[Updated] China Offers Philippines Talks Out of Court

China is ready to start negotiations with the Philippines on South China Sea-related issues if Manila ignores an arbitration ruling expected next week on their long-running territorial dispute, the official China Daily reported on Monday.

The Philippines brought the case to the Permanent Court of Arbitration in the Hague and a ruling is expected on July 12. The case contests China's claims to the bulk of the South China Sea, a body of water through which $5 trillion in ship-borne trade passes every year. China has said it plans to ignore the Court's ruling which would represent a snub of the international legal order.

The Philippines, Vietnam, Malaysia, Taiwan and Brunei have overlapping claims with China in the area. Beijing has rejected the arbitration case, claiming the court has no jurisdiction and saying it wants to solve the issue bilaterally. In recent weeks it has ramped up its propaganda campaign downplaying the outcome of the case.

Negotiations between China and the Philippines could cover "issues such as joint development and cooperation in scientific research if the new government puts the tribunal's ruling aside before returning to the table for talks", the China Daily said.

Armed Clash expected

However, on Tuesday, the state-run Global Times said China should prepare itself for military confrontation in the South China Sea.

In joint editorials in its Chinese and English editions, the state-run Global Times said the dispute, having already been complicated by U.S. intervention, now faces further escalation due to the threat posed by the tribunal to China's sovereignty.

"Washington has deployed two carrier battle groups around the South China Sea, and it wants to send a signal by flexing its muscles: As the biggest powerhouse in the region, it awaits China's obedience," it said.

China should speed up developing its military deterrence abilities, the paper added.

"Even though China cannot keep up with the U.S. militarily in the short-term, it should be able to let the U.S. pay a cost it cannot stand if it intervenes in the South China Sea dispute by force," it said.

"China hopes disputes can be resolved by talks, but it must be prepared for any military confrontation. This is common sense in international relations."

The newspaper is published by the ruling Communist Party's official People's Daily, and while it is widely read in policy-making circles it does not have the same mouthpiece function as its parent.

China, which has been angered by U.S. patrols in the South China Sea, will be holding military drills in the waters there starting from Wednesday.

China's Defence Ministry said the drills are routine, the official China Daily reported.

U.S. officials have expressed concern that the Hague court ruling could prompt Beijing to declare an air defence identification zone, or ADIZ, as it did over the East China Sea in 2013.

What response China takes will "fully depend" on the Philippines, the China Daily added, citing unidentified sources.

"There will be no incident at all if all related parties put aside the arbitration results," one of the sources told the English-language publication.

"China has never taken a lead in ... stirring up regional tension," another of the sources added.

About $5 trillion in ship-borne trade passes every year though the energy-rich, strategic waters of the South China Sea, where China's territorial claims overlap in parts with Vietnam, the Philippines, Malaysia, Brunei and Taiwan.