Mrs. Arroyo, who returned late Wednesday from a three-day state visit to China, said Chinese President Jiang Zemin agreed there should be no "provocative action" in the area.
The Spratlys, a chain of atolls and islets also being claimed by Brunei, Malaysia, Taiwan and Vietnam, have long been tagged as a potential "hot spot" because of the conflicting claims.
But Mrs. Arroyo disclosed that during bilateral talks with the Chinese leader, they agreed to "search for a peaceful settlement of the South China Sea dispute under international standards and regional consensus."
The President recognized that China has long asked for "joint development" of the disputed area and expressed no serious objection to the Chinese proposal.
But Manila is "awaiting the modalities, the specific project proposals," Mrs. Arroyo said.
"I don’t want to stick to motherhood statements... I want to move forward. Sometimes, it will succeed and sometimes it will not push through but I don’t want to be static," the President stressed.
"One of the things that we might look at, and this is very preliminary, is maybe look at our position on cooperation in marine preservation and matters like that of protecting the environment," she said.
She also suggested that Manila and Beijing may also agree on joint oil exploration in the Spratlys by tapping Filipino geologist Fred Mañalac who has helped discover oil for China.
"We also have one ‘superstar’ Filipino geologist there who discovered oil for China. He’s going to be working with (Energy Secretary Vicente) Perez on some proposals for joint development in the South China Sea," Mrs. Arroyo said.
She also announced that Perez and the Department of Energy will be working with China on its possible participation in the country’s power privatization program.
While the President appeared to be keen on pursuing joint development projects in the disputed area, she reiterated Manila’s position of pushing for a multilateral "code of conduct" among claimant nations.
China has expressed no objection to a code of conduct but wants to forge bilateral pacts with each of the six claimant nations.
"We want to have a solution that is peaceful and to the mutual satisfaction of all the claimants, not just China and the Philippines," she said.
"In other words, these are multilateral issues and we are pushing to develop a consensus on a regional code of conduct in the South China Sea," she stressed.
The President also emphasized that the Philippines and China have historically enjoyed close cooperation in trade and culture and the Spratlys issue should not spoil such good bilateral relations.