The incident occurred when a group of militants armed with knives and swords attacked people randomly at the crowded Kunming railway station in the capital of southwest China's Yunnan Province last night causing panic all around.
"It was an organised, premeditated violent terrorist attack," state-run Xinhua news agency reported today.
Police shot dead at least four attackers and are hunting for the rest, it said, adding that more than 10 "terrorist suspects" were involved in the attack.
TV footage showed police recovering swords carried by some of the members of the group.
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This is first time militants allegedly belonging to the banned East Turkistan Islamic Movement (ETIM), which is fighting for the independence of Muslim Uygur majority Xinjiang province, has carried out such a major attack outsides their province.
Last year three members of a family including two men tried to carry out an attack at the Forbidden city near the Tiananmen square here. Four people were killed in that attack.
For several years the province experienced ethnic unrest between native Muslim Uygurs and the Han national from the Chinese mainland for the past few years over the increasing settlements of Hans in the region.
Currently the investigation to the case is underway.
Injured people have been rushed to hospital for emergency treatment. According to Kunming railway bureau, train departures have not been affected.
The authorities vowed to crack down on violent terrorist activities in all forms and guarantee the safety of people's lives and property, Xinhua said.