Hundreds of demonstrators have marched through the streets of Hanoi to protest, for the third time this month, against China's claims to sovereignty in the South China Sea.

Protesters stopped mid-morning traffic as they carried banners and Vietnamese flags, while shouting "The Spratly and Paracel Islands belong to Vietnam!" and "Down with Chinese aggression!".

Marching through the capital's tree-lined colonial avenues towards the Chinese embassy, demonstrators were turned away by police who had cordoned off the area. Similar rallies last year were broken up by police.

Sunday's protest follows an increasingly tense dispute over what China calls the South China Sea and Vietnam terms the East Sea, an area with considerable deposits of both oil and gas, substantial international shipping routes and fishing rights to which a number of south-east Asian nations lay claim.

Beijing, which lays claim to the whole South China Sea, recently upset Hanoi after the government-backed China National Offshore Oil Corporation (CNOOC) said it was seeking bids for oil exploration in what Hanoi deems Vietnamese waters, while Hanoi increased tensions last month by adopting a law claiming sovereignty over the Spratly Islands.

The debate marred regional talks last week in Phnom Penh. But the Association of South-east Asian Nations (Asean), of which both Vietnam and the Philippines - who have also recently been incensed by so-called Chinese aggression - are members, agreed a "code of conduct" and plan to negotiate in September.

The demonstrators were also protesting against increasing human rights violations. Land grabs and accounts of police violence are subjects of growing anger among Vietnam's 90 million population, a fact analysts say is terrifying Hanoi's one-party authoritarian government.

"The last thing the government wants is uncontrolled demonstrations," says Vietnam expert Carlyle Thayer of the University of New South Wales. "Demonstrators are peaceful … [but] they will be absolutely and utterly oppressed."

While police escorted the protesters through the streets and did not appear to be making arrests, police have heavily cracked down on dissent in the past few weeks, and a number of influential activists and bloggers have been harassed and detained.

"Police came to my house last night and told me that if I attended [the demonstration] I would be arrested," one prominent human rights activist told the Guardian by telephone on Sunday. "When I tried to leave this morning, a group of them forced me back into the house to stop me, and they are still outside."

Official and plain-clothes officers circulated freely amongst Sunday's few hundred-strong crowd, photographing demonstrators and eavesdropping on conversations. Those activists who were able to attend were followed by undercover agents who actively monitor their phone calls, emails and whereabouts.

"Everywhere I go, there they are," one activist who has been repeatedly imprisoned for his democracy efforts told the Guardian. "I'm a little afraid but I have to continue. I can't let them stop me from doing what I need to do."

While anti-China rallies took place for about three months last year, authorities later cracked down and detained dozens of protesters after discussions started between China and Vietnam.

A Guardian article last year detailing increasing government encroachment on activists resulted in the detention of the reporter and the forced fleeing from Vietnam of two of his interviewees.

But demonstrators repeatedly point to an increasingly tech-savvy generation who expect to be better informed than ever, with a number of those at the rally filming and recording the demonstration, quickly uploading photos and videos after the protest had peacefully ended.

"We have the internet, we can communicate with each other now," said one 25-year-old student protester. "They can't stop us, however much they might want to."

• Esmer Golluoglu is the pseudonym of a journalist working in Hanoi