Anwar's remarks come after he opened the door for negotiations with China earlier this week, in a sign of mounting pressure on Malaysia's energy operations in waters that Beijing claims as its own.

China claims sovereignty over almost the entire South China Sea, through which about US$3 trillion worth of ship-borne trade passes annually. Malaysia, Brunei, the Philippines, Taiwan and Vietnam have some overlapping claims.

Petronas operates oil and gas fields within Malaysia's 200-nautical mile exclusive economic zone (EEZ) and has in recent years had several encounters with Chinese vessels.

China was worried that "Petronas has carried out a major activity at an area that is also claimed by China," Anwar said, responding to a parliamentary question about his discussions on the South China Sea during his visit to China last week.

"I stressed [...] that Malaysia sees the area as Malaysian territory therefore Petronas will continue its exploration activities there," Anwar said, without specifying an offshore project or a location.

But Malaysia is open for negotiations "if China feels this is their right", Anwar said.

China would like to work with Malaysia to handle differences in the South China Sea through dialogue and consultation in an appropriate manner, its foreign ministry said on Tuesday.

Petronas declined to comment.

China claims its territory via a "nine-dash line" on its maps, which cuts into the EEZs of Vietnam, the Philippines, Malaysia, Brunei and Indonesia.

The Permanent Court of Arbitration, however, ruled in 2016 that the nine-dash line, which stretches as far as 1,500 km off its coastline, has no legal basis.

United States think tank the Asia Maritime Transparency Initiative (AMTI) last week said a Chinese coast guard vessel was for the past month operating near Petronas' Kasawari gas development off Malaysia's Sarawak state, and came as close as 1.5 nautical miles of the project. A Malaysian navy ship was in the area, AMTI said.

China foreign ministry on Monday said it was not aware of the specific incident but said the conduct of the China coast guard is beyond reproach.

The Kasawari field holds an estimated 85 billion cubic meters of gas reserves and is expected to start production this year.

Anwar, in his parliamentary comments, said China believed its ships were in international waters.

Malaysia's foreign ministry will issue a protest note if there were "collisions" between Malaysian and Chinese vessels there, Anwar said.

In response, the Chinese foreign ministry said Beijing safeguards its "legitimate rights and interests" in the South China Sea.

Chinese investment

In the meantime, China will invest an estimated 170.07 billion ringgit (US$38.64 billion) in Malaysia, including in the petrochemical and automotive industries, Anwar said on Tuesday.

Rongsheng Petrochemical Co Ltd will invest an estimated 80 billion ringgit in a petrochemical refinery in southern Malaysia, Anwar said in parliament.

Automaker Geely 0175.HK will invest 2 billion ringgit initially and later ramp that up to 32 billion ringgit, he said.

Anwar, who was on an official visit to China last week, did not give a time frame for the total investment commitments.

The premier also said he discussed with China reducing Asia's dependency on the US dollar.

Malaysia's central bank is working on an initiative to allow Kuala Lumpur and China to conduct trade using the ringgit and renminbi, he said.

"There is no reason for a country like Malaysia to continue to depend on the US dollar," Anwar said.

Anwar said he proposed setting up an 'Asian Monetary Fund' at the Boao Forum in China last week, and in a bilateral meeting Chinese President Xi Jinping welcomed the idea to be discussed further.