The probe was launched following the publication Monday of an investigative report by Southern Metropolis, a state-run daily newspaper in Guangdong.

The report said the children were 'sold like cabbages' by their parents to gangs who then sold them off to employment agencies or directly to factories hundreds of kilometres from their homes.

Most of the children were from Liangshan, a poor farming town in southwestern Sichuan province, and ended up working in factories in Guangdong's Dongguan city as well as Shenzhen and Huizhou, the report said.

The official China Daily newspaper on Wednesday quoted Dongguan spokesman Wang Yongquan as saying that the city's 'labour enforcement and trade union will investigate all companies in the town, the labor market and agencies'.

He told the newspaper that police had already rescued more than 100 youngsters from rented houses and arrested several people.

The official Xinhua News Agency said on Thursday the Dongguan government had investigated more than 3,000 companies involving 450,000 individuals in the city, but found that only a handful of small companies and workshops had hired temporary workers who might have been children.

'The government has a very clear cut attitude towards the illegal use of child laborers, and we will resolutely crack down on it. When we find one child laborer, that business will be investigated,' Ms Li Xiaomei, deputy mayor of Donguan City, was quoted as saying.

The government would also fine the companies as much as 50,000 yuan (S$9,786) if caught, he said.

The probe comes less than a year after Chinese media uncovered that children as young as 8 years were abducted or recruited from bus and train stations with false promises of well-paying jobs and sold to brick kilns in central Shanxi province for about US$65.

The victims were forced to work almost around the clock, beaten, and deprived of pay, nourishment and basic medical care.

The Southern Metropolis said the children from Liangshan earned as little as 2.5 yuan per hour and were forced to work long hours.

The Guangzhou Daily described following police on Tuesday in Dongguan as they questioned young factory workers. One girl named Luo Siqi from Liangshan said she made 4 yuan per hour, and she initially claimed to have come to Dongguan on her own.

When told by police that the money she thought she was sending home could not have reached her family, she broke down in tears, the paper said.

'My father and mother sold me; I don't want to go back,' Luo was quoted as saying. -- AP