North Korea has paid thousands of dollars in compensation to the relatives of three Chinese nationals shot dead by its border guards this month, an online newspaper said Wednesday.

Daily NK quoted an unidentified North Korean businessman in Dandong, China, as saying that a North Korean delegation visited the border town this week and apologised over the shooting on June 4.

The delegation paid 3,000 dollars each to the families of the victims in accordance with a treaty between the two allies, he said.

Three Chinese nationals were killed and one injured when North Korean border forces opened fire along the shared frontier on June 4, according to China's state media.

Beijing, which provides vital economic and diplomatic support to the impoverished North, lodged a formal diplomatic protest with Pyongyang over the killings, in a rare show of discord between the allies.

The Chinese, all of whom lived in Dandong, were suspected of crossing the border to engage in illegal trade, China's state news agency Xinhua said.

But according to Daily NK, the North Korean border guards fired on the Chinese as they tried to get away following an altercation over overdue payment owed to the North Koreans.

The North Korean delegation told Dandong authorities that those responsible would be severely punished for both killing Chinese nationals and trafficking in antiques, it said.

Defectors say some North Koreans smuggle out antiques, paintings or other valuable items but such crime is not common because of tight security.