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From Reuters via PlanetArk.org (Beijing officials testing towels at a small commodities market, via thebeijingnews.com):

Provincial officials in northern China have closed nine factories and seized about 1 million towels that had been dyed using banned toxic chemicals, local media reported on Wednesday.

Authorities in Hebei province had confiscated 40 tonnes of industrial dye following state television reports last month on what it said was a widespread problem, the Beijing News said.

The cheap towels sold nationwide contained cancer-causing Benzene compounds such as Benzidine, state television said at the time. [Full Text]

– The Beijing News story (Chinese)