Residents of Guangdong province's Dongzhou village, northeast of Hong Kong, have said authorities killed up to 20 people Tuesday when they fired on demonstrators protesting allegedly inadequate payments for land taken for a power plant.
The province has formed a special group to investigate the incident, the official Xinhua New Agency said.
It quoted the city government as saying that hundreds of villagers "incited by a few instigators" had violently attacked a wind power plant on Tuesday and assaulted police in a "serious violation of the law."
The villagers used knives, steel spears, sticks, dynamite, petroleum bombs and fishing detonators to attack the plant, Xinhua said.
Police used tear gas to disperse the crowd and arrested two insurgents, it said.
However, the attackers regrouped, and when it became dark they began throwing explosives at police, it said.
"Police were forced to open fire in alarm. In the chaos, three villagers died, eight were injured with three of them fatally injured," Xinhua said.
The violence drew renewed attention to rising tensions in rural China over land seizures for projects such as factories, power plants and shopping malls.
Xinhua said the villagers were unhappy over land requisition and were demanding more compensation.
Farmers often say they're paid too little. Some accuse officials of stealing compensation money.
Late Saturday, villagers said a tense standoff continued around Dongzhou as thousands of troops patrolled the perimeter, and frightened villagers either remained in their homes or argued with police over relatives' bodies.
"Many police are surrounding the village today," said one woman, who refused to give her name for fear of official retaliation. "We are not permitted to leave the village."
Hong Kong's South China Morning Post newspaper reported that Dongzhou villagers said authorities were trying to cover up the killings by offering families money for the bodies.
"They offered us a sum but said we would have to give up the body," an unidentified relative of one slain villager, 31-year-old Wei Jin, was quoted as saying. "We are not going to agree."
Police with villagers' photos were trying to find people linked to the protest, the newspaper said, citing residents.
A village woman told The Associated Press by telephone that police were holding some bodies, refusing relatives' pleas to return them.
The woman, who refused to give her name for fear of retribution, said 10-20 people were dead as a result of Tuesday's violence.
A village man, who gave only his surname, Chong, put the number at 15-20. He said many of the victims' families had gone to a local police station seeking compensation, but officers had turned them back.
Chong said dozens of people were still missing, but didn't elaborate.
Telephone calls to the local police station went unanswered.
Incidents like the one in Dongzhou have alarmed communist leaders, who are promising to spend more to raise living standards in the poor countryside, home to about 800 million people.
By the government's count, China had more than 70,000 cases of rural unrest last year. Protests are growing more violent, with injuries on both sides.
A 14-year-old Dongzhou girl said a local official on Friday called the shootings "a misunderstanding."
"He said (he) hoped it wouldn't become a big issue," the girl said by phone. "This is not a misunderstanding. I am afraid. I haven't been to school in days."
"Come save us," she said.
Like most of the villagers, she didn't want to be identified, fearing official retaliation.
President Hu Jintao's government has made a priority of easing rural poverty and trying to spread prosperity to areas left behind by China's 25-year economic boom. But in many areas, families still live on the equivalent of a few hundred dollars a year.