NUSA DUA, Indonesia (Reuters) - Relations between the United States and China could hit another rough patch this week at Asia's biggest security forum, where some participants will be seeking U.S. help to thwart what they see as Beijing's expansionism in the South China Sea.
Sino-U.S. ties are already being tested -- Beijing reacted angrily to President Barack Obama's meeting with the Dalai Lama last week, calling it a gross violation of its internal affairs, but stopped short of threatening retaliation.
That row comes only days before U.S. Secretary of State Hillary Clinton heads to the Indonesian resort island of Bali for the annual Association of South East Asian Nations (ASEAN) Regional Forum. The meeting will focus on disputed atolls and islands in the oil-rich South China Sea, and China's perceived muscle-flexing in the area.
"It could be a rough ARF," said Simon Tay, chairman of the Singapore Institute of International Affairs, referring to the forum. "The bilateral relationship has not been the best, and this will make it worse."
Both Vietnam and the Philippines have accused China of acting aggressively over the past few weeks in asserting its claims to the strategically located and potentially lucrative waters, which straddle vital shipping lanes.
Both have been looking to Washington to support their case, while China is adamant about not involving other parties to help resolve the matter. It wants the disputes to be resolved bilaterally.
"Chinese leaders can't be seen to be weak on this issue because of the backlash they will get within the country," said Ian Storey, a fellow at the Institute of Southeast Asian Studies in Singapore.
China, Taiwan, the Philippines, Malaysia, Brunei and Vietnam all claim parts of the South China Sea and the latter four are members of ASEAN. Some analysts say the dispute could lead to armed conflict.
Foreign ministers from the 10-nation ASEAN, who began their own meeting on Tuesday, appear divided on the dispute, diplomats said. Some nations, including hosts Indonesia, want a long-awaited code of conduct for all parties in the South China Sea to be finalised by the end of the year.
"Things do not necessarily have to be this slow. We need to see some progress on the South China Sea," Indonesian President Susilo Bambang Yudhoyono said.
"We need to send a strong signal to the world that the future of the South China Sea is a predictable, manageable and an optimistic one."
But Foreign Minister Marty Natalegawa said after the day's talks that guidelines were unlikely to be finalised soon.
Some diplomats said Beijing was seeking the support of allies within ASEAN, including Laos and Myanmar, to persuade the group to avoid taking a hard stance.
The ASEAN ministers will be joined by dialogue partners for meetings over the rest of the week culminating with the 27-nation forum on Saturday.
ECONOMIC LIFELINE
China transports as much as 80 percent of its oil imports through the South China Sea, and sends the exports on which its economy relies through the same waters to Europe, the Middle East and Africa.
"It is clearly in no country's interest for the free flow of maritime trade through the South China Sea to be disrupted, and we are not nearly at that point yet," Storey added.
The value of China-ASEAN trade reached $171 billion in first six months of 2011, around one tenth of China's total during that period.
"China's card is its tightening economic ties with ASEAN, and it will certainly use it to emphasise the common interest between China and ASEAN, especially in view of the weak economies in the U.S. and Japan," said Joseph Cheng, a professor at City University of Hong Kong.
Also, with the U.S. economy in dire straits and China holding over $1 trillion of U.S. Treasury bonds, ties between the world's largest economy and the second largest are in a sensitive phase.
Nevertheless, U.S. officials said Clinton will emphasise Washington's position that it has national interests at stake in ensuring that international waterways remain open to navigation and in combating threats such as piracy.
Diplomats may also be looking for some preliminary groundwork on a resumption of the six-party talks on North Korea's nuclear ambitions.
All six parties -- the two Koreas, China, Russia, Japan and the United States -- will be at the Bali meeting.
But Japan, South Korea and the United States are wary of Chinese efforts to relaunch the talks and want Pyongyang to show clear signs it is ready to change its bellicose behaviour, U.S. officials said.
(Additional reporting by Manny Mogato in Manila and Andrew Quinn; Writing by Raju Gopalakrishnan; Editing by xx)
