Democracy Party leader Xu Wenli is serving 13 years

China's state news agency Xinhua said Wang Ce was released early for "good behaviour and obedience in jail".

Mr Wang's sister told the AFP news agency that he had already left the country for Spain, where he lived for six years in the 1990s.

His arrest in 1998 coincided with a government campaign to suppress any dissident political activity.

Fateful donation

Wang Ce, who headed a coalition of exile groups, Alliance for a Democratic China - entered the country illegally in late 1998.

He was arrested after meeting a leading activist, Wang Youcai, who was also jailed later.

Wang Ce was accused of subversion after giving Wang Youcai $1,000.

China has ignored international criticism

His relatives have maintained that the money was to support Wang Ce's unemployed friend, not to fund his political activities.

But the prosecution argued that the two were political allies - and Wang Ce had endangered China state security.

The arrests came as part of a Chinese clampdown on the illegal China Democracy Party - leading to long prison terms for Wang Youcai and CDP leader Xu Wenli.

Correspondents say it is highly unusual for the Chinese state media to report the release of dissidents.