Yes and No. The diplomacy of recent weeks has lowered temperatures, even if it has further exposed the fault lines dividing the region.

Chinese officials have met Philippine and Vietnamese officials after formal protests from both nations over incursions by Chinese vessels - actions denied by Beijing amid its own assertions of sovereignty.

Vietnam, locked in a fraternal yet historically suspicious relationship with its northern neighbour, has in turn started to rein in street protests in Hanoi and Ho Chi Minh City. After initially leading the charge, Hanoi officials have also toned down public condemnation of Beijing.

The Philippines, however, is proving a tougher nut for Beijing. Its foreign minister, Albert Del Rosario, was the most outspoken at last month's Association of Southeast Asian Nations meeting in Bali. The Philippines is trying to seek an international court ruling on its claims - an act that will need Beijing's approval. Beijing has rejected such a move.

The Bali meeting was significant. After nine years of painstaking negotiations, Chinese and Asean envoys found compromises to push through so-called guidelines to foster peace through voluntary co-operation while disputes are resolved. The guidelines build on a landmark declaration between China and Asean in 2002 and pave the way for talks on forging a code of conduct.

Given that the 2002 deal was until recently seen as something of a dead letter, the importance of such co-operation is not easily dismissed. Even while Foreign Minister Yang Jiechi repeatedly asserted China's 'indisputable sovereignty' over the entire South China Sea, he still pushed for co-operation with Asean in sessions much less heated than 12 months ago. 'China will continue to contribute to peace and stability in Asia,' he said.

The question for many insiders is now timing. Such a code would be a legally binding document and unique for Asean, which has long favoured consensus over action.

But with the guidelines having taken nine years to reach amid allegations of Beijing deliberately playing for time, few seem optimistic.

Indonesian Foreign Minister Marty Natalegawa acknowledged 'that is the reality we are facing'. He urged all parties not to get hung up on the guidelines but focus on the code.

After meetings with regional counterparts, including Yang, Australian Foreign Minister Kevin Rudd also highlighted the differences. 'If I listen to my friends in Asean,' he said, 'they have an expectation this will be done relatively swiftly. If I listen to my friends in China, they have a different speedometer attached to this'.

The guidelines refer to 'eventual realisation' of the code - a phrase some diplomats believe will allow Beijing to move cautiously. Yang also told some of his counterparts that the code would be passed when appropriate conditions were met.

Amid the wait, the value of the South China Sea is not in doubt. Rich in oil, fish and tourism potential, it is one of the world's most important stretches of water, linking the economies of China, Japan and South Korea to the world. And it carries much of their imported oil.

WHY IS THE NINE-DASH LINE SO IMPORTANT?

One feature of the recent diplomatic manoeuvring has been the intensifying debate over China's so-called nine-dash line that covers virtually the entire South China Sea. It reaches more than 1,600 kilometres from China's shores into the maritime heart of Southeast Asia. China has signed and ratified the UN Convention on the Law of the Sea, and many analysts believe the line cannot be legally justified under the law's terms and international norms. It is a potential point of contention should any negotiations loom.

The law provides for an exclusive economic zone of 200 nautical miles out from baselines off a state's coast. A map showing the hypothetical economic zones of claimants to the South China Sea - China, Vietnam, the Philippines, Malaysia and Brunei - paints a very different picture to the nine-dash line.

While China repeatedly asserts its sovereignty, both in words and through the actions of its maritime surveillance ships operating off southeast Vietnam and west of the Philippine island of Palawan, Beijing has never formally spelt out its precise limits or meaning.

It did, however, attach a map with the nine dashes in a protest to the UN in 2009 over a joint VietnameseMalaysian submission. Vietnam, the Philippines and Malaysia filed counter protests. Indonesia, not a claimant to the South China Sea but whose waters are close to the southern tip of the line, also protested.

Long a point of regional concern - it has appeared on Chinese official maps since the late 1940s after first being drawn by a Kuomintang general - back-room tensions over the line have recently burst into the open. Addressing a defence forum in June with Defence Minister Liang Guanglie , Vietnam's defence chief insisted that the nine-dash line could not be used as the basis for any future joint development deal.

Ahead of the Asean meeting, Singapore urged China to clarify its claims to help provide a peaceful solution. At the meeting itself, Del Rosario was the most explicit, saying the nine-dash line had no basis in international law.

'If Philippine sovereign rights can be denigrated by this baseless claim, many countries should begin to contemplate the potential threat to freedom of navigation in the South China Sea,' he said.

Later he warned of the risk of clashes at sea.

His remarks drew swift condemnation from Beijing, with delegation spokesman Liu Weimin issuing a statement challenging Del Rosario's comments. Facts proved they were totally groundless, he said.

US Secretary of State Hillary Rodham Clinton urged claimants to clarify their positions based on the Law of the Sea and international norms, comments buttressed by several other countries at the Bali meeting, including Japan, South Korea and India. Clinton did not name China but no one missed the point, according to diplomats inside the room. 'It is all about the nine-dash line,' one US official said.

Professor Carl Thayer, a veteran scholar of South China Sea issues at the Australian Defence Force Academy, said: 'There is no doubt that clarification from China over the nine-dotted line would help negotiations over the code of conduct ... in fact it is hard to imagine it succeeding without it.'

A senior Japanese official said the South China Sea was increasingly proving a test case for China's peaceful rise, revealing the extent it was prepared to deal calmly with the region and its commitment to international norms. 'We see it as China's great test,' he said.

As they seek to cool heads, Chinese officials call for joint development and one-to-one negotiations and restate China's historic and legal claims to the South China Sea. They rarely mention the line in official discussions. 'The line is not something we feel we need to discuss,' one Chinese envoy said privately.

WHAT TROUBLES LIE AHEAD?

A key point to remember amid the diplomatic debate is that nothing fundamental has changed at sea. Underlying tensions remain, even as Beijing and Hanoi pledge to act to cool hot nationalistic sentiment.

Vietnam and the Philippines have both vowed to push ahead with oil exploration activity - over China's objections - as part of deals struck with foreign firms. China is actively modernising its fleet of maritime surveillance vessels with the stated goal of responding to breaches of sovereignty in the South China Sea.

Less visibly, all claimants apart from Brunei have been gradually building up their military facilities in the Spratly Islands. Vietnam is by far the biggest landlord across the archipelago, occupying more than 25 shoals and reefs - a point which is of increasing concern to PLA naval strategists. Regional military attach?s warn that the risk of clashes, accidental or otherwise, is significant.

Diplomatically, even while all sides pledge co-operation, the core issues have yet to be tackled and suspicions remain. Chinese officials remain wary of what they describe as meddling by foreign powers, particularly the US and Japan. Mainland media commentaries warn the sudden US concern and involvement in South China Sea issues reflects other agendas at work as Washington attempts to contain China through more regional engagement.

That said, China is due to host the next Sino-Asean working group on the South China Sea later this year and confidence-building measures will be discussed.

Freedom of navigation is a sticking point. Yang and other officials have been at pains to insist that they are committed to ensuring freedom of navigation as part of their sovereignty. They face a chorus of concern from the US and regional countries. Beijing continues to insist that US military surveillance is not permissible in waters Washington considers international off China's coasts.

Dr Wang Hanling, a mainland expert on the Law of the Sea who is studying in Singapore, recently questioned concerns from Japan that freedom of navigation was at risk. 'Freedom of navigation has never been seriously in question. In such a situation, I can only assume Japan is pursuing other agendas here.'

Attempting to ease fears, Premier Wen Jiabao told his Asian counterparts in a closed-door meeting last year that he hoped the South China Sea would become a 'sea of peace and tranquillity'.

That vision, it seems, is still some way off.