Update | Aquino says Manila wrong about 'concrete blocks' in Scarborough Shoal

Manila has been forced into an embarrassing climbdown over accusations that China was building concrete blocks in a disputed shoal that has been a major source of tension between the two countries.

Philippine President Benigno Aquino said yesterday the "blocks" on Scarborough Shoal, a group of rocks China calls Huangyan Island 120 nautical miles off the coast of Luzon, were "very old" and "not a new phenomenon".

Last month, Philippine Defence Secretary Voltaire Gazmin told lawmakers China had violated a non-binding code by preparing to build structures on the shoal, showing lawmakers surveillance photos of the "blocks".

China denied the accusation and accused Manila of deliberately stirring up trouble over disputed waters in South China Sea.

Photos taken recently at the shoal show only natural rocks and coral jutting above the surface.

Manila's climbdown came as Philippine officials said a Filipino-British company had begun talks with China's state-owned offshore oil producer for an oil- and gas-exploration deal at Reed Bank. The bank is in another part of the South China Sea where Philippine and Chinese vessels were involved in a confrontation 2½ years ago.

If a deal is struck, it would be the first between China and the Philippines involving territory in the sea that both countries claim.