China is looking to rework nature with a gargantuan project to divert water from its lush south to the parched and populous north which will take half a century and tens of billions of dollars to achieve.

But when test runs began this year, villagers along the route said the inflow polluted their lake, leaving it teeming with silvery rotting fish carcasses and killing their livelihood. Officials in the eastern province of Shandong rejected their account, but the incident feeds into concerns that the behemoth South-to-North Water…