Vietnam dredges on disputed reef in South China Sea
Sand can be seen spilling from a newly dredged channel in this view of Vietnamese-held Ladd Reef, in the Spratly Island group in the South China Sea, November 30, 2016, in this Planet Labs handout photo received by Reuters on December 6, 2016. Reuters

China returned a US underwater drone it captured last week in disputed waters off Subic Bay near the Philippines, ending a tense diplomatic standoff.

"After friendly consultations between the Chinese and US sides, the handover work for the US underwater drone was smoothly completed in relevant waters in the South China Sea at midday on Dec 20," China's Defence Ministry said in a statement on Tuesday.

The South China Sea dispute took a turn for the worse after a Chinese navy vessel seized the US Navy probe last Friday. The US lodged a diplomatic protest and asked China to return the drone immediately. The US officials said they could not recall a similar event in the past.

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The drone seizure came after US president-elect Donald Trump made a series of China bashing statements including those touching on currency manipulation and the One-China principle. Trump's unofficial telephone call with Taiwanese President Tsai Ing-wen had also infuriated China.

The US said China acted unlawfully by seizing the drone about 50 nautical miles northwest of Subic Bay off the Philippines. "The UUV was lawfully conducting a military survey in the waters of the South China Sea," an unnamed US official said, Reuters reported.

The naval probe was seized when U.S. Navy's oceanographic ship the USS Bowditch was collecting information on water temperature.

"The UUV [unmanned underwater vehicle] was lawfully conducting a military survey in the waters of the South China Sea," Pentagon spokesman Jeff Davis said.

"The UUV (unmanned underwater vehicle) is a sovereign immune vessel of the United States. We call upon China to return our UUV immediately, and to comply with all of its obligations under international law," Cook said, according to the CNN.

With China issuing a low key, process driven response to the US request to release the drone, Trump mocked China again by saying that Beijing can keep the drone it stole.

China's building of defence facilities in the artificial islands in South China Sea has been a matter of concern for the US and its allies in the region.

Last week think tank Asia Maritime Transparency Initiative said China has likely erected anti-aircraft guns that can thwart potential cruise missile strikes by the US aimed at its military assets in Spratly island chain.