A Vietnamese boat has capsized in the disputed waters of South China Sea after colliding with a Chinese vessel amid on-going maritime territorial disputes between the two Asian countries.

The incident took place 17nm from a $1bn Chinese oil rig off the Paracel islands.

Vietnam coastguard commander Nguyen Quang Dam was quoted by Reuters as saying that the Chinese boat rammed and sank the Vietnamese fishing vessel; however, nearby Vietnamese ships rescued the ten fishermen on-board.

"A Vietnamese boat from the central city of Da Nang was deliberately encircled by 40 fishing vessels from China before it was attacked by a Chinese ship," Dam said.

The Vietnamese Fisheries Resources Surveillance Department said that China has placed a fast attack missile boat and a minesweeper around the rig, reported tuoitrenews.vn.

China’s placement of the deep-water oil rig had triggered anti-Chinese protests in Vietnam, and prompted China to send ships to evacuate its nationals in Vietnam.

The violent riots started as a peaceful march on 12 May in Vietnam and later broke out into arson and destruction, killing two Chinese people and leaving more than 100 injured.

Last week, Vietnam Prime Minister Nguyen Tan Dung said that the country may take legal action against China according to international law.

Vietnam and the Philippines have jointly condemned Chinese actions in the South Sea. The Philippines is also raising issues with China in the United Nations tribunal.