SHANGHAI (Reuters) - A Chinese city has suspended preliminary work on a proposed 100 billion yuan ($15 billion) nuclear waste processing plant following protests by local residents concerned about health risks.

Reports that Lianyungang - a coastal city about 500 km (310 miles) north of Shanghai - was set to be chosen as the site for the project sparked protests that began at the weekend.

The project, to be run by the state-owned China National Nuclear Corporation (CNNC) in collaboration with France’s Areva, is due to start construction in 2020 and scheduled to be completed by 2030.

"The Lianyungang Municipal People's Government has decided to suspend site selection and preliminary work on the nuclear recycling project," the local government said in a notice posted on its website (www.lyg.gov.cn).

It did not give further details.

In a report published on Monday by the official local newspaper, the Lianyungang Daily, the local government said “no final decision had been made” on the location of the plant.

It threatened to take legal action against “illegal elements” it accused of “fomenting social disorder” and spreading rumours about the project.

Lianyungang, in the province of Jiangsu, is the location of the Tianwan nuclear project, which currently consists of two Russian-designed reactors. Two more units are now under construction and there are plans to expand further.

An Areva spokeswoman in Paris said the company could not comment on the protests or on the choice of a site for the plant. She added the company had completed negotiations about the technical aspects of the project in June 2015 and was now in commercial negotiations. There is no deadline for the project.

The negotiations between CNNC and Areva are about the price of a technology transfer, as the plant will not be built and operated by Areva but by CNNC.

China wants to build a nuclear fuel reprocessing plant modelled on Areva’s installations in La Hague, western France, as well as a MOX fuel plant modelled on Areva’s plant in Melox, southern France.

La Hague takes the plutonium out of spent uranium burned in EDF’s French plants, which Melox blends with uranium to produce new fuel rods for pressurised water nuclear reactors.

The Chinese plant is expected to have a reprocessing capacity of 800 tonnes per year, compared to a maximum capacity of 2,700 tonnes in La Hague.

CNNC could not be reached for comment, but an official with the firm told state newspaper Science Daily on Tuesday that Lianyungang was just one of several candidates and the central government would make the final decision on the plant’s location.

China has ambitions to become a world leader in nuclear power. It had 30 reactors in commercial operation by the end of June this year, amounting to 28 gigawatts of capacity. It is aiming to raise that to 58 GW by the end of 2020.

However, it is struggling to resolve bottlenecks in the industry, including fuel processing, waste recycling, grid access and a shortage of qualified staff.

China’s reactors could instead take the U.S. route and bury waste underground, said Li Ning, a nuclear scientist and Dean of the School of Energy Research at Xiamen University.

“But the (Lianyungang) government gave in so quickly, and from that perspective, it does not bode well for the nuclear industry,” he said.

High-profile government-driven publicity campaigns designed to promote nuclear power have not stopped Chinese citizens from taking action against nuclear projects in the past.

In 2013, residents in the city of Heshan in Guangdong province took to the streets to protest against a uranium processing plant scheduled to be built in the city. The project was eventually cancelled.

“These actions are happening more frequently, on a larger scale and in a more agitated way,” Li said.