The United States has backed down from plans to impose economic sanctions on China for cyber attacks after both countries agreed to curb economic spying, President Obama indicated Friday.

"I raised once again our very serious concerns about growing cyber-threats to American companies and American citizens," Obama said. "I indicated that it has to stop."

Obama said that he and Chinese leader Xi Jinping agreed in principle that "governments don’t engage in cyber espionage for commercial gain against companies."

"What I’ve said to President Xi and what I say to the American people is, the question now is, are words followed by action?" Obama said. "And we will be watching carefully to make an assessment as to whether progress has been made in this area."

By avoiding mention of the Chinese government role in cyber attacks and cyber espionage, the president appeared to be signaling that aggressive sanctions on Beijing over the OPM attacks are unlikely.

In response to the hacking of records on 22 million federal workers stolen from Office of Personnel Management networks, the president said he is ready to impose limited sanctions, and will closely monitor whether China backs off large-scale cyber attacks.

Obama said both leaders during talks Thursday and Friday agreed to halt economic cyber espionage for commercial gain, but Obama questioned Chinese sincerity in abiding by the commitment.

During a Rose Garden press conference, Obama said he would initiate sanctions on people and entities when there is proof identifying those behind cyber attacks on U.S. companies or persons.

"And we did not, at our level, have specific discussions of specific cases, but I did indicate to President Xi that we will apply those and whatever other tools we have in our tool kit to go after cyber criminals, either retrospectively or prospectively," Obama said, adding that any sanctions would not be directed at governments.

The president suggested that during the talks with Xi the Chinese leader told him he could not guarantee the behavior of 1.3 billion Chinese, an indication Xi may have made the unlikely claim he was unaware of large-scale Chinese military and intelligence cyber operations.

Obama stated that "significant progress" was made in discussions of Chinese cyber operations and that law enforcement and security officials would cooperate against cyber criminals and cyber attacks.

"And what I'm hoping President Xi will show me, is that [they] are not sponsoring these activities and that when it comes to our attention that non-governmental entities or individuals are engaging in this stuff, that we take it seriously and we're cooperating to enforce the law," Obama said.

Comments from both leaders did not address Chinese government-sponsored cyber attacks, which officials have said were the origin of the OPM hacking, as well as other recent incidents.

Chinese cyber attacks and cyber espionage against both government networks and private sector information systems have been underway for more than a decade and U.S. officials have said that they have not slowed under the Obama administration. The president has rejected several times using counter cyber attacks over concerns about escalation. Instead, the administration has limited its response to diplomacy and law enforcement measures that so far have failed to halt the attacks.

Obama said the United States and China, working with private sector companies and the United Nations, should develop a new security architecture governing behavior in cyberspace. The new norms should be "enforceable and clear," he said.

"I believe we can expand our cooperation in this area, even as the United States will continue to use all of the tools at our disposal to protect American companies, citizens, and interests," Obama said.

Xi, in his remarks, said both countries should bolster dialogue and cooperation on cyber issues, indirectly suggesting that any tough U.S. policies in response to Chinese hacking, such as sanctions, would bring retaliation.

"Confrontation and friction are not the right choice for both sides," Xi said.

Xi said both governments would not engage in or "knowingly support" the online theft of intellectual property and seek norms of behavior for cyberspace.

"And we will establish a high level joint dialogue mechanism on the fight against cyber crimes and related issues and to establish hot-line links," the Chinese leader said.

China’s military, through technical reconnaissance bureaus, has engaged in large-scale theft of both government and business secrets, including the compromise of design and engine secrets from the frontline F-35 Joint Strike Fighter.

Beijing cut off talks on cyber security following the May 2014 indictment of five Chinese military officers linked to cyber attacks on American companies.

Xi also said the U.S. and Chinese militaries would increase exchanges and policy talks and hold more joint exercises and training.

Both countries concluded new "annexes" to a memorandum reached in November that was designed to limit dangerous sea and air encounters between the two militaries.

A week before the summit, a Chinese jet nearly collided with a U.S. RC-135 reconnaissance jet over the Yellow Sea, in the second close call by an intercept jet since the August 2014 encounter between U.S. and Chinese jets.

Critics in Congress have called on the administration to curb military exchanges with China over concerns about Chinese cyber attacks and worries that military exchanges have been exploited by Chinese military visitors to enhance China’s warfighting capabilities.

Sen. John McCain (R., Ariz.), the chairman of the Senate Armed Services Committee, has said that the Pentagon should not send aircraft carriers to visit China during future exchanges.

Rep. J. Randy Forbes (R., Va.), a senior member of the House Armed Services Committee, has called for scaling back the Pentagon’s military exchange program with China.

On the issue of South China Sea tensions, Xi stated defiantly that China had no intention of backing off disputed maritime claims to islands and waters of the South China Sea.

"Islands in the South China Sea since ancient times are China's territory," Xi said. "We have the right to uphold our own territorial sovereignty and lawful and legitimate maritime rights and interests."

The islands China is seeking to control are claimed by Vietnam, the Philippines, and other regional states.

Xi said island building did not target or impact any country and that China did not plan to "pursue militarization" of the new islands.

Pacific Command commander Adm. Harry Harris warned in Senate testimony two weeks ago that China’s military activities in the South China Sea were threatening the peace and stability of the region.

China has reclaimed some 2,900 acres of islands in the sea and is building three airstrips that Pentagon officials say will be used for warplanes. Deep-water ports are also being built for Chinese warships and Beijing appears set to deploy missiles on the islands.

The strategic waterway is used to transport $5.3 trillion in goods annually.

Obama said that he had candid discussions with Xi on the South China Sea and that he "reiterated the right of all countries to freedom of navigation and overflight and to unimpeded commerce."

"As such, I indicated that the United States will continue to sail, fly, and operate anywhere that international law allows," he said. "I conveyed to President Xi our significant concerns over land reclamation, construction, and the militarization of disputed areas."

Obama also said that he "affirmed America’s unwavering support for the human rights and fundamental freedoms of all people, including freedom of assembly and expression, freedom of the press and freedom of religion" during the talks.

"And I expressed in candid terms our strong views that preventing journalists, lawyers, NGOs, and civil society groups from operating freely, or closing churches or denying ethnic minorities equal treatment, are all problematic in our view, and actually prevent China and its people from realizing its full potential," he said.

On Tibet, Obama called on China to preserve the religious and cultural identity of the Tibetan people and to meet with representatives of the exiled Tibetan leader, the Dalai Lama.

On other issues, a White House fact sheet said the two leaders discussed cooperation on Afghanistan, international peacekeeping, nuclear security, wildlife trafficking, and ocean conservation.

Joint work on public health, food security, and humanitarian assistance was also mentioned. Plans to boost tourism were announced along with greater Chinese-language training for Americans.

A joint presidential statement asserted that "climate change is one of the greatest threats facing humanity."