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 ship has been ablaze for nearly a week since it collided with another vessel on January 6 in the East China Sea and has been drifting into Japanese economic zone over the past several days.
The ship later sank, the official news agency Xinhua cited the State Oceanic Administration as saying.
Iranian oil tanker sinks one week after collision - reports
Speaking at a joint press conference with the Iranian labor minister on Sunday morning, the Chinese commander said all people on board the doomed tanker are feared dead, given the magnitude of the initial explosion in the crash. The cause of the collision remains unclear and 29 crew members are still unaccounted for.
The crew consisted of 30 Iranian and two Bangladeshi sailors. All 32 crew members aboard the vessel presumably died within the first hour of the incident, spokesman for Iran's rescue team Mohammed Rastad said.
The Chinese freighter had 21 crew members, all of whom were reported safe.