China said it landed three planes over Fiery Cross Reef in recent days, prompting protests from rival claimants Vietnam and the Philippines, and raising fears it could impose military controls in the area.
"Freedom of navigation and overflight are non-negotiable. They are red flags for us," Hammond told a joint news conference with his Filipino counterpart, Albert del Rosario, in Manila.
Hammond, whose Manila visit followed a trip to China, did not elaborate on what action would be taken if the "red flag" was raised, other than to say Britain would continue to assert its right to sail in the area.
Del Rosario said he was worried that, with the test flights, China was laying the groundwork for the declaration of an Air Defence Identification Zone (ADIZ), similar to the one it declared in the East China Sea that riled Japan.