Image copyright AFP Image caption China denies its fleet is on alert

China has denied reports its military forces are preparing for war amid tensions over a disputed territory in the South China Sea.

The defence ministry statement comes despite warnings to the Philippines that military conflict is possible over a reef known as the Scarborough Shoal.

Ships from China and the Philippines have been confronting each other for more than a month over the shoal.

Both sides accuse the other of intruding into territorial waters.

"Reports that the Guangzhou military region, the South China Sea fleet and other units have entered a state of war preparedness are untrue," the ministry said in a brief statement on its website late on Friday.

Fears of an armed clash escalated when the Chinese army's own newspaper warned the military should not be treated as a paper tiger, says BBC Asia analyst Charles Scanlon.

That led to excited rumours on Chinese internet sites that the navy was preparing for action and that the Guangzhou military command in the south of the country was on a war footing, our analyst says.

The defence ministry has officially denied those reports - but hardline elements in the leadership appear to be losing patience with the defiant approach of a much smaller neighbour.

Analysts say the central government may see an opportunity to deflect attention from its internal problems.

We do call on governments to clarify and pursue those claims and accompanying maritime rights in accordance with international law including the UN Law of the Sea Convention Bob Carr , Australian foreign minister

But its intentions are far from clear - and the competing interests of maritime agencies and the military mean its next step is hard to predict, our analyst adds.

Protests

On Friday, several hundred protesters demonstrated at the Chinese embassy in Manila, calling for China to withdraw its ships from the shoal.

The row began early last month when the Philippines said its naval ship had found eight Chinese fishing vessels at the shoal, which is claimed by both sides.

A number of Chinese and Philippine fishery and coastguard ships remain stationed at the shoal, with both sides refusing to withdraw.

The shoal itself, called Huangyan Island by China, is a series of rocks and reefs more than 100 miles (160km) from the Philippines and 500 miles from China.

China claims sovereignty over a large U-shaped area of the South China Sea, bringing it into dispute with several neighbouring countries. In recent months, it has grown more assertive over the issue.

Manila has asked China to settle the issue at the International Tribunal on the Law of the Sea (ITLOS).

On Saturday, Australian Foreign Minister Bob Carr - speaking at the start of a visit to China - called on countries in the region to settle their claims through international law.

"We don't take a side on the various claims over the South China Sea," he said.

"But we do, given our interest in the South China Sea, given the fact that a large proportion of our trade travels through it, ... call on governments to clarify and pursue those claims and accompanying maritime rights in accordance with international law including the UN Law of the Sea Convention."