The blaze took place after midnight in a three-storey building in Qingyuan City, Guangdong province, and was put out shortly before 1:00 am local time, according to the police.
A preliminary investigation found that the fire was caused by arson, the Qingyuan public security department said on its Weibo social media account.
"The public security authorities are stepping up their investigation," it said.
The police statement did not describe the location of the fire but the official Xinhua news agency said it occurred in a KTV house, or karaoke lounge.
Deadly fires are common in China, where safety regulations are widely flouted and enforcement is often lax.
A blaze that killed 38 people at a nursing home in 2015 sparked soul-searching about safety standards in China. Courts jailed 21 people, including firefighters and government staff, over the fire last year.
In the days following the accident, China's top safety watchdog said the facility had poorly-designed fire exits, while safety checks, fire and electricity management, and the emergency response system were all found lacking.
More than two dozen people were killed in two fires in Beijing's migrant neighbourhoods late last year. The first blaze, which killed 19 people in November, prompted authorities to begin tearing down unsafe buildings in the capital, driving residents out in the middle of winter.
