The August 27 incident, which Japan called regrettable, came amid widespread anti-Japan demonstrations in China over a disputed East China Sea island chain known as Diaoyu in China and Senkaku in Japan.

Ambassador Uichiro Niwa was not hurt in the incident and there was no other damage to his diplomatic vehicle, according to the Japanese embassy.

Beijing police detained a 23-year-old man surnamed Guo and a 25-year-old man surnamed Xia as the chief suspects in the incident, the city government's official news website Qianlong reported.

The two men, who both admitted the wrongdoing, were "administratively detained", the report said, which means they are likely to face lesser punishments than if they were placed in criminal detention.

Another man, who allegedly used his car to stop the ambassador's vehicle allowing the flag-snatch to take place, was issued a warning, it added.

China last week said it was "seriously investigating" the incident, state media said.

Tensions between Japan and China flared earlier this month after pro-Beijing activists landed on one of the disputed islands, which are controlled by Japan.

They were arrested by Japanese authorities and deported.

About a dozen nationalists raised Japanese flags on the island days later.

Thousands of Chinese citizens in more than 20 cities have protested over the last two weeks. Japanese businesses, restaurants and cars were targeted in some cities.

Clinton plans to meet the full Chinese leadership including President Hu Jintao and his expected successor Xi Jinping, at a time when tensions have been soaring over the South China Sea in particular.

Clinton has voiced hope that China, which claims virtually all of the strategic waterway, will agree to work out a code of conduct on the disputes and has encouraged Southeast Asian nations to stand united.

Opening her talks in Beijing, Clinton sought to reassure China, whose state media has repeatedly accused the United States of using its vaunted new strategic focus on Asia as a cover to contain Beijing.

"We are committed to building a cooperative partnership with China. It is a key aspect of our rebalancing in the Asia-Pacific," Clinton said as she entered a dinner Tuesday with Foreign Minister Yang Jiechi.

Yang, who will hold a rare joint news conference with Clinton on Wednesday, said that China "stands ready to work" with the United States.

"Maintaining the healthy and steady development of our relationship serves the fundamental interests of our two countries and two peoples and is conducive to stability, peace and development in the Asia-Pacific region and beyond," Yang said.

The conciliatory tone was at sharp odds with the state-run Xinhua news agency, which on the same day called on Washington to "stop its role as a sneaky troublemaker" in Asia.

The Philippines and Vietnam have accused China of intimidation of its ships in the South China Sea, the gateway for half of the world's cargo trade and where six nations or territories hold sometimes overlapping territorial claims.

China recently established a remote garrison in the South China Sea, angering Vietnam and the Philippines. Hanoi in June passed a law proclaiming its jurisdiction over the Paracel and Spratly islands.

In response to the tensions, President Barack Obama's administration has stepped up military ties with Southeast Asia, furthering its goal of nurturing relations with the economically dynamic and largely US-friendly region.

Clinton, asked in Indonesia about China's garrison, did not fault Beijing directly but called on all nations to avoid "steps that would increase tensions or do anything that would be viewed as coercive or intimidating to advance their territorial claims".

Beijing has also been in dispute with Japan, a close US ally, over a group of disputed islands in the East China Sea.

Clinton will also be looking to coordinate with China on hotspots around the globe. China, which wields veto power on the Security Council, has rejected US-backed UN efforts to step up pressure on Syrian President Bashar al-Assad over mounting violence, although Beijing is seen taking a backseat to Russia.

Clinton's last visit to China, in May, was overshadowed by a row over dissident Chen Guangcheng, who escaped what he said were beatings under house arrest for the safety of the US embassy.

China agreed to allow Chen, who enraged authorities by exposing corruption in the country's one-child policy, to move to New York as a student.

Clinton's trip comes two months before elections in the United States, where Obama's Republican challenger Mitt Romney has vowed a tougher stance on China over its currency rate and its military build-up.