China’s plan to board and search ships that illegally enter what it considers its territory in the disputed South China Sea could spark naval clashes and hurt the region’s economy, Southeast Asia’s top diplomat warned on Friday.

Seeking to ease alarm over the issue, China said it attached “great importance” to freedom of navigation in waters that have some of the world’s busiest shipping lanes.

New rules that take effect on January 1 will allow police in the southern Chinese province of Hainan to board and seize control of foreign ships which “illegally enter” Chinese waters, China Daily said on Thursday.

Surin Pitsuwan, secretary-general of the Association of Southeast Asian Nations (Asean), said the Chinese plan was a “very serious turn of events”. “It certainly has increased a level of concern and a level of great anxiety among all parties, particularly parties that would need the access, the passage and the freedom to go through,” Surin said over  phone from Thailand.

Using unusually strong language, Surin said the plan could trigger a major incident that would affect confidence in East Asia, a key engine of global economic growth.

Several countries have overlapping sovereignty claims in the South China Sea, which is believed to be rich in oil and gas. It is the region’s biggest potential military flashpoint.

Chinese Foreign Ministry spokesman Hong Lei declined to elaborate on the new rules at a briefing in Beijing on Friday and what might constitute illegal entry. “All countries have freedom of navigation in the South China Sea in accordance with international law ... At present there are no problems in this regard,” he said, adding Beijing wanted to resolve the dispute with neighboring countries through negotiations.