Sunday's blast hit a crumbling light-industrial area after a fugitive wanted for manufacturing and selling illegal explosives had asked relatives to dispose of the material, Ningbo police said in a statement.
The 33-year-old suspect surnamed Shan, who has been wanted by police in the northeastern province of Liaoning since late October, was arrested on Monday night.
The police did not indicate why the suspect had been making explosives.
The explosion, which killed two and injured at least 19, happened when his relatives were dismantling the substance, which contained aluminium powder and barium nitrate, the statement said.
The material had been shipped from Liaoning to Ningbo before it was stocked at the location of the blast.
The local government had said Monday that a septic tank was at the epicentre of the blast.
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