India's foreign minister said on Wednesday that two traders who claimed they were abused and detained during a business dispute in China had been freed and were travelling to Shanghai.

The assurance came after the two men spoke to Indian television channels by telephone from the Chinese city of Yiwu, saying they had no access to fresh water in a hotel room where they were under police custody.

The two men said they had been detained since mid-December by Chinese businessmen and "tortured like animals" before being handed over to the police a few days ago.

"Let us not blow it out of proportion," Foreign Minister S.M. Krishna told reporters in New Delhi.

"The larger perspective of the safety of these two Indian nationals... is now practically achieved and now in two hours' time they will be in Shanghai," he said.

Krishna hinted that the two may not be able to leave China immediately because of the unresolved business dispute.

"Let us not forget there is a civil litigation and we will have to make an assessment of that also," the foreign minister added.

The case has triggered an official complaint from the Indian government after one of its diplomats was manhandled during a court case in Yiwu over the weekend as he was trying to secure the release of the two men.

Shyam Sundar Agarwal and Deepak Raheja told NDTV that they were workers of a trader accused by Chinese businessmen of failing to honour bills in Yiwu, which is home to the world's largest wholesale market for consumer goods.

Raheja told NDTV that "the situation is getting from bad to worse and our lives are in terrible danger".

"If our government cannot do anything in 24 hours then I will commit suicide. We don't have anything in our hotel room for eating or drinking," he said earlier Wednesday.

A Chinese spokesman in Beijing earlier Wednesday confirmed the two Indians were in a hotel in Yiwu, adding they were being given police security.

"China always attaches great importance to maintaining the rights and interests of foreign businessmen in China," Hong Lei said.

India has advised its nationals not to do business in Yiwu due to tensions over the case, which threatens to create friction between the two uneasy Asian neighbours.

New Delhi's foreign ministry on Monday summoned Zhang Yue, Beijing's deputy chief of mission in New Delhi, to complain about the diplomat being manhandled in court.

The Chinese spokesman in Beijing on Wednesday denied any mistreatment had occurred.

Relations between China and India have often been fraught, principally over disputed borders and the presence of the exiled Tibetan spiritual leader, the Dalai Lama, on Indian soil.