"The report is denied by the Indian navy. We also conformed with the relevant authorities. The report is groundless", Chinese Foreign Ministry Spokesperson, Jiang Yu told a media briefing.
She was replying to questions whether the Chinese government had verified Indian government statement that its naval ship, INS Airavat received a radio message, while through South China Sea, by a caller identifying himself as the "Chinese Navy," stating that "you are entering Chinese waters".
Jiang said "I hope that media while reporting on such mater consult and confirm with the relevant governments".
The Financial Times of London last week reported that a Chinese warship confronted the Indian navy vessel shortly after it left Vietnamese waters in late July in the first such reported encounter between the two countries' navies in the South China Sea.
Meanwhile, a UK-based risk consultancy firm said the alleged confrontation is an evidence that the South China Sea would remain an arena of tension and competition.
"Challenging an Indian vessel in an area other countries consider to be international waters will add to widespread perceptions that China's more robust assertion of its maritime territorial claims is the main drive of frictions," said the report "South China Sea: Heating Up" by the Control Risks.
Contrary to popular perceptions, zero-sum competition for oil and gas resources was not the key factor stoking tensions in the South China Sea, especially the Spratly and Paracel islands which are being claimed by China, Taiwan, The Philippines, Vietnam, Malaysia and Brunei, it said.
Most claimant countries, including China, were open to considering joint development of the oil and gas resources around the disputed islands.
However, China would only pursue such approach to the extent that it does not undermine its sovereignty claims or aspirations to greater influence in the South China Sea, said in the report by Control Risks, the regional headquarter of which is in Singapore.
"China will be cautious in any actions that could threaten the security of foreign vessels, but reported harassment incidents show that it is willing to take action beyond the diplomatic sphere," said the report.