The Philippines says its main naval vessel is engaged in a stand-off with Chinese surveillance ships at a disputed South China Sea shoal.
The Philippines said its warship tried to arrest Chinese fishermen anchored at the Scarborough Shoal, but was blocked by the two surveillance boats.
Both countries dispute the ownership of the shoal, which lies off the Philippines' northwestern coast.
The Philippine government said it would "assert sovereignty" over the area.
Philippine Foreign Secretary Albert Del Rosario said after meeting Chinese ambassador Ma Keqing on Wednesday that both countries were committed to finding ''a diplomatic solution'' but negotiations were at an ''impasse''.
The Philippines had summoned Mr Ma on Wednesday to lodge a protest over the incident. However, China maintained it had sovereign rights over the area and asked that the Philippine ship leave the waters.
A statement from the Philippines' Ministry of Foreign Affairs said the naval vessel, the Gregorio Del Pilar, found eight Chinese fishing vessels at the shoal when it was patrolling the area on Sunday.
The BBC's Kate McGeown in Manila says the Philippine navy boarded the ship and found a large amount of illegally-caught fish and coral.
Two Chinese surveillance ships then apparently arrived in the area on Tuesday, placing themselves between the warship and the fishing vessels, preventing the navy from making arrests.
The stand-off comes as the Philippines prepares for joint naval exercises with the United States from the 16 to 27 April near the disputed area.
Six countries claim competing sovereignty over areas in the South China Sea, which is believed to contain huge deposits of oil and gas.
Along with China and the Philippines, they are Brunei, Malaysia, Vietnam and Taiwan.
China's claim includes almost the entire South China Sea, well into what the UN Convention on the Law of the Sea recognises as the 200-mile-from-shore Exclusive Economic Zones of other claimants.
That has led to occasional flare-ups and to competition to occupy islands, reefs and sandbars.