China's Wen warns "outside forces" off sea dispute

Chinese Premier Wen Jiabao attends the ASEAN-China Commemorative Summit on the sidelines of the ASEAN and Related Summits in Nusa Dua on the Indonesian island of Bali November 18, 2011.

NUSA DUA, Indonesia (Reuters) - Chinese Premier Wen Jiabao said on Friday that "outside forces" had no excuse to get involved in a complex dispute over the South China Sea, offering a veiled warning to the United States and others not to stick their noses into the sensitive issue.

But Wen also struck a softer line during a summit with leaders of the Association of Southeast Asian Nations (ASEAN) on the Indonesian resort island of Bali, offering $10 billion in loans and lines of credit and saying China only wanted to be friends.

China claims a large swathe of the South China Sea, which straddles key shipping lanes and is potentially rich in energy resources.

Vietnam, the Philippines, Taiwan, Malaysia and Brunei are the other claimants to parts of the sea, and along with the United States and Japan, are pressuring Beijing to try and seek some way forward on the knotty issue of sovereignty, which has flared up again this year with often tense maritime stand-offs.

While the White House says U.S. President Barack Obama will bring up the issue at another summit on Saturday, also in Bali, China has said it does not want it discussed, preferring to deal with the problem bilaterally amongst the states directly involved.

"The dispute which exists among relevant countries in this region over the South China Sea is an issue which has built up for several years," Wen told the ASEAN leaders, according to a copy of his remarks carried on the Foreign Ministry's website (www.mfa.gov.cn).

"It ought to be resolved through friendly consultations and discussions by countries directly involved. Outside forces should not, under any pretext, get involved," he added.

Japan has also expressed concern over the dispute, and India has become involved via an oil exploration deal with Vietnam in the South China Sea.

Indonesian Foreign Minister Marty Natalegawa told reporters that China had sent positive signals about further discussing the code of conduct for the waters.

"I think this is an important development," the minister added.

In July, China and Southeast Asian countries agreed on a preliminary set of guidelines in the South China Sea, a rare sign of cooperation in a row that has plagued relations in the region for years.

LOANS AND TRADE

Despite the disagreements over the South China Sea, Beijing has been keen to deepen trade and economic ties with Southeast Asia, and has a free trade agreement with the bloc.

"The China-ASEAN relationship is solidly based and has great potential and a promising future," Wen said.

"China will forever be a good neighbor, good friend and good partner of ASEAN. We will work closely with you to implement all the agreements we have reached to bring more benefit to our people and make greater contributions to peace and prosperity in our region."

To this end, Wen said China would offer ASEAN another $10 billion in loans and lines of credit, including $4 billion of soft loans, on top of a similar pledge of $15 billion two years ago.

China will also set up a 3 billion yuan ($473 million) fund to expand practical maritime cooperation by promoting cooperation in environmental protection, navigational safety and combating transnational crimes, Wen added.

He said that China and ASEAN should step up cooperation in the financial field, by increasing the use of local currency swaps and "encourage the quoting of China's yuan and ASEAN currencies in each other's interbank foreign exchange."

"The world is undergoing profound and complex changes. The global economy may experience uncertainty and instability for a long time to come," he said.

"China and ASEAN should be both confident and sober-minded, keep our destiny firmly in our own hands and advance in the direction we have set to pursue our goal."

(Additional reporting Olivia Rondonuwu.)