The confrontation Friday near Indonesia's Natuna Islands was the third such skirmish in the area this year between Chinese and Indonesian vessels, as tensions mount in the waterway over Beijing's growing assertiveness.
Indonesian warships fired warning shots at a group of foreign vessels allegedly fishing illegally and detained a Chinese-flagged boat and seven crew.
China protested after the clash and said one fisherman was injured. Jakarta has said none of the detained crew were hurt.
"China protested because it thinks this area is theirs," commander Achmad Taufiqoerrochman told reporters.
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"Actually the (fish) stealing is just a ruse to stake its claim," he said, referring to allegations that Chinese vessels regularly fish illegally in Indonesian waters near the Natunas.
"They need a presence and their way to do it is with fishing boats."
Unlike several of its Southeast Asian neighbours, the Indonesian government has long maintained it has no maritime disputes with China in the South China Sea. It has no overlapping claims with China to islets or reefs there.
China has said it recognises Indonesia's sovereignty over the Natuna Islands themselves.
Following Friday's clash, China's foreign ministry noted that "China and Indonesia have overlapping claims for maritime rights and interests" in the area, a statement which analysts said was significant as it openly acknowledged the existence of a dispute.
In the past, China has typically defended the actions of its vessels by saying they were operating in "traditional Chinese fishing grounds".
"It suggests that it doesn't recognise Indonesia's claim to that exclusive economic zone."
Confrontations between Indonesian and Chinese vessels around the Natunas have escalated since Jakarta launched a crackdown on illegal fishing in 2014. Indonesia plans to sink a group of impounded foreign fishing vessels next month.