Southeast Asian leaders Thursday held talks on the Indonesian island of Bali dominated by a maritime dispute with China and a debate over whether to reward Myanmar for fledgling reforms.

With the eurozone lurching through a debt crisis, raising the spectre of the region's export markets drying up, there is also pressure on the 10-member bloc to speed up the integration of its potentially huge common market.

The Association of Southeast Asian Nations (ASEAN) talks will widen Saturday into the East Asia Summit which takes in Australia, China, India, Japan, South Korea and New Zealand, and this year welcomes the United States and Russia.

President Barack Obama comes to Bali as the US rolls out a diplomatic campaign to assert itself as a Pacific power, including plans for up to 2,500 Marines to be deployed in Australia.

Its more robust role, which smaller Asian states welcome as a counterbalance to China, has already caused friction with the two powers trading warnings that set the stage for a confrontation at the East Asia Summit.

The US has signalled it will raise the issue of China's territorial claims over the South China Sea, with its strategic shipping lanes and rich oil and mineral reserves, despite Beijing saying the topic should be off-limits.

Secretary of State Hillary Clinton said Wednesday on a visit to the Philippines, which along with Vietnam has complained China is becoming more aggressive in asserting its claims, that threats were unacceptable.

"Any nation with a claim has a right to exert it, but they do not have a right to pursue it through intimidation or coercion," she said.

The Philippines, which has led calls for ASEAN to build a united front against China over the dispute, was slammed by China's state-run Global Times Thursday, which said it should be punished with trade boycotts and travel bans.

"The way that China punishes the Philippines should not be overdone or elicit regional fears toward China, but it must make the Philippines pay the price," said the paper, known for its nationalistic stance.

Diplomats in Bali have expressed concern that Southeast Asian nations may get squeezed between the competing interests of the two big world powers.

"We must ensure the stability and security of our region, Indonesian President Susilo Bambang Yudhoyono said in an opening speech.

"ASEAN must continue to play a proactive role to facilitate and engage itself in the resolution of issues," he said in an apparent reference to the South China Sea.

Bali, a resort island that is normally a haven for tourism and relaxation, has been transformed for the event, with six warships patrolling off the beaches and 7,000 police and soldiers providing a blanket security presence.

The ASEAN summit also sees the diplomatic debut of Myanmar's new military-backed government, which has surprised observers with a string of conciliatory moves since it was sworn in eight months ago.

The leaders are set to formally approve a plan to allow Myanmar to chair the regional bloc in 2014, despite objections from the United States which said it was premature.

Myanmar's Information Minister Kyaw Hsan called on the US to recognise what he said were "irreversible" reforms and abandon its economic sanctions, in an interview with the Wall Street Journal published Thursday.

Kyaw Hsan blamed the sanctions for the country's lack of development and said they forced Myanmar to be reliant on Chinese companies.

"When we are striving for development, we cannot be choosers -- we have accepted what is best for the country," he said.

The nominally civilian government has held direct talks with opposition leader Aung San Suu Kyi, freed 200 dissidents, frozen work on an unpopular mega-dam and passed a law giving workers the right to strike.

But rights campaigners say those measures could easily be reversed and that handing Myanmar the diplomatic prize could remove the incentive for more fundamental change in a nation still accused of serious rights abuses.

ASEAN's leaders will also review stuttering progress on an ambitious plan for a common, barrier-free market by 2015, a task made more urgent by the crisis in major export markets in Europe.

The gaps between the region's economies -- which range from the wealthy city-state of Singapore to underdeveloped Laos and Myanmar -- are a formidable barrier to establishing a common market of more than 600 million people.

But Indonesian Trade Minister Gita Wirjawan said Wednesday that the economic woes in Europe and the United States presented an opportunity for ASEAN to "behave more collectively".

burs-sls/slb/mtp