NUSA DUA, Indonesia (Reuters) - The United States and China moved to repair strained ties on Friday, saying tensions over the South China Sea were easing with new conduct guidelines between Beijing and Southeast Asian nations.

U.S. Secretary of State Hillary Clinton and Chinese Foreign Minister Yang Jiechi, meeting at Asia's biggest security conference, appeared eager to ensure the dispute over the oil and gas-rich waters did not become another source of friction between the world's largest economy and the second-largest.

"I want to commend China and ASEAN for working so closely together to include implementation guidelines for the declaration of conduct in the South China Sea," Clinton said at the meeting on the Indonesian resort island of Bali.

China acquiesced to the new guidelines on Thursday after almost a decade of deadlock, in what may have been an attempt to mollify ASEAN enough to take the topic off the table before Clinton's arrival.

China, Taiwan, and four ASEAN members -- the Philippines, Malaysia, Brunei and Vietnam -- all claim territory in the South China Sea and Washington has irritated Beijing by declaring it also has a national interest at stake in ensuring freedom of navigation and trade.

China says it has had undisputable sovereignty over the South China Sea since ancient times, and is adamant about not involving other parties to help resolve the matter.

China has also accused the United States of triggering tension in the region by holding naval drills, and President Barack Obama's meeting with Tibetan spiritual leader the Dalai Lama last week has added further strains.

Foreign minister Yang, hosting Clinton for bilateral talks on the sidelines of the ASEAN security forum, said the South China Sea guidelines would "go a long way to maintaining peace and stability and good neighborliness in the region."

Diplomats said the guidelines were only a small, but important, step toward resolving one of the region's longest-standing disputes.

"If parties concerned abide by the guidelines, certainly tensions will be reduced," said a senior Asian diplomat.

"We have to engage with China so China takes the right course. China has to understand international rules and the South China Sea dispute is an important test case."


Yang did not mention Obama's meeting with the Dalai Lama, regarded by Beijing as a violent separatist, but a Chinese spokesman indicated it come up -- albeit diplomatically.

"We believe that it is important to respect the sovereignty and territorial integrity of China, and to respect China's major concerns on the issue of Tibet and some other sensitive issues," spokesman Liu Weimin told reporters.

"I sense the U.S. side understand the sensitivity of these issues and we both agreed to promote further dialogue."

Yang, for his part, focused on U.S.-Chinese cooperation on a range of issues including efforts to bring North Korea back into six-party negotiations on its nuclear program.

U.S. officials said Clinton's meeting in Bali with Yang marked the start of several months of high-profile U.S. diplomacy in the region.

Both Obama and Chinese President Hu Jintao are due to attend a meeting of the APEC Asia economic forum in Honolulu later this year, and Obama will also attend November's East Asia Summit in Bali for the first time, giving him another chance to touch base with the Chinese leader.

Clinton will fly on Sunday from Bali to Hong Kong -- the first U.S. secretary of state to visit since 1997 when China resumed control of the city from Britain -- and will stop by the southern Chinese city of Shenzhen on Monday for a meeting with Chinese State Councillor Dai Bingguo.

Clinton is due to give a speech in Hong Kong on Monday that will emphasize the U.S. view of economic ties with China, which have been a serious source of tension in the past.

(Additional reporting by Raju Gopalakrishnan; Editing by Raju Gopalakrishnan and Sugita Katyal)

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