Economic and geopolitical issues in the South China Sea

A powder keg that could explode at any moment: this is how the experts see the South China Sea, one of the hottest theatres of the 21st century. On whose waters a fundamental part of the geostrategic competition between the United States and China is played, and the will to power of various rising Nations insist.

Trade routes to be conquered, alliances to be safeguarded, and old historical issues to solve are intertwined in a single thorny knot. There are many actors involved in this dispute, starting with the ASEAN countries (Association of Southeast Asian Nations): Brunei, Cambodia, Philippines, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, Vietnam. To these, we must then add, as mentioned, China and the United States, with Beijing trying to expand its influence on what it considers its “backyard” and Washington, on the contrary, trying to block the rise of the Dragon while maintaining its Asian outposts. Impossible to please everyone. Also, because, as anticipated, when we talk about the South China Sea, at least three different aspects overlap each other. The first issue concerns the historical disputes between the regional countries.

The root of the ongoing territorial disputes dates back to 1947. At the time, the Chinese nationalists of the Kuomintang made a map of the South China Sea, drawing 11 dashed lines, that is, the claims of China. Too bad that these also included the waters located between Vietnam, Malaysia, and the Philippines. A few years later, Mao’s Communists came to power. In the 1970s, then Chinese Prime Minister Zhou Enlai erased two dashed lines, reducing them to nine. Small problem: those traits were too vague, not to mention that China’s neighbors disagreed. However, as long as the Dragon was in a weak state, the matter remained open. Since the Asian giant has tightened its muscles, Beijing has returned to claim its territorial area.

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In 2013, the Philippines filed an appeal with the Permanent Tribunal of Arbitration in The Hague, which, in 2016, declared the infamous nine-stroke line a violation of international rights. Last but not least, China has signed the Convention on the Law of the Sea, which sets the exclusive economic zone of a country in the delimited space within 200 miles from its coasts. Therefore, the islands claimed by China would not belong to Beijing. Which, for its part, considers the Hague verdict to be waste paper.

The second question regarding the South China Sea is geopolitical. Each country involved in the dispute has a thousand reasons to exploit local waters fully. In addition, it is necessary to consider the essential balance required of ASEAN members, in part rivals of China and part very close trading partners.

It is no coincidence that in November 2020, a mega trade agreement was signed, which, alone, is worth 30% of world GDP. That is the Comprehensive Regional Economic Partnership (RCEP). This partnership includes members of the Association of Southeast Asian Nations and China, Japan, South Korea, Australia, and New Zealand. That is the most significant free trade agreement globally, and every actor involved is looking to capitalize on exclusive benefits.

The RCEP covers an area that is worth a third of global economic activity. The agreement unites pro-Western Asian countries such as Japan and South Korea in a single system, with Western Pacific countries such as Australia and New Zealand, with the 10 ASEAN countries of Southeast Asia, with China. Of course, each of them also has other affiliations from previous trials, including the CPTPP, which crowned a prosecution initiated by Obama (TPP), later quashed by Trump, but ultimately completed by all others except the US. Or like the New Supply Chain Pact that unites others. But it remains to be seen whether these systems will stay now that the general systemic framework has been formed.

At the same time, it is also likely that if commercial interest tends to unite these regional players, the geopolitical balance will lead many of them to counter-insure with closer military defensive collaboration with the US. For this reason, it isn’t easy to imagine that there will be a substantial integration between the RCEP and the New Silk Road with Chinese traction. Given that the two projects travel on a parallel track but on which convergences of various kinds are difficult, thanks to the more excellent geostrategic posture of the Belt and Road Initiative.