The Panamanian-flagged 274-metre tanker Sanchi was operated by Iran's Glory Shipping and heading to South Korea with its cargo, the ministry said.

The accident happened 160 nautical miles east of Shanghai.

The second vessel involved was a Hong Kong-flagged cargo ship, the CF Crystal, carrying 64,000 tonnes of grain.

"The Sanchi is still floating and continues to burn, there is oil on the sea surface; search and rescue operations are rushing and underway," the ministry said in a statement.

The foreign ministry said China had deployed specialised "cleaning ships" to the scene to minimise environmental damage.

The cause of the collision was under investigation, it added.

Chinese maritime authorities have sent eight ships and South Korea has sent a plane and a 3,000-tonne coastguard ship.

"Our ship and plane have arrived at the site and are working closely with Chinese maritime authorities," a coastguard official said.

Iran's Petroleum Ministry said the tanker belongs to the National Iranian Tanker Company (NITC) and was delivering its cargo to South Korea's Hanwha Total. The ship and its cargo were insured, a statement said.

It was the second accident in less than two years involving a tanker owned by the NITC. In August 2016 an Iranian supertanker and a container ship collided in the Singapore Strait, causing damage to both vessels but no injuries or pollution.

Saturday's collision was the latest fatal maritime accident to hit East Asia in recent years.

In October 13 crew on a Chinese fishing boat were killed after their vessel collided with a Hong Kong oil tanker off Japan's west coast.

US military vessels have been involved in a number of accidents in recent months in the region.

The USS John S McCain collided with a tanker off Singapore in August, killing 10 sailors and injuring five others.

Two months earlier, in June, the USS Fitzgerald and a cargo ship smashed into each other off Japan, leaving seven sailors dead.