Philippine President Rodrigo Duterte on Wednesday said joint military exercises scheduled next month between the Philippines and the U.S. will be the last for the longtime allies, as he seeks to avoid upsetting China, with which he hopes to build stronger trade and investment ties.

He also said he would end routine joint naval patrols in the South China Sea.

"I will serve notice to you now that this will be the last military exercise," Mr. Duterte said to an audience of some 350 Filipinos in Hanoi, where he is on a two-day state visit to Vietnam

Still, the Philippine leader reaffirmed that his country's cooperation with the U.S. stands. "I will maintain the military alliance—the RP-US pact, which our countries signed in the early 50s," Mr. Duterte said.

The military treaty with the U.S. was recently updated to allow more American troops to stay in the country for an extended period. Mr. Duterte said he was ending the routine joint patrols in the South China Sea because they, too, risk military confrontation between China and U.S., with the Philippines caught in the middle. "If the battleground will be in San Francisco, or China, then I'm OK with that," he said.

Mr. Duterte is scheduled to hold talks with Vietnamese President Tran Dai Quang and meet other leaders on Thursday to discuss trade, security and other bilateral issues. Overall trade between Vietnam and the Philippines slipped 2% from the previous year to $2.93 billion last year. The Philippines is one of Vietnam's largest rice-export markets.

Mr. Duterte said holding war games with the U.S. might undermine his efforts to improve relations with Beijing, which have soured in recent years as Manila tried to strengthen its claims to part of the South China Sea. China has increasingly asserted sovereignty over that body of water, which is also claimed in part by Vietnam, Malaysia and Brunei.

The Philippine military earlier this month invited U.S. troops to joint exercises in October, shortly after Mr. Duterte's called for the Americans to withdraw their remaining military advisers from the southern island of Mindanao. Mr. Duterte had said their presence hurt efforts to find a peace with Muslim rebels.

Earlier this week, Mr. Duterte said he plans to establish trade alliance with China and Russia. He previously had ordered his defense secretary to seek military equipment from suppliers in China and Russia to fight drug traffickers and insurgents.

Mr. Duterte has made provocative remarks against U.S. President Barack Obama , the United Nations and the European Union since coming to power on June 30. He has bristled at Western criticism of his bloody war on drugs that has claimed the lives of more than 3,000 people, according to police figures.

His words and behavior, however, have frightened foreign investors, who have been pulling back from the country, weakening Manila's stock market and sending the peso this week to its lowest against the U.S. dollar since September 2009.

Mr. Duterte has said he won't surrender the legal victory the Philippines won in July before an international tribunal in The Hague that dismissed China's claims to ownership and economic rights over most of the South China Sea. Vietnam has voiced support for the ruling, which has emerged as a main legal challenge against China's widening maritime presence in the area, including its building of artificial islands housing infrastructure such as airfields and port installations.

Write to Cris Larano at cris.larano@wsj.com

(END) Dow Jones Newswires

September 28, 2016 21:55 ET (01:55 GMT)