There was another line after that from a Canthan Peasant.
"Enough of this, I think it's time we taught you some respect, girl!"
They turn hostile, you attack but turn green before you can kill them. Xin Ji runs off and Armian (the Krytan guy) lends a hand.
Whilst this is most like just another encounter, I do find it strange that Xin Ji just runs into a wall and stops moving and that the canthan peasants just stand there (within earshot of her) after they turn back green.
Even if it's just an encounter, it seems very bugged.