EXECUTIVE SUMMARY AND RECOMMENDATIONS
The South China Sea is the cockpit of geopolitics in East Asia. Five countries – Brunei, China, Malaysia, the Philippines and Vietnam – plus Taiwan have substantial and competing territorial and maritime claims in a body of water that is both an important source of hydrocarbons and fisheries and a vital trade corridor. The recent history has been scarred by cycles of confrontation. Today, the clashes are becoming more heated, and the lulls between periods of tension are growing shorter. As the region continues to grow in influence and power, the handling of the competing claims will set the tone for relations within East Asia for years. The cost of even a momentary failure to manage tensions could pose a significant threat to one of the world’s great collaborative economic success stories. Despite China’s controversial development of some of the reefs it controls, the current relatively low temperature of the disagreement offers a chance to break the cycle, but it is likely to be short-lived. The countries of the region, supported by the wider international community, need to embrace the opportunity while it lasts.
The competition in the South China Sea goes back decades if not centuries, but the dynamics of the latest round of confrontation were set in motion by China’s decision in May 2014 to deploy an oil exploration rig in waters claimed by both it and Vietnam. The deployment provoked deadly riots in Vietnam and widespread diplomatic condemnation: the rig was withdrawn two months later. The unexpected intensity of the response and the diplomatic fallout that followed prompted some deep reflection in policy circles in Beijing and the adoption of a less provocative stance. Despite retooling its tactics, however, Beijing remains committed to consolidating its claims over the islands and waters within what is known as the “nine-dash line”, an ill-defined loop that encompasses the majority of the area of the South China Sea, as can be seen by its extensive construction on a number of reefs it controls.
Though the current situation does not inspire confidence in a lasting calm, it nevertheless offers a window of opportunity for regional stakeholders to harness China’s desire to avert another major deterioration in relations. In particular, Beijing has struck a more cooperative tone toward ASEAN (Association of South East Asian Nations). The ten-member grouping is pushing for a formal Code of Conduct to guard against and mitigate the impact of accidental clashes leading to confrontation.