Standing on the quay, Mrs Wu jokes that there are more pigs than fish in Jiapingtang river. But she isn't smiling. The 48-year-old fisherwoman, who lives in Xinfeng, a sleepy country village, recalls splashing about in the river as a child on sticky summer days. Today it is inky black, covered in a slick of lime green algae, and it smells like a blocked drain. "Look at the water, who would dare to jump in?" says Wu. At her feet a dead piglet bobs on the river's surface, bouncing against the shore.

This area of Zhejiang province, 60 miles from Shanghai, has become the subject of public and media scrutiny after more than 16,000 dead pigs were found in tributaries of the city's river, the Huangpu, a source of tapwater. As clean-up efforts wind down, mystery surrounds the cause of the pigs' demise and their appearance in the river.

As public concerns about water safety grow, what has emerged is a picture of a rural region marred by catastrophic environmental damage, inherent malpractice and a black market meat trade.

The first pigs were spotted on 7 March and were soon traced to Jiaxing through tags in their ears. Early tests show they carry porcine circovirus, a common disease among hogs not known to be infectious to humans. Shanghai's municipal water department maintains that the water meets the national standard, but hasn't said much more.

Official opacity has only embittered a public who are increasingly vocal about environmental gripes. "A sluggish response, a lack of disclosure of official data and muddled information has done nothing to quell our doubts," says Weibo (a microblog) user diamondyangxiaowu. "In this environmental crisis China's rivers are facing, there's no time to dally."

For Mrs Wu and her community it may be too late. Over the last decade she has witnessed the near collapse of her livelihood as pig farming in this region has prospered. Her house, a one-story breezeblock box, sits next to Jiapingtang river. Ten wooden flat-bottomed boats with makeshift roofs of plastic and tarpaulin are tethered to the quay. It is on these boats that Wu and her fellow villagers head out on to Jiaxing's network of waterways, though these days they are more likely to do clear-up work for local authorities than fish. A fisherman doing cleaning work from 7am-5pm seven days a week can earn up to 10,000 yuan (£1,000) a year, with an extra 150 yuan (£10.50) a day for carcasses.

"A decade ago this village was prosperous and we lived a comfortable life," says Wu. She is dressed in a leopard-print padded jacket and black wellington boots – her work gear. "We paid for our houses by ourselves, sent our children to good schools and supported the elderly. Now things are a mess."

The pig industry blossomed in Jiaxing in the 1980s. Last year China produced and consumed half the world's pork, about 50m tonnes. One village, Zhulin, which is at the centre of the scandal, earned the nickname "to Hong Kong" for its steady supply of meat to the territory. Most families in Zhulin keep pigs; the village's ample fields, which in March are covered in yellow rapeseed flowers, yield hundreds of squat concrete barns holding dozens of squealing hogs.

This upsurge is one explanation for the carcasses, though officials are reluctant to say so. "We have seven dead pig processing plants. Each is 100 cubic metres large and can gather thousands of dead pigs," says Chen Yuanhua, party secretary for Zhulin. According to a 2011 report by Zhejiang province's environmental protection bureau, 7.7m pigs are raised in Jiaxing. With a mortality rate of 2-4%, up to 300,000 carcasses need to be disposed of each year. "We have some difficulties with the growing number of pig farms and a lack of funding and land to build more plants," Chen says. He concedes that some farmers throw dead pigs into the rivers "for convenience".

There could be another, murkier reason behind the pig manifestation. On 23 March, state-run China Central Television (CCTV) exposed how illegally processed pigs have been making their way into markets for years. While farmers are required by law to send animals that die of disease or natural causes to processing pits, black market dealers intercept the chain, butchering the hogs to sell as pork. Last November a Jiaxing court sentenced three such butchers to life in prison. The offenders had processed 77,000 carcasses, making almost 9m yuan (£1m) profit.

Because of the crackdown, black market traders have stopped buying the dead stock and farmers have resorted to dumping. Pan Huimin, a Zhulin resident who is in custody on suspicion of dealing in dead pigs told CCTV there was "a 100%" correlation between his arrest and the dead pigs incident.

News of this illicit meat trade doesn't faze the residents of the Jingxiang fishing commune, a few miles from Zhulin. The trade is considered not ideal, but normal. Inside the common room, bare lightbulbs illuminate a poster of Mao Zedong on the wall, as a group of elderly residents play mahjong in the corner. There used to be 250 fishermen here, but because of the rampant pollution the 60 left mainly clean rivers.

One resident, Mr Li, says his community has been complaining since 2003. "Things changed in the early 2000s when more pig farms turned up and their waste water, manure and carcasses poured into the river," he says. "Though we've been petitioning for years, rather than an improvement the situation has deteriorated. The local government's slow responses always pass the buck."

Such negligence exacerbates the serious water quality issues China faces. Greenpeace East Asia estimates that 320m people in the country are without access to clean drinking water. A 2011 study by the ministry of environmental protection found that of 118 cities, 64 had "seriously contaminated" groundwater supplies.

Yang Hanchun, of the Chinese Association of Animal Science and Veterinary Medicine, says China has comprehensive laws for the protection of the environment against animal husbandry, but authorities often fail to uphold them.

Protests quashed

Over the weeks since the discovery of 16,000 pig carcasses in Shanghai's water supply, authorities have consistently worked to quell public outcry, reiterating that drinking water is safe. While there have been reports and discussion of the incident in state media and on the country's rollicking microblog network, which is curtailed by censors, attempts to organise protests have been swiftly quashed.

Pan Ting, an outspoken Shanghainese poet, was detained for questioning by police after she posted a call for a mass walk along the Huangpu, the city's central river, on her Sina Weibo account. The post, which went out to her 50,000 followers on 14 March, called for a "pure stroll" without banners or slogans. Soon afterwards she was asked to "drink tea" with the police – an idiom used to describe interrogations. On her other Weibo account she later posted: "I feel very disappointed. You even shut out a voice concerned about local pollution and your own lives. I will see how long you will shut me out. At least uncle tea said to me: I understand where you are coming from."

As news about Pan's detention spread through Weibo, prominent users voiced support. "Just because a young woman said a few honest words about the dead pig issue, she was detained, banned and forced to hand in all of her communication devices," said Li Minsheng, a well-known writer. "She was even 'missing' for three hours! Her only request was: 'Please do not come ring my doorbell early in the morning or in the middle of the night to scare my mum.' As a big city that has hosted the World Expo, why can't Shanghai tolerate a poet? What law has Pan Ting violated? Please respond to the whole nation, Shanghai!"

Additional reporting: Xia Keyu.