The SANCHI tanker was transporting 140,000 tons of gas condensate when it collided with the Hong Kong CF Cristal cargo ship, 290 kilometers east of the Yangtze River in the East China Sea.
The stricken tanker, Sanchi, had drifted into Japan's exclusive economic zone and "suddenly ignited", reports said.
The Panama-registered Sanchi tanker is shown burning on January 9 in the East China Sea.
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China's State Oceanic Administration said because the hull of the ship had detonated, a large amount of oil in surrounding waters was on fire, according to the official Xinhua news agency.
All 32 sailors on board an oil tanker that sank after burning for a week have been confirmed dead. The Sanchi was carrying 136,000 tonnes of light crude oil from Iran when the collision happened.
It remains unclear if there has been a significant oil leak into the sea. The crew was all Iranian except for two Bangladeshis.
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The Chinese freighter had 21 crew members, all of whom were reported safe.
Chinese Foreign Minister Wang Yi previously told his Iranian counterpart Mohammad Javad Zarif that "as long as there is 1% of hope, China will continue to make 100% effort" to rescue and recover other members of the crew.
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