China urges restraint as tensions mount between two Koreas

SHANGHAI (Reuters) - China on Saturday urged North and South Korea to exercise restraint and safeguard peace on the peninsula, after the communist north threatened to fire on the south.

Impoverished North Korea said on Friday it would attack if Seoul allowed activists to drop anti-northern leaflets on its territory, in its most strident warning against its long-time foe for months.

South Korea's defence minister told parliament its military would retaliate in the event of attack.

"As a close neighbor of the peninsula, China urges the two Koreas to resolve the conflict through dialogue and consultation," Chinese Foreign Ministry spokesman Hong Lei said in a statement.

"We hope the two parties can stay calm and not make any provocative or radical actions."

North Korea, which relies heavily on China to support its economy, shelled a South Korean island almost two years ago, killing civilians.

A looming presidential election in the south and plans to deploy longer-range missiles by the government in Seoul have angered the north and prompted an escalation of belligerent rhetoric from Pyongyang.

(Reporting by Fayen Wong; editing by Andrew Roche)