Vietnam's Ambassador to India Ton Sinh Thanh on Tuesday had told an Indian news channel that his country would welcome Indian investments in the South China Sea.
Responding to remarks, Chinese Foreign Ministry spokesman Lu Kang said: "China does not object to the development of normal bilateral relations of relevant countries in our neighbourhood".
"But China firmly oppose relevant party to use it as an excuse to infringe upon China's legitimate rights and interests in the South China Sea and impair regional peace and stability," Lu said.
Ton had also said defence cooperation is one of the important and effective areas of cooperation between India and Vietnam and India can be helpful in expanding Vietnam's defence capabilities.
China claims almost all of the SCS while Vietnam, the Philippines, Malaysia, Brunei and Taiwan have counter claims.
Oil exploration in the SCS is a sensitive issue in the Vietnam-China relations. There were anti-China riots in Vietnam when China tried to deploy oil rigs in an areas claimed by Vietnam few years ago.
India, which is ramping up ties with Vietnam, calls for freedom of navigation in the SCS through which trillions of dollars of trade happens every year.