SEOUL (Reuters) - China said on Friday it was determined to prevent an escalation of this week’s violence on the Korean peninsula but warned against military acts near its coast as U.S. and South Korean forces prepared for exercises in the Yellow Sea.

North Korea, stepping up its rhetoric just days after it shelled a South Korean island, said the four-day naval drills starting on Sunday risked pushing the region towards war.

The U.S. military said the exercises, planned long before Tuesday’s attack, were designed to deter North Korea and were not aimed at China.

“We’ve routinely operated in waters off the Korean peninsula for years,” said Captain Darryn James, a Pentagon spokesman. “These latest provocations have been by the North and they need to take ownership of those, not us.”

Calling for calm, Chinese Foreign Minister Yang Jiechi met North Korean ambassador Ji Jae Ryong in Beijing and talked by phone with U.S. Secretary of State Hillary Clinton and South Korean Foreign Minister Kim Sung-hwan.

“The top priority now is to keep the situation under control and to ensure such events do not happen again,” the Chinese Foreign Ministry said in a statement.

To help ease the tensions in the world’s fastest-growing economic region, the United States is pressing China to use its influence to rein in reclusive and unpredictable North Korea, which has defied efforts to halt its nuclear ambitions.

“SHOWER OF DREADFUL FIRE”

Beijing’s diplomacy and its warning over the naval drills came as the government in Seoul named a career soldier as the new defence minister amid criticism over the response to North Korea’s heaviest bombardment since the 1950-53 Korean War.

North Korean artillery shells rained down on the small South Korean island of Yeonpyeong on Tuesday, killing four people and destroying dozens of houses. South Korean troops fired back 13 minutes later, causing unknown damage.

“The situation on the Korean peninsula is inching closer to the brink of war due to the reckless plan of those trigger-happy elements to stage again war exercises targeted against (North Korea),” the official KCNA news agency said.

The language was typical of North Korean state media but the increasing tension depressed South Korea’s currency, the won, by as much as 2.2 percent. Its stock market closed 1.3 percent lower, in line with the wider region.

“Investors are growing more jittery ahead of the joint military exercise,” said Kim Hyoung-ryoul, a market analyst at NH Investment & Securities. “The key concern is whether North Korea will again take unforeseen, rash actions.”

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In a later statement, KCNA said North Korea was “getting fully ready to give a shower of dreadful fire” if provoked.

“We will respond to good faith in kind but punish the provocateurs encroaching upon our dignity and sovereignty with resolute and merciless counteraction,” it said.

The United States has also angered China by sending an aircraft carrier group led by the nuclear-powered USS George Washington for the manoeuvres with South Korea.

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“We oppose any military act by any party conducted in China’s exclusive economic zone without approval,” the Foreign Ministry in Beijing said, referring to a maritime area up to 200 nautical miles from the country’s coast.

James, the Pentagon spokesman, said China had been informed of the drills.

“This exercise and the ones we’ve done in the past are not directed at China,” he said. “These have been designed to strengthen deterrence against North Korea.”

South Korea’s presidential Blue House named Kim Kwan-jin, a former chairman of the joint chiefs of staff, to replace Kim Tae-young, who had tried to resign the defence portfolio in May following criticism of the government’s response to a torpedo attack on a South Korean warship blamed on the North.

Presidential secretary Hong Sang-pyo said the new defence minister was “the right person for the post in order to restore trust from people and boost morale in the entire military.”

There was brief panic in Seoul in the afternoon when television reported sounds of shelling near Yeonpyeong island. But the military said the artillery fire was distant and no shells landed in South Korea.