The accident happened at around 7 AM (local time) when the bus went up in flames near a furniture mall in Helan County's Yinchuan city in Ningxia Hui Autonomous Region.
Police arrested Ma Yongping who was suspected to have set the bus on fire. He was caught with bunt clothes.
While there is no word yet on why he set the bus on fire, China has witnessed such incidents in the past with disgruntled people with grievances carried fuel into the buses and set them on fire.
All the 32 injured, aged between 20 and 65, are being treated at Ningxia Medical University General Hospital in Yinchuan, capital of Ningxia Hui Autonomous Region, said Ma Kai, vice mayor of Yinchuan at a press conference.
Six of the injured are in serious condition, including one critical, said Jia Shaobing, deputy president of the hospital. The condition of others are stable.
"I was sitting at the front of the bus when suddenly people started screaming 'Fire! Bus on Fire!'," Hu Yuexiang, recalled.
"When I turned around, the flames were racing toward me and quickly my shoes were on fire. I thought the bus was about to explode, and I was going to die," Hu said.
Hu said he wanted to film the fire, but the bus quickly "turned into a skeleton."
The bus driver sustained minor burns in the incident and is assisting police with the investigation.
The 84-seater bus had about 40 people on board when it caught fire. The bus, which was bound for Yinchuan Railway Station, belongs to state-owned Yinchuan Public Transport Co Ltd.
The company has begun a safety check of all its vehicles following the incident, the report said.
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