Siamese crocodile skin is used to produce handbags and other luxury leather goods.
The roughly 25-cm long crocodiles were about 15 days old and were likely trafficked from Vietnam, the report said.
Police in Guangxi Zhuang Autonomous Region said they saw three nervous-looking men moving goods in front of the house where the crocodiles were found and approached them for questioning. One man was caught, while the two others escaped.
Siamese crocodile skin is used to produce handbags and other luxury leather goods, but the reptiles can only be raised in China with a licence and trafficking in them is illegal, according to Xinhua.
China is a major destination market for many products made using exotic and often endangered, species. The government has held high-profile events to destroy large caches of illicit animal products in an attempt to discourage trafficking in them.