced Britain's Queen Elizabeth for meeting Ugandan President Yoweri Museveni, who they say abuses rights.
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 We really have to get a concerted view on this (climate change) with the Bali conference coming up  Don McKinnon, Commonwealth Secretary General
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The three-day summit on Friday suspended Pakistan for civil rights violations under its emergency rule.
Opposition
On Saturday, the Commonwealth leaders are working at a retreat on Lake Victoria, away from officials and media.
Officials said the summit would try to iron out differences between member states on climate change.
Many Commonwealth nations, led by Britain, want to issue an influential statement before next month's UN talks in Bali, which will discuss a new agreement to replace the Kyoto protocol, which expires in 2012.
"We really have to get a concerted view on this (climate change) with the Bali conference coming up," Mr McKinnon said on Friday.
But Canada has insisted that any statement should refer to the need for contributions from the world's major polluters, including the United States, who has so far resisted any binding targets.
Australia is also a major CO2 emitter and - like the US - has not ratified the Kyoto Protocol.
Brown optimism
A new global trade agreement is also on the summit's agenda.
It is one of the most divisive issues for the Commonwealth, which includes some of the world's wealthiest nations as well as some of the poorest.
UK Prime Minister Gordon Brown on Saturday expressed optimism that a new deal could be reached in the next few weeks.
The talks have repeatedly stalled since their inception in Qatar's capital, Doha, in 2001.
Liu Jiaxun also said China's lowest and southernmost glacier, Mingyong, has shrunk by at least 40 meters over the past 13 years.
The combined effects of ice melting and drying water sources would have devastating effects downstream, said Liu, deputy director of the Meteorological Bureau of Diqing Tibetan Autonomous Prefecture, in northeastern Yunnan Province.
Mingyong -- at 2,700 meters above sea level and 28.5 degrees north -- had the lowest elevation and latitude of all China's glaciers, said Liu.
At 11.7 km long and covering 13 sq. km, it was shrinking faster than any other Chinese glacier, he said.
Mingyong is located on the eastern side of the 6,740-meter Kagbo Peak, the highest peak on the Meili Snow Mountain, on the border of Yunnan and the Tibet Autonomous Region in southwest China. The mountain has been shrouded in mystery after attempts to climb it failed over the past decades.
Liu's observations were based on his study of global warming and its impact on scenic resorts, including Meili Snow Mountain, Baimang Snow Mountain and Haba Snow Mountain, in the province, after analyzing the meteorological data collected over ten years.
Glaciers were sensitive to changes in the global climate. With the world's climate warming up, almost all low latitude glaciers were melting.
The melting would result in floods, farmland damage and mud-rock slides, while the drying up would lead to river shrinkage and severe drought, Liu said.
In addition, the disappearance of the glacier landscape would destroy natural resources for scientific research and tourism.
"In Europe, the snow line of the Alps has truncated 100 meters in 50 years," said Liu. "The annual temperature in Shangri-la county of Yunnan has risen from 4.8 degrees centigrade since 1990 to 5.2 degrees in 2006."
Zheng Guoguang, president of the China Meteorological Bureau, said China had suffered 21 consecutive warm winters, pushing up ocean levels by 2.5 mm annually and the national average temperature in 2006 hit a record 10.2 degrees centigrade.
Diqing, also known as Shangri-la after the unearthly beautiful land invented by British novelist James Hilton in his 1930s novel "Lost Horizon", also boasts the Three Parallel Rivers World Nature Heritage Site recognized by UNESCO.
In order to better understand global warming and its impact on the Tibetan sacred mountains and the fauna and flora, Liu has initiated a series of scientific programs by carrying out routine tests and data-collecting activities on depth of snow and melting of glaciers.
"People tend to think that the melting is attributable to tourism, however, there is no direct evidence for that observation," said Liu. "The mining and industrial activities will always top the list of major contributors to global warming."
The number of domestic tourists in Diqing has increased from 517,500 in 1997 to 2.86 million in 2006, when foreign tourists numbered 308,000.
The Waste Electrical and Electronic Equipment (WEEE) Directive requires 4kg of "e-waste" to be recycled per person.
Manufacturers have to fund recycling schemes, while retailers must offer take-back services to customers.
The legislation was supposed to be operational by August 2005 but was delayed by "major difficulties".
"E-waste", which includes PCs, games consoles, microwaves and washing machines, is the fastest-growing form of rubbish in the European Union.
The UK produces an estimated 1.2m tonnes of e-waste each year, most of which has been ending up in landfill sites.
Beyond the shelf
"I think this is an absolutely great piece of legislation," said Jonathan Wright, a senior supply chain executive for Accenture, the management consultancy.
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"In the past, all that companies focused on was getting products made and getting them out to customers," he explained.
"Now, organisations are having to think about what is going to happen after the product has been sold."
The WEEE directive entered the statute book at the beginning of the year, but full producer responsibility was delayed until 1 July.
Under the legislation, retailers selling electrical goods are obliged to offer customers a free in-store take-back service on a "like for like" basis, or help fund the expansion of a network of WEEE collection points.
Comet, one of the UK's largest electrical retailers, is among the companies funding the upgrading of local authority-run recycling facilities.
The company's managing director, Hugh Harvey, welcomed the belated introduction of the law.
"We believe this legislation is a really positive initiative which will make it much easier for consumers to recycle their electrical waste," he said.
Collective responsibility
The directive has also required manufacturers to join one of 37 "Producer Compliance Schemes" operating in the UK.
The schemes, which are monitored by the Environment Agency, collect and recycle the e-waste on behalf of the companies.
"The amount we are responsible for is calculated by looking at the amount we sell," explained HP's takeback compliance manager, Kirstie McIntyre.
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Recycling stops harmful substances entering the environment
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"We report to our compliance scheme, who in turn reports to the Environment Agency on our behalf.
"We tell them how much IT we sold to consumers and business customers last year; the Environment Agency then adds up all the sales by the major manufacturers and works out percentage responsibility for each company."
However, Mrs McIntyre voiced concern that the EU directive did not offer the same incentives as WEEE legislation in Japan.
"What they have done in Japan is introduce a more individual producers' responsibility approach," she said.
"Instead of HP being responsible for any old IT and recycling it, we are only responsible for HP equipment."
This had a number of additional environmental benefits, she added.
"Most of the environmental impact in complex manufactured goods is decided at the design stage.
"If we design our products to be more recyclable at the end-of-life stage, we not only reap the economic benefits but also the design decisions that we have made.
"Why should we make [components] easier to remove when we are getting everybody else's laptop back.
"At the end of the day, we have shareholders and we have to make a very strong business case for any changes that we make.
"At the moment, we do have design changes that we can make, but we cannot make the business case stack up because we do not get enough of our own products back."
The WEEE Directive is scheduled to be reviewed in 2008, five years after the EU first agreed to implement legislation to tackle the growing problem of e-waste ending up in landfill sites.
In a global review of desalination plants, the WWF said that some of the driest and thirstiest places in the world are turning to desalination. These include Australia, the Middle East, Spain, etc..
"Desalinating the sea is an expensive, energy-intensive and greenhouse gas emitting way to get water," said Jamie Pittock, director of WWF's global freshwater program.
"It may have a place in the world's future fresh water supplies but regions still have cheaper, better and complementary ways to supply water that are less risky to the environment," he said.
It is estimated that around 60 percent of freshwater needs in the Gulf region are met through desalination and Perth, Australia may be looking to source one-third of its freshwater the same way.
Spain is devoting an astonishing proportion of its desalinated water to agriculture - at 22 percent the highest level in the world - as well as to holiday resorts in arid areas.
Impacts of desalination include brine build-up, increased greenhouse gas emissions, destruction of prized coastal areas and reduced emphasis on conservation of rivers and wetlands.
Many of the areas of most intensive desalination activity also have a history of damaging natural water resources, particularly groundwater.
According to the WWF report, managing water demand and assessing impacts of any large-scale engineering solution are needed early in order to avert irreversible damage to nature and the cost overruns often paid by citizens over the long haul.
Sustainable sources of water start with protecting natural assets such as rivers, floodplains, and wetlands. These natural systems purify and provide water as well as protect against extreme or catastrophic events.