Blind Chinese dissident Chen Guangcheng is holed up in the US embassy in Beijing but is not seeking asylum, another rights activist said Monday as the spectre of a China-US diplomatic wrangle loomed.

Hu Jia, who was detained over the weekend for questioning in the affair, also said Chinese security officials indicated that Chen had met with US ambassador Gary Locke since the activist's dramatic flight from house arrest.

"He is in the embassy," Hu, who met with Chen after his escape, told AFP when asked whether he could confirm rumours of Chen's whereabouts. "He is not seeking political asylum."

Hu said that when he was interrogated, security officials asked him when Chen met US ambassador Gary Locke.

"So it seems very clear that he has met with the American ambassador. I had no way of answering. I do not know what is going on inside. But when I heard this I was very surprised and excited."

Chen, a self-taught lawyer, fled house arrest in Shandong province on April 22 with the help of supporters from under the noses of dozens of guards and subsequently recorded a video alleging abuses against him and his family.

Since then, rumours have swirled that Chen had made it to safety in the US mission, but the embassy and State Department officials in Washington have refused to confirm or deny these.

President Barack Obama also declined to do so Monday, saying: "What I would like to emphasise is that every time we meet with China, the issue of human rights comes up.

"It is our belief that not only is that the right thing to do because it comports with our principles and our belief in freedom and human rights, but also because we actually think China will be stronger as it opens up and liberalises its own system," he said.

Obama's careful response hinted at extreme sensitivity of the case with US Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner due in Beijing Thursday for annual talks on the often testy China-US relationship.

A senior US diplomat, Kurt Campbell, arrived Sunday to meet Chinese officials over the incident, the New York Times reported, citing senior officials and diplomats in Washington and Beijing.

"If -- as seems to be the case -- Chen Guangcheng is indeed under some form of US government protection, it has all the makings of the diplomatic equivalent of a slow-motion car crash," said Phelim Kline, senior Asia researcher for Human Rights Watch.

"The status, safety and well-being of Chen, his family and supporters will, if not publicly addressed and seen to be on the road to resolution, be the neon elephant in the room in key bilateral discussions on everything from currency issues and trade ties to regional security."

Chen, 40, won worldwide acclaim for exposing forced sterilisations and late-term abortions under China's "one child" policy, and for using his legal knowledge to help people battle a range of other injustices including illegal land grabs.

He and his family were put under round-the-clock house arrest after he completed a four-year jail sentence in September 2010.

Chen says his house arrest is punishment for defiantly continuing to speak out about official abuses, and that he and his family had suffered beatings and other brutal treatment during what he has called an illegal house arrest.

"What he demands is that the Chinese government promise to protect him and his family and end the persecution. He wants to see legal rights protected," Hu said.

Members of Chen's family and some of those who helped him escape have since disappeared into Chinese custody, Hu and other activists have said.

"Chen Guangcheng is already safe. But his wife, his children, his mother, his brothers and others are not safe," said Hu.

The European Union Monday urged China to "exercise utmost restraint" and avoid "harassment" of Chen's family and associates.

"Human rights defenders should be treated in full compliance with Chinese laws and constitution," a statement from the delegation of the EU to China said.

The case has made headlines worldwide, but has received no coverage in China's state-run media.

Chinese censors have blocked web searches of a host of terms, from Chen's name to "Shawshank Redemption", the prison-break film being compared to the escape.

The last time a Chinese dissident sought refuge in the US embassy was in 1989.

Fang Lizhi, an academic and supporter of that year's Tiananmen Square pro-democracy demonstrations, was granted asylum in the embassy, where he stayed for a year before leaving in 1990 for exile in the United States.