WWIII in the South China sea

As tensions continue to rise in the Indo-Pacific, will China risk open warfare with its SE Asian neighbours and their allies in the west?

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Every day the ‘China Threat’ theory seems to gain more ground, with ever more industries at risk of Chinese domination, more security systems exposed to hackers, and more territories under dispute. This week, Japanese Prime Minister Fumio Kishida and Philippine President Ferdinand Marcos Jr. will visit the US to discuss China’s military actions in the Pacific, and the potential for US support in the region. This follows an annual survey conducted in Japan that found that 92% of people felt that China constituted a threat to Japan’s security – up from 86% a year ago and 81% in 2022.

Taiwan has announced that it will undergo a series of wargames to simulate “a scenario where China suddenly turns one of its regular drills around the island into an actual attack”. The US says it will place missiles somewhere in the region, we don’t know where, but they’ll definitely be aimed at China. In the Philippines, protests rage against China’s aggression during run-ins with Filipino vessels in the South China Sea.

China certainly feels entitled to disputed areas, which would give it access to specific island chains that can be used as military bases, and fishing areas which make up no small part of China’s economy. There’s also the minor issue of the supposedly 11 billion barrels of untapped oil and 190 trillion cubic feet of natural gas to be found in the sea bed and islands in the region. The various island chains and fishing waters in the South China Sea and East China Sea are claimed by China as well as one or more of Taiwan, Japan, Malaysia, Vietnam, Brunei and the Philippines depending on the area.

So far, China has tried to avoid armed conflict in the region, and has instead opted for the slow and steady approach of increasing naval presence, complaining when anyone else enters the area, and then taking small, targeted actions against fishermen from developing countries. This is essentially what unfolded a few weeks ago between China and the Philippines. 

The use of water cannons by China against a civilian vessel from the Philippines quickly ramped up tensions between the two countries. The Philippines have said that the boat was on course to deliver supplies to a grounded warship, while China has accused them of supplying them with construction materials to build… something to shore up their illegal claim to the territory (a bit rich considering China has literally created new islands from scratch in disputed waters). With things getting out of hand, the Philippines summoned Beijing’s envoy, while China maintains the other side was being ‘provocative’. 

At worst, these actions lead to a stalemate, and at best, China gains some ground, a few inches at a time. However, it is unclear how long these push-and-shove tactics will continue to work.

Global gang up

After several decades of relative global peace, war in general seems to be increasingly a part of our daily reality. This has not escaped the notice of Western leaders, who have just realised that they’re going to have to spend a lot more on rearmament than in peacetime, potentially at the detriment to already ailing, ageing populations:

Even just meeting the [NATO] alliance’s 2% of annual GDP minimum for military outlays would stall much of the EU’s post-pandemic debt consolidation. Getting to 4% would push the bloc’s weaker sovereigns to make painful choices between even deeper levels of borrowing, significant cuts in other parts of the budget, or else tax increases.

France, Italy and Spain would be particularly exposed if the extra spending is funded through bond markets, with Rome’s public debt jumping to 179% of output by 2034 from 144% this year.

How a remilitarized world can reconcile such commitments with finite tax revenues and ever-greater welfare and health needs is set to become a searing political question in the years ahead.

But as China’s military spending is set to grow by 7.2% this year, the west and its anti-China allies have no choice but to at least match their military growth like for like. Malaysia has increased its military spending by 10.2% this year, closely followed by 8.5% growth for the Philippines.

We spoke in a previous newsletter about the launch of AUKUS, a strategic pact between the US, UK and Australia to neutralise the threat of China in the Indo-Pacific region. The plan is to share technology (read: how to build a nuclear submarine) with Australia to keep ‘strategic interests in the region secure’. Now it's been announced that Japan may join the group, at least as an honorary member, alongside New Zealand. While AUKUS spokespeople deny claims that membership of the group will expand, as we’ve seen with NATO, acronyms mean nothing when western nations feel global security is on the line.

China has not been passive in the face of this allied ramp up. On the one hand, China has been pursuing a softer approach in some areas, appealing to Vuong Dinh Hue’s (chairman of the National Assembly of Vietnam) better nature and encouraging him to distance the country from US foreign policy. On the other hand, China is not afraid to display its military might, conducting two days of air and naval drills in the disputed area at the same time the US conducted joint exercises with the Philippines, Japan and Australia in the same area. It’s unclear who would prevail in a military conflict, but when it comes to pettiness, China wins hands down.

Global supply chain revisited

But jumping into armed conflict is not so simple, as most of the countries that have beef with China are, as always, closely linked with China’s economy.

Japan may see China as a threat, but as the Ministry of Foreign Affairs in Japan plainly states, China is Japan‘s largest trading partner, and one of the largest investment destinations for Japanese companies. They are both members of APEC, G20 and RCEP. Chinese exports to Japan in 2023 were valued at US$157.5 billion, with Japan running a trade deficit of around 5 billion Yen.

Developing nations like Indonesia and Vietnam may not like China politically, but their opinions on China’s economic impact on the region could not be more different. Most Southeast Asian nations view China’s Belt and Road (BRI) programme as having a positive impact, and their cooperation with China extends well beyond the parameters of BRI. Indonesia is particularly reliant on China for infrastructural and general economic development, and while Vietnamese academics and officials have reservations about the transparency of some BRI deals, the number of joint projects in the country is only increasing. Of all the Southeast Asian nations, only the Philippines has announced their full exit from the BRI programme, a bold political decision borne out of tensions in the South China Sea, which brought funding for new railways in the country to a deadlock.

As The Economist points out, China is well on its way to becoming the dominant player in the global south (as far as such a place exists), as China continues to cast itself as a natural ally to other developing nations previously dominated by western colonial powers. Appropriately, the article adds: “a survey in South-East Asia asked opinion-makers whom they would rather their country align in the event of a new cold war: 50.5% of respondents picked China; 49.5% chose America. When asked what countries should do about Sino-American rivalry, most opted against picking a side.”

Speaking of the US, while they may not be as reliant on China’s good graces as some closer countries, they cannot exactly afford to walk into the Indo-Pacific guns a-blazing. Already tackling the drawn-out conflict in Ukraine and supporting Israel in their increasingly gruesome pursuit of Hamas, another war abroad would be extremely unpopular with a nation of people beset by political, social and financial woes of their own. And without the support of the US, no nation in the region would stand a chance against China, even if they all teamed up - which would be unlikely given that many of them are fighting with each other as well as China over certain areas.

It’s quite obvious that China has no respect or care for other countries’ claims to disputed territories and waters. Though the threat of war now looms larger than ever, China may be willing to risk a skirmish or two with the knowledge that most countries in the region won’t want the situation to escalate. I argued in my last newsletter on the issue that these disputes may just constitute a new Cold War period, but now I’m not so sure. While I think all-out war is unlikely, I think a gradual creep on China’s part is feasible, if not already underway.

It’s very possible that China may get away with letting people complain about their actions in theory, while in practice being able to snag an entire region. Wikipedia may continue to dispute the facts, but the real test of the issue is to see who, in five years’ time, can sail freely from Kaohsiung to Manila, and who will be policing them.