On Thursday the Chinese navy seized the drone
from the USNS Bowditch -- an unarmed, oceanographic survey ship -- about 50 miles northwest of Subic Bay in the Philippines.
The Pentagon says the unmanned vehicle was in the South China Sea gathering "military oceanographic data," such as salinity, water temperature and sound speed.
But a commentary published in the People's Daily, the ruling Communist Party's official mouthpiece, said the drone was linked to US efforts to "contain" China and was "just the tip of the iceberg"
of its military strategy in the region.
China has agreed to return the drone, but details of the transfer haven't yet been agreed upon, the Pentagon said.
The incident comes at a volatile moment in US-China relations, with President-elect Donald Trump showing himself to be increasingly willing to challenge Beijing.
"You've got a very crude, transactional businessman who is now the most powerful politician in the world, dealing with a relationship which is extremely complicated and has very high stakes," said Kerry Brown, an associate fellow in the Asia program at British think tank Chatham House
"So it will really depend on whether Trump's got good advisers around him who can navigate these issues," he added. "If not, then things could go badly wrong very quickly."
Why did China seize the drone?
China likely perceived the vessel as a threat to its small fleet of Type 094 strategic nuclear submarines that operate in the waters, said Zhang Baohui, a security expert at Lingnan University in Hong Kong.
"China is super-sensitive to US surveillance in the South China Sea, and many in the US don't accept mutual nuclear deterrence," Zhang explained.
"It's a confined area, and China feels its submarines are very vulnerable. It is my reading that China thought the US was using the drone to track down one of its submarines and they felt that had to act."
Was it in retaliation for Trump's Taiwan call?
The incident comes just weeks after Trump took a phone call from Taiwan's president,
upending decades of diplomatic protocol and questioning the longstanding US position that the Taiwan is part of "one China" and not a sovereign state.
"It seems likely to be in response to Trump's comments -- these things don't just happen by accident," said Brown.
"And for China, Taiwan is non-negotiable. It's something they're willing to get emotional about," he added.
What was Trump's reaction to the drone incident?
Trump took to Twitter to air his fury at the "unpresidented" act (he later changed the spelling to "unprecedented").
"China steals United States Navy research drone in international waters - rips it out of water and takes it to China in unprecedented act," said the US President-elect in one tweet.
"We should tell China that we don't want the drone they stole back.- let them keep it!" he said in another.
And the response in China?
China's official response to Trump's tweets has been relatively muted. However the Global Times, a provocative but state-sanctioned tabloid, had a scathing response.
"He bears no sense of how to lead a superpower," an opinion piece published in the newspaper late Sunday said.
"Even the US military did not use the term 'steal' to describe the move by the Chinese navy. Trump's second tweet makes people worry that he will treat China-US relations as child's play," it added.
What were US-China relations like before?
"On the whole it was relatively stable," said Brown of relations between the countries prior to Trump's comments.
"Obama and (Chinese President) Xi Jinping had forged a fairly strong relationship -- they got used to each other the last few years. There was a familiarity, they managed to read each other quite well," he added.
And what could they look like in the future?
Brown said that Trump wants a more profitable US trade deal with China and is keen to bring jobs, which he claimed were going to Chinese workers, back to America.
Meanwhile, China "basically wants America to get out of its backyard as much as possible," Brown said.
"At the moment Trump's just all talk," he added. "But if he carries on behaving like this when he's president, the Chinese response will be to push back even more."