The Chinese ambassador to the Philippines on Wednesday moved to calm growing fears of armed confrontation in the Pacific, where the two countries are locked in a tense territorial row.

The Philippines has responded to what it perceives as heightened Chinese aggressiveness by calling for stepped up military ties with the United States.

And it will hold a large-scale military exercise with the US next month on the main island of Luzon and in Palawan, an island on the Philippines' southwest coast facing the South China Sea.

But Ma Keqing said any such military ties were an internal matter for the Philippines, and that for now China was willing to jointly develop disputed areas in the South China Sea.

"The Pacific is large enough for the US and China. We hope that the US will take a constructive role to make this region more peaceful and stable," the ambassador told reporters.

"It's up to you: military, economic (ties) with other countries. It's a basic principle not to intervene with other's affairs. Every country adopts its policy according to its national conditions."

China and the Philippines, along with Taiwan, Vietnam, Malaysia and Brunei have competing claims over large parts of the South China Sea including the Spratly islands.

The territorial dispute over the waters, which are believed to sit atop vast deposits of gas and oil, has for decades been regarded as one of Asia's potential military flashpoints.

Tensions rose last year after the Philippines accused China of aggressive actions including an incident where Chinese vessels fired on Filipino fishermen and harassed an oil exploration vessel in its waters.

The Philippines responded by calling for stepped-up military ties with the United States, triggering an angry response from China.

However, the ambassador played down the spat and said that while no government could compromise on territorial integrity, the two countries could resort to "joint cooperation" to develop the disputed area until a final decision on the issue.

Ma also said the 11.2 percent increase in China's military budget should not be a concern since its defence spending as a proportion of its total budget will still be lower than the United States, Russia, India or Brazil.