Foreign Ministry spokesman Liu Jianchao said on Thursday that the government had “serious concern over the development of the matter”.
“If Japan deliberately authorises private enterprises the right to drill, this will constitute a serious infringement of China‘s sovereignty and will complicate the East China Sea situation.
“We strongly advise Japan not to take any actions that are unfavourable for the stability of the East China Sea and would damage China-Japan’s overall relations,” he added.
Earlier on Thursday, Japan granted permission to Tokyo-based Teikoku Oil to be the first company to test-drill in the area, the Japanese company said in a statement.
The area where Tokyo has approved drilling is east of the line that Japan regards as its sea boundary with China, but Beijing disputes that demarcation.
Tokyo said in April it would let companies explore the potentially huge fields, where Beijing began drilling unilaterally in 2003 despite protests by Japan.
A series of meetings between Tokyo and Beijing to resolve the gas dispute have failed to make headway amid deteriorating bilateral relations.