China has released from prison one of the country's most prominent dissidents, Xu Wenli.

Mr Xu was serving a 13-year sentence for subversion after he tried setting up an opposition political party.

United States officials and human rights activists say he has already left for the US, where a vocal campaign has called for his release since he was arrested in 1998.

XU WENLI: BIOGRAPHY

1943: born 1979: participated in Democracy Wall protest 1982: jailed for 12 years for 'counter-revolutionary' activity 1993: released from prison 1998: Sentenced to 13 years in jail for founding China Democracy Party (CDP) 2002: freed from prison, flies to United States

Xu Wenli: 'Godfather of dissent'

John Kamm, a US activist who has negotiated with China over human rights issues, said Mr Xu was being released on "medical parole" following a deterioration in his health.

The veteran dissident, who was first arrested for his part in the 1979 Democracy Wall movement, suffers from Hepatitis B.

Mr Kamm said the release was part of China's drive to improve relations with the US.

It comes in the wake of an official visit to China by US human rights diplomat Lorne Craner, who handed over a list of 298 people that Washington believes are being held as political prisoners.

As part of the visit, China agreed to invite United Nations experts on torture and religious freedom to visit the country in a bid to improve its human rights reputation.

But in an unrelated move, it signalled it was still not prepared to tolerate dissent by confirming it had detained Wang Bingzhang, another veteran dissident now based in the US, for "spying and terrorism".

Exile

Mr Xu, 59, was one of the founders of the China Democracy Party, which was set up in the hope of introducing multi-party democracy to China and challenging the Communist Party's grip on power.

Authorities in Beijing at first appeared to tolerate the threat, before cracking down and arresting all the leaders of the new party, which was branded an "illegal organisation".

Following Mr Xu's sentencing, his case has regularly been raised with Chinese authorities by human rights groups and foreign governments.

The BBC's Holly Williams in Beijing says the terms of his release are effectively exile.

She says Mr Xu will not be free to live in China or return for visits and will not be allowed to contact other members of the China Democracy Party, most of whom are still in prison.

Labour unrest

In a separate development, China has also released two leaders of a labour protest nine months after they were locked up without charge.

The two men, Pang Qingxiang and Wang Zhaoming, led around 30,000 laid-off workers in several weeks of protests against the government and the managers of their factory in Liaoyang City in the country's north-east.

Two other leaders of the March demonstrations, Yao Fuxin and Xiao Yunliang, remain in custody.