BEIJING, CHINA- Two Chinese grandmothers sentenced to re-education through labour for applying to protest during the Olympics will escape punishment as the order has been rescinded, a rights group said Saturday.

Neighbours Wu Dianyuan, 79, and Wang Xiuying, 77, were handed the one-year punishment after they asked several times for permission to protest in one of the three areas where authorities said they would allow such activities during the Olympic Games.

The women said they wanted to protest as they had not received compensation after their homes were demolished by the Beijing city government seven years ago.

On Friday, the Beijing committee which sentenced them less than two weeks ago rescinded its order, said Human Rights in China.

The group welcomed the move but stressed that the original sentence was "baseless".

"In the glare of international attention, it seems that even the government itself has acknowledged that this punishment was harsh and inappropriate," group director Sharon Hom said in a statement.

The International Olympic Committee had said it would investigate the case after the women were sentenced.

China promised to improve its human rights record when it was awarded the right to host the Olympic Games seven years ago.

The government said it would set up three protest zones for use by demonstrators during the August 8-24 Games, but Beijing police have said that not a single protest had been formally approved.