"Because of our friendship with China and because we value your friendship I will not go there to raise the Philippine flag," he told about 2,000 Filipinos during an official visit to Saudi Arabia.
"I will not go to any of the islands. Maybe I will send my son, just to show that our claim is clearly good for all generations of Filipinos," he said to applause.
Duterte first made the threat on April 6 when he told reporters: "I have ordered the armed forces to occupy all -- these so many islands, I think nine or 10 -- put up structures and the Philippine flag."
Pag-asa (Hope) is the Philippine name for "Thitu island" in the Spratlys, the largest of the islands occupied by the Philippines in that disputed archipelago.
Duterte's initial declaration confused many.
His spokesmen and the military later insisted that he meant they should upgrade the facilities on about nine of the islands and outcroppings the Philippines already occupies.
Duterte's declaration also apparently surprised China which he has been wooing since he took office in June.
But he said his setting aside of the territorial dispute opened the door to improved trade, investment and assistance with China.
In Riyadh, Duterte again cited the export of Philippine bananas and pineapples to China which resumed after he took a conciliatory stance toward Beijing.
Saudi Arabia is the second-largest employer of Philippine overseas workers, hosting 760,000 Filipinos who send home remittances vital to the Philippine economy.
From Riyadh, which Duterte called "a very important ally", Duterte travelled to neighbouring Bahrain and will finish his Gulf tour in Qatar.
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