Thousands of people pack the Kim Il Sung Square in Pyongyang for a rally condemning South Korea and the U.S. ((Kyodo News/Associated Press)) About 100,000 people gathered in the North Korean capital Pyongyang on Sunday to denounce South Korea and the United States, heightening cross-border tensions over the sinking of one of the South's warships.

Demonstrators raised their fists in the air during the rally in Kim Il Sung Square as a government official denounced South Korean President Lee Myung-bak as a traitor. The official also suggested the U.S. and South Korea were preparing for war against the North.

Demonstrators raise their fists during a rally Sunday at the central square in North Korea's capital, Pyongyang. ((Kyodo News/Associated Press))

"Because of the South Korean war-loving, mad puppets and American invaders, the North and South relationship is being driven to a catastrophe," Choi Yong Rim, secretary of the North Korean Workers Party in Pyongyang, told the crowd.

The rally in Pyongyang — and a counter rally in Seoul — were held on the final day of weekend talks in Seoul between Lee, Japanese Prime Minister Yukio Hatoyama and Chinese Premier Wen Jiabao.

Wen on Sunday gave no indication he would support UN sanctions against the North, which is accused of sinking the naval ship Cheonan with a torpedo two months ago, killing 46 sailors.

China's backing of sanctions or a statement of condemnation would be key, because it wields veto power at the UN Security Council as a permanent member.

Repeating a message he expressed on Saturday, the Chinese premier said tensions between the two Koreas urgently need to be defused.

"The urgent task for the moment is to properly handle the serious impact caused by the Cheonan incident, gradually defuse tensions over it and avoid possible conflicts," Wen said.

"China will continue to work with every country through aggressive negotiations and co-operation to fulfil our mission of maintaining peace and stability in the region," he said.

Last week, South Korea laid out a series of punitive measures, including slashing trade, resuming anti-North Korean propaganda broadcasts across the border and launching large-scale naval exercises off the western coast.

The North warned the South's moves would push the peninsula closer to war.