A Chinese weekly newspaper at the centre of rare public protests against government censorship will publish as usual on Thursday, a senior reporter said, following reports of a deal to end the row.

"The newspaper will publish as normal on Thursday," the Southern Weekly staff member, who declined to be named, told AFP after reports said journalists had reached an agreement with the authorities.

The row at the popular liberal paper, which had an article urging greater rights protection replaced by one praising the ruling Communist Party, has seen demonstrators mass outside its headquarters in the southern city of Guangzhou.

Protesters gathered for a third day Wednesday holding a large banner reading "Democratic China" and scuffled with a group of pro-government rivals, who threw leaves and twigs at them and played patriotic songs.

Public challenges to the authorities on issues of press freedom are rare in China and the affair is seen as a test for the new party leadership under Xi Jinping.

"It was a case of internal politics," the reporter said. "I am writing an article as we speak, it's about Alexis de Tocqueville's 'The Old Regime and the Revolution'," referring to the French thinker's analysis of the events of 1789.

The South China Morning Post said Guangdong province's communist chief Hu Chunhua, a rising star in the party, had stepped in to mediate in the row.

"There's a verbal agreement in place. Basically it's back to normal, but we'll see how the two sides react to each other in the future," Dow Jones Newswires quoted a Southern Weekly editor as saying.

Under the deal, journalists involved in the protests would not be punished and direct pre-publication interference by propaganda authorities would stop, Dow Jones said.

It was a "small victory" in a long-running struggle between journalists and censors in China, said David Bandurski, a Chinese media researcher at Hong Kong University.

"It's a victory in the most concrete terms, it's a turn back to a normalcy of censorship that journalists have become accustomed to," he said, adding that the high-profile stand-off could persuade officials not to further tighten controls.

Protestors numbered in the hundreds on Monday and the campaign quickly won support online, including from celebrities with millions of followers on China's Twitter-like Weibo.

Beijing's propaganda department denied reports that the row was spreading with the resignation of the publisher of the Beijing News, part-owned by the Southern Weekly's owner, over a directive to reprint a dismissive editorial on the issue.

The commentary, originally in the state-run Global Times, said that an "absolutely free media" was unlikely in the country, adding: "Media reform should be in line with China's politics."

Media and online posts said Beijing News publisher Dai Zigeng told a propaganda official he was quitting after being threatened with the paper's closure if it did not print the article, leaving newsroom staff in tears.

But a Beijing Propaganda Bureau official told AFP: "Mr Dai is still at work as usual," and a member of the company staff denied he had resigned.

Extracts of the commentary appeared on page 20 in Wednesday's edition, attributed to the Global Times. But it also published an article on its website entitled "Southern Porridge", which sounds like "Southern Weekly" in Mandarin.

"A bubbling hot bowl of porridge from southern soil seems to have a brave heart," it said.

All Chinese media organisations receive instructions from government propaganda departments, which act to suppress news seen as "negative" by the ruling party. But the censorship of Southern Weekly was seen as unusually direct.

The paper won a reputation for investigations, but has also suffered periodic purges. Its editor was demoted in 2009 after the White House gave it an exclusive interview with Barack Obama, while its news director was ordered to resign in 2011.

China came 174th in a press freedom ranking of 179 countries issued by the advocacy group Reporters Without Borders last year, falling three places.