Chinese President Xi Jinping said China and the Philippines could take a "bigger step" in the joint development of oil and gas resources in the South China Sea if they can "properly" handle their dispute over sovereignty.
Xi made the remarks on Thursday in a meeting in Beijing with Philippine President Rodrigo Duterte, who has positioned himself as a friend of Beijing but has come under growing pressure at home to push back against China's maritime assertiveness.
The visit comes amid a recent rise in tension on multiple fronts, with Chinese vessels challenging energy assets and sea boundaries of Malaysia, Vietnam and the Philippines, prompting the United States to accuse China of "coercive interference" and holding hostage $2.5 trillion of oil and gas in the region.
Duterte's spokesman said earlier this month that he would meet Xi to discuss a 2016 arbitration ruling that invalidated China's claim to sovereignty over most of the South China Sea.
A report on Thursday's meeting by China's state news agency Xinhua made no mention of the ruling, which China has vociferously disputed.
It said Xi urged the two sides to "set aside disputes, eliminate external interference, and concentrate on conducting cooperation, making pragmatic efforts and seeking development".
"As long as the two sides handle the South China Sea issue properly, the atmosphere of bilateral ties will be sound, the foundation of the relationship will be stable, and regional peace and stability will have an important guarantee," it quoted Xi as saying.
The two sides could take a "bigger step" in the joint development of offshore oil and gas, it quoted Xi as saying.
Duterte "expressed his view that the path to peacefully resolving the South China Sea disputes is through cooperation, rather than confrontation", according to Xinhua.
He also pledged to speed up joint maritime oil and gas exploration with China.
On Thursday, China and the Philippines announced the establishment of an "intergovernmental joint steering committee and a working group between relevant enterprises" on oil and gas cooperation, Xinhua reported.
China's claims in the South China Sea, through which about $5 trillion in ship-borne trade passes each year, are contested by Brunei, Malaysia, the Philippines, Taiwan and Vietnam.