The Chinese National Petroleum Corp. plans to build a chemical plant that would produce 550,000 tons of paraxylene (PX) in the nearby city of Anning, the BBC reported.
The chemical is used in the production of polyester film and fabrics for the textile industry.
Demonstrators expressed concern about the possibility of a chemical spill. A banner at the protest read "We want to survive, we want health, get PX out of Kunming."
State media said 200 people were at the protest, but bloggers estimated the crowd at 2,000.
Iranian woman stops the execution of son's killer
Rosie O'Donnell unveils nearly 50-pound weight loss