MANILA, March 5 (Reuters) - The Philippines said on Saturday it had spotted a Chinese navy ship and dozens of militia vessels around a contested Philippine-occupied island in the South China Sea, as territorial tensions mount in the area.

The Philippine Coast Guard said 42 vessels believed to be crewed by Chinese maritime militia personnel were seen in the vicinity of Thitu island, while a Chinese navy vessel and coast guard ship were observed "slowly loitering" in the surrounding waters.

The Chinese embassy in Manila did not immediately respond to a request for comment on the assertion.

Thitu in the Spratly island chain is Manila's biggest and most strategically important outpost in the South China Sea, a body of water largely claimed by Beijing where several countries have conflicting territorial claims.

President Ferdinand Marcos Jr said two weeks ago the Philippines "will not lose an inch" of territory as the Southeast Asian protested China's "aggressive activities" in the sea.