"We ask everyone to observe all the necessary restraint, and we consider the diplomatic solution is still possible and efforts in this direction must continue," Chinese Foreign Minister Li Zhaoxing told a news conference in the Mauritanian capital Nouakchott.

Li said China believed in the principle of non-proliferation of nuclear weapons but did not say whether China backed Iran's right to use nuclear energy for peaceful purposes.

China, like Russia, has adopted a different attitude from that of the United States, which is pressing for sanctions to be agreed by the UN Security Council.

Iran said Sunday it would not suspend uranium enrichment despite EU plans to offer incentives to the Islamic republic if it halts the sensitive nuclear work.

"We cannot retreat. The proposal should provide ways to secure our rights," foreign ministry spokesman Hamid Reza Asefi told reporters. "We will not stop enrichment.

"The basis of our work is that the Islamic republic of Iran's rights must be recognised in any plan," Asefi said.

In their latest bid to defuse escalating international tensions over Iran's disputed nuclear drive, Britain, France and Germany are preparing a package of trade, technology and security benefits if Tehran stops enriching uranium.

Iran says it wants to enrich uranium only to make reactor fuel, although the process can be extended to make weapons.

A draft by the so-called EU-3 asks world powers to support a plan by which Iran will build several light water reactors and set up a nuclear fuel bank that would guarantee the country access to reactor fuel but not the sensitive fuel cycle technology.

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