CHINA and Vietnam must withdraw their vessels and oil rig from the disputed waters in the South China Sea to make room for diplomacy to reduce the escalating tension, the United States has demanded.

"We do have a problem with blanket assertions by both Vietnam and China that their claims are indisputable," Mr Daniel Russel, US Assistant Secretary of State for East Asia and the Pacific, told select journalists on Tuesday in a conference call from Yangon, where attended meetings related to the Asean Regional Forum.

"The issue is one of behaviour, not absolute rights and the problem with the deployment of the rig in part is that it was done at a time of heightened tensions following a series of other troubling confrontations at sea."

The senior US official was speaking after China's foreign ministry earlier presented its case for sovereignty over the Paracels, based on historical grounds, such as ancient naval expeditions and latter day evidence such as Vietnamese maps describing the isles with Chinese names.

While the US does not have a position on the merits of the case, Mr Russel noted that Vietnam has claimed sovereignty of the Paracels for a long time. Moreover, it also had been developing oil and gas reserves in an area where it had formally declared an Exclusive Economic Zone that derives from its mainland coast.

"Both China and Vietnam should remove all their ships, and China should remove the oil rig not because we take a position on who is right but to create space for the diplomatic process to manage tensions," he said.