Slow progress on South China Sea issue: PM

Prime Minister Malcolm Turnbull has lamented the slow progress on resolving the South China Sea dispute.

Mr Turnbull told reporters at the ASEAN summit in Laos there was a "sense of cautious optimism" towards an agreement on a code of conduct.

"Territorial disputes should be resolved in accordance with international law, peacefully and by negotiation," he said, adding all countries should refrain from conduct that adds to tensions with their neighbours.

Mr Turnbull is about to head into bilateral talks with Chinese Premier Li Keqiang where he expected the maritime dispute would be discussed.

There was a lot at stake over the issue because over the past 40 years there had been relative peace and harmony in the region and that had been the foundation of much prosperity.

"Everybody has a vested interest from the biggest countries to the smallest countries," he said.

"It calls for cool heads, calm disciplined communication and a measured response to these issues."

The South China Sea dispute involves overlapping claims between the Philippines, China, Vietnam, Malaysia, Brunei and Taiwan.