South China Sea claims will be elephant in the room at the G20 summit

From Global Risk Insights (Sep 4): South China Sea claims will be elephant in the room at the G20 summit

When the meeting of the G20 is convened on September 4th in Hangzhou, its Chinese hosts hope to keep the conversation germane to the prevailing issues of the global economy. This may be especially difficult given China’s recent actions in the South and East China Sea. 



China’s territorial claims and military activities have become increasingly brazen. In July, China responded to The Hague’s judgement in favor of Filipino territorial claims to the Spratly Islands with complete disregard. Subsequently, there are signs that regional tolerance of China’s activities is running out and may come to a head during the G20 negotiations.

Indonesia

During its recent Independence Day celebrations, Indonesia took the provocative step of sinking a number of Chinese fishing vessels to protest sovereign territorial disputes in the South China Sea. China has tacitly claimed control of the area of the Natuna Islands allowing its fishing vessels to operate at will, flaunting Indonesian territorial fishing rights.

Indonesia has, until recently, proven conciliatory towards Beijing. China has surpassed the United States as the chief source of foreign direct investment in Indonesian infrastructure, leverage it has used to temper reaction to its expanding territorial claims over the South China Sea. This leverage, however, may have reached a tipping point as Indonesian President Joko Widodo held a cabinet meeting aboard a warship patrolling the waters around the Natunas, demonstrating to Beijing that it will not tolerate further exploitation of its territorial waters.

Philippines

While not a G20 member, the Filipino government has expressed continued concern for the Chinese development of military infrastructure on the Spratly Islands in the South China Sea. While the Philippines recently had their territorial claims to the islands and surrounding waters legally reinforced by the United Nations Convention on the Law of the Sea (UNCLOS), China has dismissed the ruling undermining the court’s authority. Following the ruling, Vietnam, which also claims territorial rights to the Islands, quickly positioned rocket launchers to five bases within range of Chinese airstrip development.

Heightening tensions further, China also claims territorial rights to Scarborough Shoal, a group of islands also claimed by the Philippines. China recently permitted its fisherman to harvest from the Philippine waters around the Shoal, further antagonizing the island nation.

India

As a member of the G20, India will have a significant seat at the G20 table at a time when Indian-Chinese relations appear to be cooling. China recently vetoed India’s attempt at entering the Nuclear Suppliers Group (NSG), an international group which attempts to control and prevent nuclear proliferation. India’s irritation with Beijing over this move coupled with Chinese activities in the South China Sea have served to drive India closer to the United States on matters requiring international cooperation.

Following the Hague’s ruling on the legal jurisdiction of the Spratly Islands, India vocally defended it against Chinese dismissal saying, “As a state party to the UNCLOS, India urges all parties to show utmost respect for UNCLOS which establishes the international legal order of the seas and oceans.” India has sent additional signals of its displeasure with Chinese actions when it announced the signing of a defense pact with the United States last week to mutually address growing Chinese assertiveness in the region.

Japan

Similar to China’s actions in the Philippine Scarborough Shoal, it has also permitted fishing in Japan’s Senkaku Islands.  Japan is also a member of the G20, thus tensions surrounding the territorial dispute threaten to cloud the meeting this week. China’s Ambassador to Japan has been called in several times to protest both Chinese fishing vessels and Coast Guard cutters in the area of the Senkakus. Japan has also communicated to Beijing that ties has “deteriorated markedly” because of the repeated violations of the historically Japanese territorial waters.

Implications of Chinese actions

While China has stated it will not discuss activities in the South and East China Seas at this week’s G20, lingering regional concerns will likely negatively impact cooperation and may, nevertheless, spill out into the negotiating process despite China’s preference. This is because, while China chooses to regard its actions as an exercise in sovereignty, these actions have real economic consequences.

Each year over $5.3 trillion of commerce passes through the disputed waters, over one quarter of global annual commerce. These sea routes may become increasingly unstable as militarization of the region continues and regional diplomatic relations grow icy. Outside of the United States, China’s 3 largest export markets are countries bordering the South and East China Seas. A deterioration in relations could jeopardize these vital partnerships at a time when the Chinese economy is flagging.

In addition to China’s sovereign claim to these vital shipping routes, the area of the South China Sea off the coast of Malaysia is rich in resources, particularly oil and gas. Claims of Chinese sovereignty over these waters may be a precursor to domestic energy exploration. While global prices are currently low, China remains set to overtake the United States this year as the largest global importer of oil. While China does not currently have the capacity to tap this reserve, claims to a large domestic energy source in the South China Sea may provide the country with long-term energy security to fuel a maturing economy.

Another sure economic consequence of these activities is a renewed focus on passage of the Trans-Pacific Partnership (TPP). Marketed in the United States as a means of setting the rules of Pacific commerce before China does so, recent Chinese aggression has begun to and will continue to strengthen relations between the United States and a number of regional actors. Regional instability may also drive significant Asian economic actors not currently signatories of the TPP to consider membership, such as South Korea.

http://globalriskinsights.com/2016/09/g20-south-china-sea/