Authorities in Pakistan-administered Kashmir on Thursday cleared a Chinese man accused of committing blasphemy by desecrating a Koran, officials said.

Lee Ping, the administration manager of a Chinese consortium building a major hydropower project, was accused on May 17 of throwing the Islamic holy book on the ground, prompting hundreds of workers to attack his company offices.

Blasphemy is a highly sensitive issue in Pakistan, where 97 percent of the 180 million population are Muslims. Even unproven allegations can spark a violent and sometimes deadly public response.

Police took Lee into protective custody at a secret location after protests erupted at the company offices near Muzaffarabad, the main town of the disputed Himalayan region, but on Thursday he was cleared.

"Police investigation has cleared the Chinese worker of desecration of Koran charges," cabinet minister Matloob Inqalabi told reporters.

"No such incident of desecration of Koran happened there," he said, adding that action would be taken against the people involved in the violence.

"Police has identified 35 people who were involved in violence at the project on that day. Legal action will be taken against them," said Inqalabi.

But he refused to reveal the whereabouts of the Chinese worker or what would happen to him.

Lee was accused of throwing a copy of the Koran on the ground while moving the belongings of a Pakistani doctor after he had refused to vacate his room for relocation.

Rights campaigners say Pakistan's tough blasphemy laws, which include the death penalty, are often abused to settle personal scores and should be reformed.

In March more than 3,000 furious Muslims rampaged through the Joseph Colony area of Lahore, looting property and burning buildings after a Christian was accused of blasphemy.

Pakistan and China have close relations and Chinese firms and engineers are working in development and energy projects across the country.