"As everyone knows, pressure and sanctions are not the fundamental way forward to resolving the Iran nuclear issue, and cannot fundamentally solve this issue," Foreign Minister Yang Jiechi told a news conference on the sidelines of China's annual parliament.
Washington and other Western powers want China to approve a proposed United Nations resolution imposing new sanctions on Tehran, which they say wants the means to make nuclear weapons and has violated non-proliferation safeguards.
Beijing has previously resisted calls for harsh sanctions against Iran, a big source of oil for China, and Yang emphasized his government's reluctance, while stopping short of outright opposing any new U.N. resolution.
"Frankly speaking, there are some difficulties surrounding efforts to settle the Iranian nuclear issue at present, but we don't think diplomatic efforts have been exhausted," he said.
Tehran denies it wants to build an atomic bomb and says its uranium enrichment is for future electricity generation and for medical isotopes.
IMPORTS IRANIAN OIL
A draft Western document proposes restricting more Iranian banks abroad, but does not call for sanctions against Iran's oil and gas industries.
China is one of the five permanent members of the U.N. Security Council, each holding the power to veto resolutions.
Beijing has long said sanctions are not an effective tool for resolving international disputes, including over Iran, which is a major source of crude oil for China.
China has backed previous U.N. resolutions against Iran, after working to cut out proposed measures that could threaten flows of oil and Chinese investments.
"Yang has restated China's basic position that the focus has to be on diplomacy," said Shi Yinhong, a professor of international relations at Renmin University in Beijing.
"China will bargain in the Security Council, and if the sanctions can be weakened enough, then naturally China will vote for them as it has for previous resolutions (about Iran)," said Shi.
"It will be up to how far the United States and other Western countries are willing to dilute their demands," he added. "China wants a resolution without many teeth."
Shi said China would be wary of sanctions on Iranian banks that could entangle its energy imports from Iran, the fast-growing Asian economy's third biggest foreign supplier of crude oil last year.
US TIES STRAINED
The Iran nuclear dispute is one of a number of issues that are testing ties between China and the United States.
The two countries have tussled recently over trade, Chinese internet controls, U.S. weapons sales to Taiwan, and President Barack Obama's meeting with the Dalai Lama, the exiled Tibetan Buddhist leader.
Beijing considers Taiwan an illegitimate breakaway from mainland rule, and reviles the Dalai Lama as a "separatist" for seeking self-rule for his homeland.
This week, U.S. Deputy Secretary of State James Steinberg visited Beijing to seek to ease friction and discuss the Iran nuclear dispute.
Yang said relations between the two powers had been seriously upset, and he blamed Washington.
"I believe the United States understands very well China's core interests and major concerns," he said, referring to Taiwan and Tibet.
Beijing has not yet acted on its threat to sanction U.S. companies involved in $6.4 billion of new arms sales to Taiwan that the Obama administration moved forward with in late January.
Yang said it was wrong to say China had become hawkish.
"Resolutely adhering to one's principled stance is not the same thing as being hardline," he said.
Shi, the professor, said Yang's comments indicated that China has misgivings about the Obama administration.
"China doesn't want confrontation, but is not rushing to fully restore relations with the United States," he said.
(Additional reporting by Emma Graham-Harrison; Editing by Bill Tarrant)
