Demonstrators in the city north of Shanghai trashed local government offices and roughed up various officials in a move to block the pipeline, which they claimed would carry pollutants from a paper mill into the sea.
Japan's Asahi Shimbun newspaper said the protest led to the ransacking of city offices and the discovery of wine bottles and other items the demonstrators claimed were evidence of payoffs from the Japanese mill owners.
The operators of the Oji Paper mill told the newspaper the plant continued to run and that they were unaware of any problems with their waste water.
"We have not received any direct complaints," a company official said. "The waste water is treated and we are not aware of any pollution."
The BBC said the protest was the latest in a growing opposition to development considered to be threats to the environment in China. Political analysts said the protests were also a reflection of pending leadership changes within the Communist Party.