In Dapu, a rain-drenched rural outpost in the heart of China's grain basket, a farmer grows crops that she wouldn't dare to eat.

A state-backed chemicals factory next to her farm dumps wastewater directly into the local irrigation pond, she says, and turns it a florescent blue reminiscent of antifreeze. After walking around in the rice paddies, some farmers here have developed unexplained blisters on their feet.

"Nothing...