"It is the Philippines that has created and stirred up the trouble," Vice Foreign Minister Liu Zhenmin said in introducing the paper.
The Philippines, under a U.N. treaty governing the seas, sought arbitration from an international tribunal on several issues related to its long-running territorial disputes with China.
The tribunal in The Hague, Netherlands, rejected China's claims in a landmark ruling that also found the country had aggravated the seething regional dispute and violated the Philippines' maritime rights by building up artificial islands that destroyed coral reefs and by disrupting fishing and oil exploration.
While the decision is seen as a major legal declaration regarding one of the world's most contested regions, its impact is uncertain given the tribunal has no power of enforcement.
In the new policy paper, China asserts its sovereignty over South China Sea islands and their surrounding waters and opposes other countries' "illegal claims and occupation."
The paper blames the Philippines for violating an agreement with China to settle the disputes through bilateral negotiation and says Manila "distorted facts and concocted a pack of lies" to push forward the arbitration proceedings.
Still, Liu said that China remains committed to negotiations with the Philippines, noting new Philippine President Rodrigo Duterte's positive remarks on the issue.
"China stands ready to work with the new Philippine government," he said, adding that "early removal of obstacles posed by the arbitration case" would help improve relations.
While the findings cannot reverse China's actions, it still constitutes a rebuke, carrying with it the force of the international community's opinion. It also gives heart to small countries in Asia that have helplessly chafed at China's expansionism, backed by its military and economic power.
"The Philippines strongly affirms its respect for this milestone decision as an important contribution to ongoing efforts in addressing disputes in the South China Sea," Philippine Foreign Secretary Perfecto Yasay said Tuesday, calling on "all those concerned to exercise restraint and sobriety."
Former Foreign Secretary Albert del Rosario, who helped oversee the filing of the case, said the ruling underscored "our collective belief that right is might, and that international law is the great equalizer among states."
Six regional governments have overlapping territorial claims in the South China Sea, waters that are rich in fishing stocks and potential energy resources and where an estimated $5 trillion in global trade passes each year.
The disputes have increased friction between China and the United States, which has ramped up its military presence in the region as China has expanded its navy's reach farther offshore.
White House spokesman Josh Earnest encouraged all parties to "acknowledge the final and binding nature of this tribunal."
Speaking to reporters aboard Air Force One as President Barack Obama was flying to Dallas, Earnest said the United States seeks a peaceful resolution to disputes and competing claims in the region, while preserving freedom of navigation and commerce.
Earnest also urged the parties not to use the ruling as an opportunity to engage in escalatory or provocative actions.
U.S. Defense Secretary Ash Carter said at a news conference in Afghanistan that the ruling is an opportunity for everyone in the region to act in a sensible way in accordance with the rule of law in order to settle disputes.
The five-member panel from the Permanent Court of Arbitration unanimously concluded China had violated its obligations to refrain from aggravating the dispute while the settlement process was ongoing.
It also found that China had interfered with Philippine petroleum exploration at Reed Bank, tried to stop fishing by Philippine vessels and failed to prevent Chinese fishermen from the Philippines' 200-nautical mile exclusive economic zone.
China, which boycotted the entire proceedings, reiterated that it did not accept the panel's jurisdiction. China "solemnly declares that the award is null and void and has no binding force. China neither accepts nor recognizes it," the Foreign Ministry said.
Australian Foreign Minister Julie Bishop said Wednesday that China's reputation and ambitions of becoming a world leader would suffer if it ignored the South China Sea ruling.
"To ignore it would be a serious international transgression," Bishop told Australian Broadcasting Corp. "There would be strong reputational costs."
Japan's Foreign Minister Fumio Kishida said the tribunal's decision is "final and legally binding." He said in a statement that "Japan strongly expects that the parties' compliance with this award will eventually lead to the peaceful settlement of disputes in the South China Sea."
Beijing says vast areas of the South China Sea have been Chinese territory since ancient times and demarcated its modern claims with the so-called nine-dash line, a map that was submitted under the U.N.
treaty. The tribunal said that any historical resource rights China may have had were wiped out if they are incompatible with exclusive economic zones established under the U.N. treaty, which both countries have signed.
It also criticized China for building a large artificial island on Mischief Reef, saying it caused "permanent irreparable harm" to the coral reef ecosystem and permanently destroyed evidence of the natural conditions of the feature.
Just before the panel announced its ruling, a busload of Chinese tourists arrived outside the court building in The Hague and joined a handful of other protesters shouting down three people calling for China to leave Philippine waters. In Manila, dozens of rallying Filipinos jumped for joy, wept, embraced each other and waved Philippine flags after news of their victory. One held up a poster that said: "Philippine sovereignty, non-negotiable."
The aftermath of the ruling could be greatly influenced by the new Philippine president, who took office late last month and inherited a case filed by his predecessor. Duterte has spoken of having friendlier relations with China and said last week his government stood ready to talk to Beijing if it got a favorable ruling. It remains to be seen, however, how far Duterte can stray from Manila's previously critical stance, given growing nationalist sentiment in the Philippines against China's actions.