Cambodia, with the top US diplomat keen to avoid souring ties amid a fraught background of rows between Beijing and its neighbours.
The US has made a military and economic "pivot" towards Asia in a strategic bid to counteract China's influence in the region, the main bright spot of the morose global economy and home to huge untapped resources.
Discussions between Clinton and Yang at the ASEAN Regional Forum in Phnom Penh come amid a fresh spat over a string of remote islands claimed by Japan and China.
The sudden flare-up of new tensions, sparked by Chinese patrol boats approaching the islands on Wednesday, threatened to overshadow efforts by Southeast Asian nations to agree on a "code of conduct" for disputed waters.
Nations of the region should "resolve disputes without coercion, without intimidation, without threats, and without use of force", Clinton said in a speech to the summit, according to a text released to the media.
She again urged progress on the long-stalled code of conduct, to avoid "confusion and even confrontation" over shipping and fishing rights in the resource-rich South China Sea.
Japan lodged a formal complaint with China on Wednesday over their island dispute and summoned the Chinese ambassador, while Beijing said they "have always been China's territory since ancient times".
Japan refers to the islands in the east China Sea as Senkaku and sees a Japanese family as the owners, while China calls them the Diaoyu.
Analysts say Clinton is likely to try to balance support for US allies Japan, the Philippines and Vietnam -- all angered by China's recent perceived aggression in contested seas -- with efforts to keep Beijing onside.
The resource-rich south China Sea, home to vital shipping lanes, is the subject of overlapping claims by Vietnam, the Philippines, Malaysia and others, but is considered almost entirely Chinese by Beijing.
China said it is prepared to discuss a limited code of conduct to boost trust, but it wants to settle territorial disputes bilaterally -- largely because it can bring its huge economic clout to bear in negotiations with small neighbours.
In a statement late on Wednesday, it said some Association of Southeast Asian Nations (ASEAN) members had proposed starting discussions about a code, which China saw as being possible only "when conditions are ripe".
The Philippines is leading a push for ASEAN to unite to persuade China to accept a code of conduct based on a UN law on maritime boundaries that would delineate the areas belonging to each country.
Asked about the Japan-China spat, Philippine Foreign Minister Albert del Rosario told reporters on Wednesday: "It looks like they're (China) becoming more aggressive every day."
Wary of irking China, which has warned against "hyping" problems in the South China Sea, Clinton will also discuss several less contentious issues with her Chinese counterpart -- such as joint humanitarian response work.
She will also raise the spike in tension between Japan and China, an aide to Clinton told AFP.
The islands are covered by a US-Japan security pact dating back to 1960, but Washington is keen to see the issue of ultimate sovereignty resolved "through peaceful means".
Analysts say the unexpected confrontation over the islands in the east China Sea will further spur neighbouring countries anxious about China's rise into the United States' orbit.
"The Chinese huff and bluff with Japan does not augur well," said southeast Asia expert Carl Thayer, who runs a consultancy. "China's actions have certainly pushed the Philippines towards Washington."