Thousands of people demonstrating over fears of pollution from a sewage pipeline at a paper factory in east China clashed with police Saturday, the latest in a series of environmental protests.

The protestors overturned two cars and ransacked local government offices in the coastal city of Qidong, near Shanghai, an AFP photographer said.

Demonstrators seized bottles of liquor and wine from the offices along with cartons of cigarettes, items which Chinese officials frequently receive as bribes, according to messages on Sina Weibo, China's Twitter-like service.

Thousands of people had gathered in a square in front of the government offices and in adjacent streets Saturday morning, with armed police arriving at the scene at 9:00 am, AFP witnessed.

But the crowds dispersed after local authorities used television, radio, the Internet and text message to announce that the waste water pipeline project at the mill, which belongs to Japanese company Oji Paper, would be "permanently cancelled".

Oji Paper denied it was causing pollution and said closing the 110 kilometre (70-mile) pipeline would not affect operations at the plant, located in Nantong, Jiji Press reported.

"We don't release 'polluted water' as we are currently releasing water after purification that meets the local environmental standards," the news agency quoted a company public relations official as saying.

Protests against environmental degradation have increased in China, where three decades of rapid and unfettered industrial expansion have taken their toll.

The sewage pipe from the paper mill would have discharged into the sea in the port of Lusi, one of four fishing harbours in Qidong, one protestor, who for safety reasons only gave her name as Qin, told AFP.

Discharges were set to climb to 150,000 tonnes of sewage a day when the mill was fully operational, according to residents quoted Friday by the state-run Global Times newspaper.

Qin said there had been about 50,000 demonstrators but that "almost everyone left after the government's promise to stop the project".

A Nantong official, who gave his name as Chen, denied rumours that an 18-year-old man had been beaten to death by police.

"It must be a rumour, if true we would know," Chen told AFP by phone.

A photograph posted on the Internet showed a man, identified online as Sun Jianhua, the party secretary of the city, protected by police. He had apparently been stripped to the waist by protesters.

One microblogger using the name Qidong Longhuisheng estimated numbers at 100,000.

"There are people everywhere, on walls, cars, rooftops, in streets," said another Internet user writing under the name Jiaojiaotaotailang earlier in the day.

"The air is filled with the smell of alcohol, and there are sounds of breaking glass."

Searches including "Qidong" were blocked Saturday on Sina Weibo, which has more than 250 million subscribers.

The move to close the paper mill's waste water pipeline comes after Chinese authorities this month scrapped plans to build a $1.6 billion metals plant in the southwest province of Sichuan following violent protests by local residents concerned about the planned factory's environmental impact.

Similar incidents are reported regularly around China, many over environmental concerns that locals say are linked to corruption, but authorities typically quash the protests and push ahead with the projects.

The Chinese government warned Friday that security would be tightened throughout the country ahead of a major Communist Party Congress this autumn, which should see a new generation of leaders take over the reins of power.