An American factory boss held hostage for nearly a week over a labour dispute that has highlighted employer-worker tensions in the country has been freed, a union official said.

Chip Starnes, who arrived from the US-based Specialty Medical Supplies to lay off 30 workers, was barred last Friday by the remaining 100 from leaving the premises until a resolution is reached.

"He has left the factory," Chu Lixiang, an official with a district labour union in the north of Beijing, told AFP, saying the dispute had been resolved. She did not provide any details.

Starnes had lived in his office while workers guarded the premises and negotiations proceeded, involving legal counsel on his side and the local Huairou district labour union.

Starnes could not be reached for comment on Thursday, but he had earlier given AFP details of his ordeal.

He said by telephone that he had access to food, water, a cot and a shower, and that local authorities had checked on his safety but otherwise declined to set him free.

Incidents of workers detaining their employers are not frequently reported in China, but labour disputes are common.

Many workers fear bosses will shut operations and skip town without paying wages, though it was unclear if that concern figured in this case.

The nature of the disagreement itself has remained under dispute.

Starnes had told AFP the conflict arose after the 100 employees asked to be laid off and receive severance packages like their 30 colleagues were given.

For long-time workers at the plant, which opened 10 years ago, the compensation could amount to a year's wages.

On Wednesday Starnes said he had decided to offer such compensation, but that other issues remain to be sorted out, from payment technicalities to the fate of factory machinery.

But the state news agency Xinhua, citing the district government, reported on Tuesday that the workers were demanding two months' unpaid wages.