Chen's urine sample tested positive for Hydrochlorothiazide on August 7, Xinhua reported.
It added that the China Swimming Association has pledged to cooperate with investigators and will respect the final decision of the sports arbitration court.
Chen Xinyi is 18 years old and has already competed in the 100-meter butterfly event, placing fourth in the final held on Monday, according to the Rio Olympics official web site.
She is next scheduled compete in the 50-meter freestyle on Saturday, the website says.
Chen rose to fame at the National Games in 2013.
She won gold at the women's 100-meter butterfly at the 2014 Asian Games in Incheon and broke the world youth record in the category at the World Championship in Kazan last year.
