The United States accuses China of militarising the South China Sea by turning contested reefs and rocks into putative military bases.
Beijing says it is only asserting its "indisputable" sovereignty over the islands and charges that the United States is interfering by encouraging rival claimants to antagonise China.
The nationalist Global Times tabloid called Obama's claim that the Vietnam move was not aimed at China "a very poor lie," adding that it would exacerbate the "strategic antagonism between Washington and Beijing."
While not an official mouthpiece, the Global Times nevertheless often represents a strain of nationalist thinking within the ruling Communist Party.
It accused Washington of trying to knit three nets around China - in ideology, in security and in economy and trade - to try to secure its dominance of the region.
While it is unlikely that Vietnam, whose weapons systems are largely Russian-made, would import significant quantities of US arms for the moment, the paper said, lifting the embargo draws Hanoi into a "US-dominated regional security system".
The paper also implied that there was hypocrisy in the move to cozy up to Communist Vietnam. "When the US has an urgent need to contain China in the South China Sea, the standards of its so-called human rights can be relaxed," it wrote.
Speaking in Ho Chi Minh City after Obama arrived there, US Secretary of State John Kerry said the relaxation of the arms embargo was not about China but about promoting a "rules-based order" in the fastest-growing marketplace in the world.
"If you want to point to the possibility of tinderbox and possibly igniting something, I would caution China, as President Obama and others have, to not unilaterally move to reclamation activities and the militarisation of the islands and areas that are part of the claims being contested today," Kerry told reporters in the former South Vietnamese capital.
"We don't take a position on those claims. China should note that. We are not saying China is wrong in the claims. We are simply saying, 'Resolve it peacefully; resolve it in the rules-based order.' "
Relaxing an "out of the ordinary" arms embargo was neither out of order nor inflammatory, Kerry insisted. "I hope China will read this correctly."
Experts in China said they expected that US warships would sooner or later be granted access to Cam Ranh Bay, a deep-water port that served as the key US naval base during the Vietnam War.
Shi Yinhong, a professor in international relations at Renmin University of China, said Beijing would not respond in a tit-for-tat way but would continue to build its military power in the South China Sea, while exerting pressure on Hanoi not to draw too close to Washington.
"China will try to cosy up to Vietnam but at the same time put pressure on it," he said.
On social media, there were some angry reactions. "It looks like Vietnam is going to be America's new puppet," one user wrote. "Vietnam needs to give serious consideration to inviting the wolf into the house."
"The US is walking an arms race path," wrote another, arguing this was good news as Beijing had deeper pockets. "China can wait until the enemy is exhausted."
