Police have killed two people in a clash with villagers in southwestern China in the latest outburst of social unrest in the run-up to the Beijing Olympics, an activist group and state media said on Sunday.

The clash occurred Saturday morning in remote Yunnan province when more than 1,000 local rubber growers protested in a dispute over the sale of their crops, the Hong Kong Centre for Human Rights and Democracy said.

Police called in to quell the protest in Menglian county then battled with the rubber planters, shooting two dead and seriously injuring a third, said the centre, which frequently issues reports about unrest in China.

It said about 20 people had been arrested.

Local police declined comment when contacted by AFP by phone.

China's government has expressed increasing concern about mounting social tension that could mar the country's hosting of the August 8-24 Olympics, which Communist leaders are using to project an image of national unity and harmony.

More than 200 people, mostly rubber farmers, continued to gather at the site in the pre-dawn hours on Sunday morning, state-run Xinhua news agency said.

The Hong Kong rights centre said the farmers were angry about being forced to sell all their rubber plant crop to local government departments at prices 40 percent lower than they could obtain on the open market.

It said the mood in the area remained tense.

Xinhua said provincial authorities had been sent to the scene of the unrest with instructions from top Yunnan Communist Party official Bai Enpei to defuse the dispute.

It quoted Bai saying the team should listen "attentively to the complaints and appeal of local residents, making great efforts to rescue the injured people, and consoling family members of the dead to prevent the matter from escalating."

More than 100 people in southern China's Guangdong province attacked police officers on Thursday over the suspected beating to death of a motorcycle driver by security guards, state media reported earlier.

China recently ordered local governments to go all-out to solve sensitive social disputes at local level to prevent protests spreading to Beijing.