REUTERS - Tension between Myanmar government troops and an armed ethnic group has sparked an exodus of thousands of people into China from northeastern Myanmar, activists and witnesses said on Wednesday.

Large groups crossed the border on Tuesday from Kokang in Myanmar’s Shan State, said a Reuters witness in Nansan, a town in China’s southern Yunnan province. About 10,000 people have fled Kokang since Aug. 8, China’s Chongqing Evening News reported.

The Washington-based U.S. Campaign for Burma said tensions first flared on Aug. 8 when the Myanmar army deployed hundreds of troops in Kokang, a mostly ethnic Chinese region where rebels have observed a two-decade-old ceasefire with the government.

The rebels issued a statement via the Myanmar Peace and Democracy Front (MPDF), a newly formed alliance of four ethnic groups, saying the army was pressuring its fighters to join a border security force under the government’s control ahead of Myanmar’s elections planned for 2010.

"Tensions are extremely high," the MPDF said in the statement issued via the U.S. Campaign for Burma. "With anticipation of resurgence of war, tens of thousands of ethnic people have fled."

A Nansan shop owner, Xie Feifei, said refugees were being housed by the local government in disused or half-built homes. He did not know of any who had been sent back.

"We haven’t had anything like this happen for about 10 years," Xie told Reuters by telephone on Wednesday. "Many people have been coming across the border but it’s fallen off now," Xie added. "I think everyone who wants to escape has already."

A local government official in Nansan, however, told Reuters that no refugees had entered the town.

The U.S. Campaign for Burma said the mobilisation of troops was a move by the junta to force ethnic groups to form political parties to contest next year’s election, the first in Myanmar, formerly known as Burma, in 20 years.

Many ethnic groups feel they have nothing to gain from running in the polls and suspect the junta is trying to neutralise their threat by bringing rebel fighters into the army under the command of the Yangon regime.

The MPDF and Chinese media reports said troops had attacked a factory used by the ethnic groups to service and repair weapons on suspicion it was being used to produce illicit drugs. They said a standoff ensued, prompting thousands to flee the area.

Myanmar, which has been ruled by the military since a 1962 coup, is home to more than 100 different ethnic groups.

Many armed groups observe a ceasefire with the government but several have resisted. Ethnic insurgencies have continued, in many cases fuelled by the opium trade.