Beijing's offer aims to mend Sino-Japanese ties which deteriorated rapidly following the massive anti-Japan demonstrations across China last month, the evening edition of business daily Nihon Keizai Shimbun said on Thursday.
Japan has repeatedly demanded China apologise and offer compensation after demonstrators threw rocks and bottles at Japanese diplomatic compounds, including the embassy in Beijing, breaking dozens of windows.
Beijing has refused to offer an apology and compensation but hopes to settle this matter "through a less formal kind of payment", the daily said, without giving sources.
Beijing is likely to offer the payment, estimated at over 10 million yen ($94,000), when Japanese and Chinese Foreign Ministry officials hold talks in the Chinese capital on Friday and Saturday.
Japan is expected to accept the Chinese payment, the daily said.
Relations between the two
countries have been strained
But Chief Cabinet Secretary Hiroyuki Hosoda said on Thursday he was not aware of China's payment proposal.
"I am not aware that China has proposed such a payment. We will continue talks over ways to settle this problem," Hosoda, Japan's government spokesman, told a news conference.
The Foreign Ministry said in a statement that Vice Foreign Minister Shotaro Yachi would discuss bilateral as well as regional issues on his weekend visit to Beijing.
Announcing another visit, China said it would send Vice Premier Wu Yi to Japan from 17 to 24 May for the World Exposition - a technology showcase in central Aichi province - an apparent snub as the premier was invited.
China is outraged that Koizumi
visited the Yasunki shrine
"I think we can find various reasons behind the final decision to have Vice Premier Wu Yi attend the World Expo," foreign ministry spokesman Kong Quan said in Beijing.
Japan's last Expo in Osaka in 1970 was seen as a sign of Japan's emergence as an economic power. The next World Expo will be held in Shanghai in 2008.
The anti-Japan demonstrations came after the Japanese education ministry approved a history textbook written by avowed nationalists who believe Tokyo is too apologetic for its past.
Bilateral relations have also been strained over Japan's ambition to get a permanent seat on the United Nations Security Council, seen as reflecting its wish to be considered a major power in the region and the world.