The man in Laixi city, Shandong Province, stabbed the driver of the truck and drove it away with two children aged four and six.
Police tracked down the suspect, surnamed Yan, in Pingdu City and shot him as he threatened to stab the children, state-run Xinhua reported.
The children were rescued unharmed.
Yan, 33, has a long criminal record, including cases of assault and disturbing the peace, the report said.
China has seen a number of attacks against children in recent years, including incidents in 2010 that left 17 people dead -- 15 of them children -- and wounded more than 80.
A suspect was shot dead on June 10 after attempting to take control of a primary school in central China's Hubei Province.