At least two people were reportedly killed and scores injured as tens of thousands of people clashed with armed police in a string of protests last month over the building of the Pubugou Dam in Hanyuan county, Sichuan province.
Around 100,000 people are to be relocated to make way for the project but many are unhappy at the compensation payments offered.
A Sichuan government official surnamed Gao said Hanyuan county party secretary Tan Zhengyu was removed from his post earlier this month and was replaced by Yang Changning, one of his former deputies. She declined to say why.
The suspension handed protesters a rare victory, residents said.
Dealing with concerns
A village chief in Wanggong township, Hu Guoshang, said on Friday the central government had ordered the suspension of the hydroelectric project until residents had been properly compensated and resettled.
"The central government has sent down a work group and it is now dealing with the villagers' concerns," he said.
"They [police] are everywhere, around some villages, there are crowds of them"
Jinyan village resident
But the Chinese government has also maintained a strong grip on order by keeping military police in the area.
A resident from Jinyan village surnamed Peng said armed police sent to deal with the clashes were still present. "They [police] are everywhere, around some villages, there are crowds of them," she said.