The privately owned Biaoxin Chemical Company was found illegally discharging waste water into a river in Jiangsu Province, Xue Yu, Secretary-General of the city administration, said.
Two water plants in the city were found contaminated with phenol after the waste water was discharged into the river.
The Yancheng City has three tap water plants, which provide drinking water to the city's 1.5 million people. One water plant was not contaminated, said Xue.
Officials at the two water plants noticed an unusual smell early Friday and tests confirmed the presence of carbolic acid, or phenol, making the water unfit for drinking.
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Residents at the second floor or above have no access to tap water due to the inadequate water pressure, a manager of Huijin Water Co. Ltd., which manages the two plants, said.
The stoppage of the tap water has also affected industrial production in the city.
It was not immediately known when the two water plants would resume operation. Meanwhile, the workers are cleaning the water pipes.
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