Villagers in south-western China, infuriated by a factory that was polluting the environment, smashed its offices and equipment and later clashed with police.

Residents of Baha, a village in Yunnan province, said they had grown increasingly angry over a local metalwork factory that had been coughing up black smoke and discharging polluted wastewater into the rural area. After the factory's boss refused to meet with villagers last week, they smashed cars, equipment, offices and dormitories.

On Wednesday, Baha locals said police had arrested people involved in Friday's clash at the local police station. The official Xinhua news agency said officers had identified 16 suspects.

"We have been living with the factory for 14 years, and we live in dust almost every day and can't sell our rice and other farm products," villager Huang Liangzheng said. "We need to live."

Police were ordering villagers who took part in the clashes to surrender, Xinhua said. Huang said he was on his way to the police station.

"Yes, I am one of those people they are looking for and I have nothing to fear," Huang said.

An official at Guangnan county's Communist party propaganda department who gave his surname as Lei said he did not have any information about the incident. Calls to county police rang unanswered.

Environmental protests are on the rise in China, with the public becoming increasingly critical of the fouling of the country's air, soil and waterways during decades of breakneck development. The unrest poses a serious political challenge to the Communist party – anger over the party's response, or lack thereof, to environmental crises has fuelled wider dissatisfaction with corruption and a lack of official accountability.

Most protests have taken place along China's developed coastal region, reflecting the area's heavy pollution from industry as well as the rising demands of the country's well-off. But the latest unrest was in rural Yunnan, indicating the protest has now spread further inland.

Yunnan's provincial capital, Kunming, was the site of large protests last year against a planned petroleum refinery that were largely peaceful despite minor scuffles between demonstrators and police.

In the most recent unrest, the villagers said they went to the police station to seek the release of a few of the people who had been detained after the attack on the factory. It was police who first attacked the villagers, said another Baha resident.