YANGON (AFP) - A two-year-old girl was killed and two children injured on Saturday (Oct 1) after their village was hit by heavy artillery in Myanmar's rebel-held north, an activist and local resident said, the latest violence to threaten the new government's peace bid.

The shots were reportedly fired in Pu Wang village in northern Shan state, an area bordering China where ethnic minority rebels are locked in a long-running battle with the Myanmar army.

Sporadic clashes in the region have displaced tens of thousands of people and dampened enthusiasm for a peace push driven by Myanmar's newly elected leader Aung San Suu Kyi.

"It happened in the morning today when these three children were playing. Six powerful shots were fired into the village," Ying Sau, a pastor in the ethnic Kachin village, told AFP.

His nephew's two-year-old daughter was killed, while two children, ages 5 and 6, were injured and taken across the border to a hospital in China, he said.

Khon Ja, an activist from the Kachin Peace Network, also reported the death and posted photos on Facebook of the injured children receiving treatment in China's Yunnan province.

Both blamed the heavy firing on the Myanmar army, which AFP could not reach for comment.

Myanmar's restive borderlands have been rocked by several outbreaks of violence in recent weeks, only a month after Suu Kyi launched a major peace dialogue aimed at ending the simmering insurgencies.

Her summit brought many key players to the table for early peace talks, though several powerful ethnic militias actively clashing with state troops did not attend.

The US Embassy in Yangon said in a statement Friday it was "deeply concerned" by ongoing fighting in Kachin, a state just north of the town where the children were hit Saturday.

"The increase in conflict in this area has led to suffering and dislocation of local populations. It also has the potential to undermine the progress and goodwill generated by the recent Union Peace Conference," the embassy said.

Around 100,000 people are currently displaced in Shan and Kachin states due to the violence, according to UN figures.

More than a dozen ethnic minority groups have waged insurgencies against the Myanmar army since the country won independence from Britain in 1948.

Suu Kyi, whose new civilian government ends five decades of military rule, is determined to end the fighting.

But the conflicts are complex and experts say the peace process will take years.