China's expanding military presence in the contested waters has worried several of its neighbors, and Washington rejects Beijing's territorial claims to much of the region, including the Paracel Islands.

"The Department of Defense is concerned about the People's Republic of China (PRC) decision to conduct military exercises around the Paracel Islands in the South China Sea on July 1-5," the Pentagon said in a statement on Thursday.

The activities "further destabilize the situation" in the area claimed by China, Vietnam and Taiwan, it said.

But Beijing rounded on the criticism, saying Friday that the drills were "within the scope of China's territorial sovereignty."

"Some countries outside this region regularly travel far and wide to the South China Sea to put on large-scale military exercises, flexing their muscle," said foreign ministry spokesman Zhao Lijian at a routine briefing.

"This is the fundamental reason impacting the stability of the South China Sea situation."

The Paracels are a group of islands equidistant from the coast of China and Vietnam, claimed by both countries as well as Taiwan, and a regular source of tension.

- 'Exercise restraint' -

The US also regularly conducts so-called "freedom of navigation operations" in the South China Sea in order to stand up to Beijing, with the US Navy sometimes sending warships to the Paracels. The region is believed to have valuable oil and gas deposits.

In April, a Chinese ship rammed and sunk a Vietnamese fishing boat near the Paracel Islands, notching up tensions between the two countries.

Vietnam said Friday that it had also delivered a protest note to China, warning "not to repeat similar violations in the future."

Such exercises also violate Beijing's "commitments under the 2002 Declaration on the Conduct of Parties in the South China Sea to avoid activities that would complicate or escalate disputes and affect peace and stability," it said.

The declaration, signed by the Association of Southeast Asian Nations (ASEAN) countries, said all parties would "avoid activities that would complicate or escalate disputes and affect peace and stability."

The exercises "are the latest in a long string" of Chinese actions "to assert unlawful maritime claims and disadvantage its Southeast Asian neighbors in the South China Sea."

The Pentagon urged "all parties to exercise restraint and not undertake military activities that might aggravate disputes" in the region, and said it will continue to monitor Chinese military activity.

In order to strengthen its territorial claims, Beijing has in recent years installed military equipment on Woody Island, the main island in the Paracels, built artificial islands in the area and heavily promoted patriotic tourism to the archipelago.

Washington rejects Beijing's territorial claim to much of the South China Sea, including the Paracels. 31 In April, China created new administrative units for the Paracel and Spratly islands, which are now governed by Sansha city, which China created on nearby Woody Island in 2012.