Authorities in central China plan to move 15,000 residents away from smelting plants in the area after nearly 1,000 children tested positive for lead poisoning, state media said.
Zhao Suping, mayor of Jiyuan city in Henan province, said the mass relocation would cost one billion yuan ($A158.66 million), the official Xinhua news agency reported.
Zhao said 70 per cent of the cost would be borne by the local government and the smelters responsible for the lead poisoning, while local residents would foot the rest of the bill, according to Xinhua.
State press reported on Tuesday that health authorities in Jiyuan found that 968 children had excessive levels of lead in their blood after tests on more than 2,700 kids under the age of 14.
The scandal was just the latest in a string of recent lead poisoning incidents around China that have exposed the dark side of the country's industrial boom of recent decades.
Excessive levels of lead are considered hazardous, particularly to children, who can experience stunted growth and even mental retardation.
Xinhua called Jiyuan the country's biggest lead-smelting centre.
The report said the relocation site for the affected residents was still being determined.
The Jiyuan government suspended production at 32 of the 35 electrolytic lead plants in the area, it added.