Photo/Illutration Philippine President Rodrigo Duterte, left, and Chinese President Xi Jinping, right, meet at the Diaoyutai State Guesthouse in Beijing on Aug. 29. (Pool Photo via AP)

SHANGHAI--Chinese President Xi Jinping said China and the Philippines could take a "bigger step" in the joint development of oil and gas resources in the South China Sea if they can properly handle their dispute over sovereignty.

Xi made the remarks on Thursday, according to the official Xinhua news agency, in a meeting with Philippine President Rodrigo Duterte in Beijing. Duterte has positioned himself as a friend of Beijing but has come under growing pressure at home to push back against its maritime assertiveness.

The visit comes amid a recent rise in tension on several fronts, with Chinese vessels challenging energy assets and the sea boundaries of Malaysia, Vietnam and the Philippines. The United States has accused China of "coercive interference" and holding hostage $2.5 trillion (266 trillion yen) of oil and gas in the region.

Duterte was steadfast in raising the Philippines' concerns, including a 2016 arbitration ruling that invalidated China's claim to sovereignty over most of the South China Sea, according to a statement sent overnight by his spokesman Salvador Panelo.

"In response, President Xi reiterated his government's position of not recognizing the arbitral ruling as well as not budging from its position," the statement said.

Duterte has been reluctant to press the issue, repeatedly warning that he risks starting a war if he does. Critics have dismissed that as nonsense and say Duterte is gambling with Philippine sovereignty and getting little from Beijing in return.

Xinhua's report on the meeting made no mention of the ruling.

It said Xi urged the two sides to "set aside disputes, eliminate external interference, and concentrate on conducting cooperation, making pragmatic efforts and seeking development."

"As long as the two sides handle the South China Sea issue properly, the atmosphere of bilateral ties will be sound, the foundation of the relationship will be stable, and regional peace and stability will have an important guarantee," it quoted Xi as saying.

The two sides could take a "bigger step" in the joint development of offshore oil and gas, it quoted Xi as saying.

That could be extremely complex and sensitive, however, as both countries claim jurisdiction over the Reed Bank, the main site of the oil and gas reserves, despite the arbitration award declaring that Manila had sovereign rights to exploit them.

The Philippines is proposing a 60-40 sharing arrangement in its favor.

China's claims in the South China Sea, through which more than $3 trillion in ship-borne trade passes each year, are contested by Brunei, Malaysia, the Philippines, Taiwan and Vietnam.