Chinese President Xi Jinping allegedly warned Philippine President Rodrigo Duterte there would be war if Manila tried to enforce an arbitration ruling and drill for oil in a disputed part of the South China Sea.
Duterte said Xi gave him the firm but friendly warning when the two met in Beijing on Monday.
"We intend to drill oil there, if it's yours, well, that's your view, but my view is, I can drill the oil, if there is some inside the bowels of the earth because it is ours," Duterte said in a speech Friday, recalling his conversation with Xi.
"His response to me, 'we're friends, we don't want to quarrel with you, we want to maintain the presence of warm relationship, but if you force the issue, we'll go to war."
The waters of the South China Sea are claimed by numerous countries, including Brunei, Indonesia, Malaysia and Vietnam. China claims sovereignty over most of the South China Sea with the so-called nine-dash line.
China is currently expanding defensive forces in the South China Sea, including building air strips on man-made islands, which has raised concerns from Southeast Asian countries and the United States.
In a ruling by last year, the Permanent Court of Arbitration in The Hague clarifies Philippine sovereign rights in its 200-mile Exclusive Economic Zone to access offshore oil and gas fields, including the Reed Bank, 85 nautical miles off its coast. It also invalidated China's nine-dash line.
China had refused to abide by the decision since there is no legal mechanism for enforcing the ruling.
Duterte has long expressed his admiration for Xi and tried to played down the conflict since assuming office last year. He has drawn closer to China, in the hopes of attracting billions of dollars in Chinese loans and infrastructure investments.
His remarks came one day after China and members of the Association of South East Asian Nations, ASEAN, agreed on a “code of conduct” to govern actions in the region.
All parties "uphold using the framework of regional rules to manage and control disputes, to deepen practical maritime cooperation, to promote consultation on the code and jointly maintain the peace and stability of the South China Sea," China's foreign ministry said.
The document would be submitted to a meeting of the foreign ministers of China and the ASEAN states in August in the Philippines. But some ASEAN diplomats have expressed concern about whether China will commit to this set of rules.
Philippine Foreign Secretary Alan Peter Cayetano said on Friday Southeast Asian nations and China should start with a "gentleman's agreement" on the South China Sea waterway because no mechanism exists to legally enforce any deal.
"If it's legally binding, which court can the parties go to? And the countries that do not comply, will they respect that court?" he asked reporters.
"Let's start with it being binding, gentlemen's agreement. We have a community of nations that signed it."
On the same day, China and the Philippines held their first session in a two-way consultation process on "the importance of appropriately handling concerns, incidents and disputes involving the South China Sea," the Chinese Foreign Ministry said in a statement.
Both sides agreed to cooperate and “find ways forward,” the Philippine ministry said.