By Michael Martina and David Brunnstrom
BEIJING/WASHINGTON (Reuters) - China will invite private investment to build infrastructure on islands it controls in the disputed South China Sea and will start regular flights to one of them this year, state media said on Friday, moves likely to anger other claimants.
A U.S. research institute, meanwhile, said China appeared to have stepped up construction work on artificial islands it has built in the South China Sea and was close to finishing two more military-length airstrips on them.
China claims almost all of the South China Sea, through which more than $5 trillion of maritime trade passes each year. The Philippines, Brunei, Vietnam, Malaysia and Taiwan have overlapping claims.
In 2012 China set up what it calls Sansha City, based on Woody Island in the Paracels, to administer its islands there.
Sansha's deputy mayor, Feng Wenhai, said they will welcome private investment and "will initiate public-private-partnership programs", state news agency Xinhua said.
"The city will also push forward the planning and construction of a maritime medical rescue center. Submarine optical cables will be laid and put into use this year, and Wi-Fi will cover all inhabited islands and reefs," Feng said.
The airport on Woody Island will also this year launch regular flights, Feng added, without elaborating.
China took full control of the Paracels in 1974 after a naval showdown with Vietnam.
Asked about China’s investment plans, Gabrielle Price, a U.S. State Department spokeswoman, said Washington continued to call on all claimants to halt land reclamation, construction of new facilities, and militarization of outposts in the South China Sea.
Though China calls it a city, Sansha's permanent population is no more than a few thousand, and many of the disputed islets and reefs in the sea are uninhabited.
Hundreds of Vietnamese demonstrated in Hanoi when China established Sansha and invited oil firms to bid for blocks in offshore areas that Vietnam claims as its territory.
Tensions between China and Vietnam have flared again in recent weeks, after Chinese civilian aircraft conducted test landings on the disputed Fiery Cross Reef, one of three runways China has been building by dredging sand up onto reefs in the Spratly Islands to the south of the Paracels.
Vietnam says China's landings were on an "illegally" built reef, and has vowed to defend its sovereignty through peaceful measures.
Chinese state media on Friday showed pictures of what it said was the first batch of civilian passengers to arrive by plane on Fiery Cross, family members of troops based there, though it only appeared to be two women and two young children.
"Everyone rapturously looked around at the island's beautiful scenery," read a caption underneath one of the pictures on the website of Chinese news portal Sina. It showed the four standing in front of two civilian aircraft.
The Asia Maritime Transparency Initiative of Washington's Center for Strategic and International Studies think tank published satellite images on Friday showing airstrips on two other artificial islands - Mischief and Subi Reefs - close to completion.
It said the work was progressing faster than expected. While the strip at Fiery Cross had taken at least seven months to complete, that one on Mischief Reef was nearly finished after only three to four months, AMTI said in a report.
The construction included housing, cement plants, docking facilities, and an area of artificial turf that could be used for sports or as a parade ground, AMTI director Greg Poling said.
The work would be of particular concern to the Philippines, given the proximity of the strips to Philippine occupied features, the AMTI report said.
The United States, a treaty ally of the Philippines, has criticized Beijing's building of artificial islands in the Spratlys and has conducted sea and air patrols near them.
(Reporting by Michael Martina in Beijing and David Brunnstrom in Washington; Editing by Ben Blanchard and Nick Macfie)