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Asean Needs Frank Dialogue on South China Sea Issue
Asean Needs Frank Dialogue on South China Sea Issue
Report 223 / Asia

Stirring up the South China Sea (I)

China is one of its own worst enemies in the South China Sea, as its local governments and agencies struggle for power and money, inflaming tensions with its neighbours, illustrated by Beijing’s latest standoff with the Philippines.

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Executive Summary

The conflicting mandates and lack of coordination among Chinese government agencies, many of which strive to increase their power and budget, have stoked tensions in the South China Sea. Repeated proposals to establish a more centralised mechanism have foundered while the only agency with a coordinating mandate, the foreign ministry, does not have the authority or resources to manage other actors. The Chinese navy’s use of maritime tensions to justify its modernisation, and nationalist sentiment around territorial claims, further compound the problem. But more immediate conflict risks lie in the growing number of law enforcement and paramilitary vessels playing an increasing role in disputed territories without a clear legal framework. They have been involved in most of the recent incidents, including the prolonged standoff between China and the Philippines in April 2012 in Scarborough Reef. Any future solution to the South China Sea disputes will require a consistent policy from China executed uniformly throughout the different levels of government along with the authority to enforce it.

China’s maritime policy circles use the term “Nine dragons stirring up the sea” to describe the lack of coordination among the various government agencies involved in the South China Sea. Most of them have traditionally been domestic policy actors with little experience in foreign affairs. While some agencies act aggressively to compete with one another for greater portions of the budget pie, others (primarily local governments) attempt to expand their economic activities in disputed areas due to their single-minded focus on economic growth. Yet despite the domestic nature of their motivations, the implications of their activities are increasingly international. Other factors – both internal and external to China – have also been responsible for increasing tensions, but they are beyond the scope of this study. Regional dynamics, including arms build-ups, competition for resources and increasing nationalist sentiment in other claimant countries are the subject of a separate report.

Effective coordination of actors is also hampered by a lack of clarity over precisely what is supposed to be defended. China has yet to publicly clarify the legal status of the so-called nine-dashed line that appears on most Chinese maps, encompassing most of the South China Sea. While the foreign ministry has taken steps to try to reassure its neighbours that Beijing does not claim the entire South China Sea and has at least partially justified its claims on the basis of the United Nations Convention on the Law of the Sea (UNCLOS), the government cannot easily back down from claims to significant portions of the sea that are based on historical presence in the region. Local government agencies take advantage of this lack of legal clarity when engaging in activities in disputed areas.

Beijing has deliberately imbued the South China Sea disputes with nationalist sentiment by perpetually highlighting China’s historical claims. This policy has led to a growing domestic demand for assertive action. While Beijing has been able to rein in nationalist sentiment over the South China Sea when it adopts a specific policy, this heated environment still limits its policy options and its ability to manage the issue.

In mid-2011, as tensions in the sea led to neighbouring countries seeking closer military ties with the U.S., China adopted a less assertive approach. While Beijing’s overall emphasis on maintaining the status quo still includes a preference for bilateral negotiations, it is strengthening regional relations through high-level visits and multilateral engagement by signing with the Association of South East Asian Nations (ASEAN) the Guidelines for the Implementation of the Declaration of Conduct (DOC) in the South China Sea.

Internally, China has taken measures to calm nationalist sentiment and discourage aggressive actions by local agencies. However, China’s current approach remains characterised by numerous ministerial-level actors and law enforcement agencies with no effective coordinating authority and no high-level long-term policy. While repeated and failed attempts to establish a centralised mechanism on maritime management show a lack of political will to address the coordination issue, Beijing might also see benefit in ambiguity. As long as this situation exists, however, its new conciliatory approach is unlikely to be sustainable. Ultimately, the ability to manage relations in the South China Sea and resolve disputes will present a major test of China’s peaceful rise.

Beijing/Brussels, 23 April 2012

Op-Ed / Asia

Asean Needs Frank Dialogue on South China Sea Issue

Originally published in The Straits Times

Leaders of the Association of South-east Asian Nations (Asean) gathering at next week's (Sept 6-8) annual summit in Vientiane, Laos, will be tempted to avoid frank talk about the South China Sea that might anger China. But if they gloss over a dangerous escalation of military tensions in area, they risk sleepwalking into conflict.

Recent satellite photos appear to show China building more than 70 hardened hangars on three of the features it controls in the Spratly chain. These were followed by reports that Vietnam had moved missile launch systems onto some of the outposts it controls in the same area. Hanoi has said the reports are inaccurate, but has reserved the right to "move any of our weapons to any area at any time within our sovereign territory", including the features it claims in the Spratlys.

Vietnam and China have fought twice within living memory over disputed areas of the South China Sea. In 1974, Vietnam lost its last outpost in the Paracel Islands, and in 1988,some 70 Vietnamese soldiers died in clashes after which China took over a number of key features in the Spratlys.

Their forces remain less than 5km apart in parts of the Spratlys, which have become the front line in a regional arms race. China's defence budget grew by 11 per cent between 2014 and last year. Vietnam is now the world's eighth-largest purchaser of arms, including missile systems, attack submarines and fighter aircraft. The Philippines has ordered frigates from India and patrol vessels from Japan and France. And even Singapore agreed to allow the United States to base surveillance planes on its territory.

The countries of East Asia seem to be heading down a one-way street that leads not just towards greater potential for confrontation, but also towards a more violent conflict should a confrontation occur.

This is despite the Declaration on the Conduct of Parties in the South China Sea, signed by China and the 10 Asean members in 2002, representing a non-binding commitment by the parties to resolving their differences "without resorting to the threat or use of force, through friendly consultations and negotiations by sovereign states directly concerned".

The signatories also promised to refrain "from action of inhabiting on the presently uninhabited islands, reefs, shoals, cays and other features".

Two of the keys to the problem are China's unpredictability and lack of clarity. It has studiously maintained what one senior Chinese diplomat described as "strategic ambiguity". It has failed to articulate either the coordinates or the nature of its nine-dash line, a key driver of the Philippines' decision to seek the ruling issued in July by the arbitral tribunal at The Hague.

China's unpredictability, such as its island-building programme or its decision to move an oil exploration rig off the Vietnamese coast two years ago, convinced the other claimants that their old security assumptions were no longer reliable.

The result is that everyone is preparing for the worst, including strengthening their defences, buying new hardware and boosting their offensive capacity.

Conflict is in nobody's interest. Trade worth some US$5 trillion (S$6.8 trillion) moves through the South China Sea each year, and the fisheries generate some US$20 billion a year.

For the claimant nations, the cost of hostility would be particularly punishing. In 2013, the last year for which data is available, China accounted for 14 per cent of trade with Asean states, and that figure is likely to have grown since. The damage that would be caused by disruption to East Asia's delicate web of supply chains would probably exceed these estimates.

Even without direct confrontation, the cost of defying Beijing is high. Between 2006 and 2013, Chinese foreign direct investment into the 10 Asean states totalled some US$33 billion, including US$2.6 billion in Indonesia and US$1.4 billion in Cambodia. The Philippines, which has had the most contentious territorial relationship with China, had negative net inflows from China of US$1 million over the same period, according to Asean figures.

China also has a great deal to lose from overt confrontation. The South China Sea trade routes are its vital economic arteries: conflict between claimants - or even lone Philippine or Vietnamese nationalists armed with rocket-propelled grenades - could result in a significant rise in shipping costs as freighters are forced to take a much more circuitous route to their destination or pay war-risk insurance premiums. As an example, when piracy in the waters off Somalia was at its height, transit insurance premiums rose from US$500 per ship to US$150,000 per ship.

If confrontation has an unacceptable price, compromise is also not cost-free. Territorial control in the South China Sea is a zero-sum game: one country's gain is another's loss. Nationalism runs deep in East and South-east Asia, a trait that governments have exploited to hang on to popular legitimacy even as they struggle to deliver economic growth amid a regional slowdown. In the current climate, any regional government hinting at ceding territory would risk being outflanked by its own right wing.

There can be no long-term military solution to the disputes in the South China Sea. If the logical conclusion of the recent rounds of militarisation and rearmament are to be avoided, the first step is for the region to admit openly that there is a real problem and then discuss how it might be resolved.

Given the fears about power asymmetry, Beijing's suggestion that it holds bilateral talks with the other claimants is unlikely to bear fruit.

Multilateral talks involving, at a bare minimum, all the claimants and preferably a regional grouping such as Asean are the only viable way forward.