Vietnam has defended a new maritime law claiming sovereignty over the fiercely-contested Paracel and Spratly islands, dismissing protests from China as "absurd".

The National Assembly on Thursday adopted the Law on the Sea, which places the disputed mineral-rich islands under Hanoi's sovereignty, prompting Beijing to summon Vietnam's ambassador to oppose the "illegal and invalid" move.

China and Vietnam, as well as other neighbouring nations, are locked in long-standing territorial disputes over the South China Sea, including the Spratlys and Paracels.

"Vietnam resolutely rejects the absurd accusations by the Chinese side," Foreign Ministry spokesman Luong Thanh Nghi said in a statement posted on the ministry's website late Thursday.

The new law -- the first adopted by Hanoi covering the South China Sea -- is "normal law-making activity", he said, adding that Vietnam had "indisputable legal basis and historical evidence of its sovereignty over the islands".

"More seriously, (Vietnam) strongly opposes China's establishment of the so-called 'Sansha City,'" Nghi said.

China said Thursday it had elevated the administrative status of the Nansha (Spratly) and Xisha (Paracel) islands from a county to a prefectural-level district under the control of the city of Sansha.

The official Thanh Nien newspaper reported Friday that the law was adopted by 495 out of 496 deputies and will come into force in January 2013.

China and South Vietnam once administered different parts of the Paracels but after a brief conflict in 1974 Beijing took control of the entire group of islands.

Vietnam holds several of the larger Spratly Islands and neighbouring countries have long been locked in diplomatic rows over their conflicting claims.

China says it has sovereign rights to the South China Sea, believed to sit atop vast oil and gas deposits, including areas close to the coastlines of other countries and hundreds of kilometres from its own landmass.

The disputed region is a key trading route for the United States, which has opposed Beijing's attempts to settle conflicting claims bilaterally, repeatedly calling instead for the peaceful resolution of disputes.

Taiwan, Vietnam, Brunei, China, Malaysia, and the Philippines all claim parts of the South China Sea.