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BEIJING — An international tribunal ruled Tuesday that China has no legal basis to claim historic rights to the South China Sea — a major blow to Beijing that could further inflame tensions.

China immediately rejected the decision by the Permanent Court of Arbitration in The Hague, but it was hailed as a landmark victory for those challenging Beijing’s reach into waters with key strategic and commercial significance.

The State Department called on China to abide by the ruling and urged nations bordering the South China Sea to avoid “provocative statements or actions.”

China insists it has full rights over the sea and has...

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