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Impoverished North Korea said on Friday it would attack if Seoul allowed activists to drop anti-northern leaflets on its territory, in its most strident warning against its long-time foe for months. South Korea's defence minister told parliament its military would retaliate in the event of attack. "As a close neighbor of the peninsula, China urges the two Koreas to resolve the conflict through dialogue and consultation," Chinese Foreign Ministry spokesman Hong Lei said in a statement. "We hope the two parties can stay calm and not make any provocative or radical actions." North Korea, which relies heavily on China to support its economy, shelled a South Korean island almost two years ago, killing civilians. A looming presidential election in the south and plans to deploy longer-range missiles by the government in Seoul have angered the north and prompted an escalation of belligerent rhetoric from Pyongyang. 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