Police officers were already at the factory when the last three victims were killed. Fan was detained shortly after and his weapons were seized.
A security guard at the factory who did not want to be identified said on Sunday that police arrived at the plant after the first victim, Zhang, was discovered dead.
Witnesses said they saw vehicles from a funeral home in front of the factory at midnight and saw bodies being carried away. There were other people injured, they said.
Shanghai Changhai Hospital, where police said the wounded were taken, would not comment on Sunday.
However, a source at the hospital told China Daily that five people had been admitted and were receiving treatment. The source was unable to disclose their conditions, but added that the naval base sentry had died at the scene.
Authorities said they are continuing to investigate the killings.
The Guangyu Fine Chemical factory was established in 2001, according to registration information from the market watchdog.
Li, the factory boss, and his family owned at least four businesses in Shanghai and Jiangsu province. They were involved in several lawsuits involving loan disputes last year.
In March 2017, a Shanghai court ordered Li's family to return a 1.7 million yuan ($277,220) loan and interest of nearly 20,000 yuan to Standard Chartered after the bank launched legal action.
In September, a court in Hangzhou, Zhejiang province, ordered the family to pay 1.62 million yuan, including capital, interest and attorney fees, after a private lending dispute.
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