China warned the United States and South Korea Thursday against holding joint war games near its waters and urged the two nations to guard against exacerbating festering tensions with North Korea.

The joint military exercises were scheduled after the March sinking of a South Korean warship that Seoul has blamed on a North Korean torpedo attack and which killed 46 sailors and sent regional tensions soaring.

"China has expressed its serious concerns with relevant parties," foreign ministry spokesman Qin Gang told reporters when asked about the war games.

"We are firmly opposed to foreign military vessels engaging in activities that undermine China's security interests in the Yellow Sea or waters close to China."

Beijing has refused to condemn its neighbour and close ally North Korea for the alleged attack despite an international probe that blamed the isolated communist state. China has said it was studying the investigation's findings.

China kicked off six days of live-fire military exercises off its eastern coast this week, in what state-controlled media said was a response to the planned US-South Korean war games.

State television this week showed footage of Chinese warships firing advanced missiles and other weaponry in a mock defence of the nation's territorial waters.

No date has been publicly announced for the exercises between the American and South Korean forces.

China, which provides badly needed aid to impoverished North Korean, is obliged by a 1961 treaty to help defend it against unprovoked aggression.

"We hope relevant parties will exercise calm and restraint and refrain from actions that exacerbate tensions in the region," Qin said.

China, a permanent, veto-wielding member of the UN Security Council, is working with other members of the body to formulate a "document" on the alleged attack, he said, giving no other details.

South Korea has asked the UN Security Council to censure Pyongyang but China has so far not lent its support to that call.

earlier related report
S.Korea says N.Korea's blunders caused tensions
Seoul (AFP) July 8, 2010 - South Korea's point man on North Korea blamed the communist state's leaders Thursday for icy cross-border relations, accusing them of blunders both at home and abroad.

Unification Minister Hyun In-Taek said the North has only itself to blame for its international isolation.

Tensions are high after the South accused the North of torpedoing a warship -- an accusation furiously denied by Pyongyang, which has threatened a "do or die" battle in response to any censure at the United Nations over the incident.

A diplomatic source quoted by Yonhap news agency said a UN statement was imminent on the March sinking of the warship, which cost the lives of 46 sailors.

Seoul's defence ministry also announced plans to spend hundreds of millions more dollars strengthening defences against unconventional attacks.

"North Korea argues this (soured relations) happened because of our hardline policy, but the North Korea policy of our government is one based on engagement and embracement," Hyun told business executives in the western city of Incheon.

"Strained relations were not caused by our policy but by their mistakes."

Hyun said "three major mistakes" by the North led to the current situation: rebuffing the South's offer to rebuild the North's economy, taking a hardline approach with the new US administration, and failing to understand its own crumbling economy.

The minister said a failed currency revaluation that the North implemented last November demonstrates an inability to feed its people.

The revaluation -- seen as an attempt by the regime to crack down on private business -- worsened food shortages and sparked rare public unrest.

Relations have deteriorated since South Korean President Lee Myung-Bak took office in February 2008. He offered the North massive economic aid if it scrapped its nuclear weapons programme, a condition which infuriated Pyongyang.

The South announced its own non-military reprisals after a multinational investigation team concluded that a North Korean submarine sank the warship in March with the loss of 46 lives.

It also asked the UN Security Council to censure Pyongyang, but permanent council members China and Russia have not publicly accepted the North's guilt.

The source quoted by Yonhap said negotiations at the United Nations on compromise wording in a statement were in the final stages.

"Negotiations are in the final stage," the source said. "We could have agreement as early as this weekend... at the latest, an agreement will be possible by next week."

The source declined to give details of the statement but suggested it would be weaker than one issued by the Group of Eight nations at last month's summit in Canada.

This did not directly accuse the North of the warship attack. It noted the findings of the investigation and urged Pyongyang to refrain from hostilities against the South.

"However weak a statement comes out, North Korea won't be grateful to China," the source was quoted as saying.

Seoul's defence ministry said it was seeking a rise of 6.9 percent equal to 2.05 trillion won (1.69 billion dollars) in its 2011 budget.

Of this, it wants to spend 844.7 billion won on planes equipped with airborne early warning and control systems or unmanned aerial vehicles, plus about 40 billion to improve anti-submarine capabilities.

The rest of the proposed rise would be used to improve the welfare of soldiers in the largely conscript army. The ministry's total requested budget for next year is 31.6 trillion won.