The fire broke out at 11 p.m. on Sunday in Zhongshan, which abuts the former Portuguese colony of Macau west of Hong Kong, the official Xinhua News Agency said.
It said the cause was under investigation.
"This small bar is an illegal business inside a restaurant," said an official in the propaganda office of Zhongshan's Communist Party branch.
"The bar owner has been detained for investigation," said the official, who would not give his name.
China Central Television showed pictures of firefighters wading through the charred ruins of the bar. Stools were burned and overturned, and much of the ceiling had collapsed.
Police and fire officials in Zhongshan refused to release any information.
Zhongshan is part of the booming Pearl River Delta region around Hong Kong whose factories form the heart of China's export-driven manufacturing industries.
Witnesses quoted by Hong Kong Cable TV said there was an explosion before the fire. Police were shown cordoning off the building and nearby roads as debris was cleaned up.
It was the second time in five years that China has suffered a deadly Christmas Day fire.
In 2000, a fire blamed on a welding accident tore through a disco in the central city of Luoyang, killing 309 people who were celebrating the holiday.
A court sentenced 23 people held responsible for the disaster to up to 13 years in prison.
China has suffered a string of such fires in shopping malls, movie theaters and other public places despite repeated official promises to improve safety.
Earlier this month, a fire blamed on an electrical problem at a hospital in the northeastern city of Liaoyuan killed 39 people and forced patients to jump from fourth-floor windows.