By Louisa Lim BBC correspondent in Beijing

The Chinese Foreign Ministry issued a statement condemning the incident as "extremely odious" and illegal.

Prostitution is increasingly common in China

The ministry statement urged Japan to teach its citizens in China to abide by Chinese law and said the case was being investigated.

Internet bulletin boards in China have been buzzing with popular outrage over the alleged three-day orgy involving 380 Japanese males - some as young as 16 - and 500 local prostitutes.

Many people said they believed the timing of the orgy - on the anniversary of Japan's invasion of north-east China in 1931 - was designed to humiliate China.

Lurid reports in the official media have also served to whip up popular indignation against Japan.

The authorities have shut down the hotel where the party was reportedly held - the Zhuhai International Convention Center Hotel. Police said they had made several arrests but they gave no details.

Wartime court case

Although Japan is now China's biggest trading partner, many Chinese still harbour deep feelings of resentment towards it over its failure to fully atone for its wartime atrocities.

These were brought to the surface last month after one Chinese worker was killed and more than forty injured when they unearthed drums of mustard gas left behind by the Japanese in north-east China.

A Japanese court on Monday awarded more than $1.5 million in compensation for Chinese victims of such attacks.