More than 4,000 rescue workers were racing against time to find survivors amid rough weather conditions.
So far 14 people have been rescued and there could be more survivors in the upturned wreckage, but strong winds and heavy rain are hampering rescue efforts, rescuers said.
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The Changjiang (Yangtze) River Administration of Navigational Affairs said 12 people had been rescued from the water and another two were pulled out from the wreckage.
At about noon, A 65-year-old woman was able to swim out of the wreckage after divers gave her breathing apparatus.
A 21-year-old man was found trapped in a small compartment. He was also given diving apparatus and swam out by himself at about 3 pm, it said.
Divers are combing the compartments for survivors, while the search on the river has expanded to 150 km downstream of the site and will continue to 220 km, said Li Jiang, vice head of the administration.
A team of 4,000, including police, fire fighters and soldiers from the Chinese Navy, are involved in the rescue mission, state-run Xinhua news agency reported.
The four-storey ship, carrying 456 people including 405 passengers, 46 crew and five tour guides from the eastern Chinese city of Nanjing for Chongqing Municipality on the upper reaches of Yangtze, sank after being caught in a cyclone at around 9:28 pm Monday.
The Ministry of Transport said most of the passengers were from Shanghai and its neighboring province Jiangsu and aged between 3 and 83. The majority were in their 60s and 70s.
Premier Li Keqiang, who is at the scene since yesterday, asked the rescuers to make "all-out efforts" and an "overnight battle" to save lives.
Chairing a meeting on the rescue and emergency response mission en route to the accident site by air yesterday, the premier stressed that saving lives should be the top priority.
He instructed rescuers to "mobilise all resources available, take every possible measure and race against time" in the search and rescue missions.
The engineers at the Three Gorges Dam on the upper stream of the Yangtze River have been ordered to reduce the water volume flowing through the giant turbines.
Li also called for regular and transparent updates on the rescue and investigation, and said authorities must ensure adequate funding and personnel to conduct rescue work.
He ordered for deployment of more frogmen to dive under after he saw two Navy divers pull a survivor from inside the overturned ship.
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