KOTA KINABALU, Malaysia (Reuters) -- Malaysia's deputy prime minister said the country must defend encroachment of its sovereignty in a veiled swipe at China's territorial claims in the South China Sea, as tensions flared ahead of a regional meeting that Beijing will attend. Without directly referring to China, Ahmad Zahid Hamidi questioned why land was being reclaimed on coral areas close to Malaysia's shores.

"If our country is threatened or being encroached, we Malaysians should rise to defend our country," he told a gathering in Kota Kinabalu, the capital of the Malaysian state of Sabah on Borneo island.

Beijing, which claims almost the entire energy-rich South China Sea through which $5 trillion in shipborne trade passes yearly, has stepped up land reclamation and construction in disputed islands and reefs.

But the U.S. challenged the territorial limits China claims around the islands in recent weeks with a so-called freedom-of-navigation patrol.

Malaysia, which will host the Association of South East Asian Nations (ASEAN) meeting this month to be attended by U.S, China and other world powers, claims a portion of the disputed waterways along with Vietnam, Taiwan, the Philippines and Brunei.

Regional states have also raised objections on China's claims. Philippines has taken China to the Permanent Court of Arbitration in the Hague. Beijing refuses to recognize the court's authority. Indonesia also said it could take China to an international court if dialogue over the islands failed.

"The international community should see this is not just a matter of economy but sovereignty," Ahmad Zahid said. "South China Sea is only the name, but 200 nautical miles in the exclusive economic zone is under our borders."

(Reporting by Kuala Lumpur newsroom; editing by Shri Navaratnam)