The Economic Showdown in the South China Sea


The Trump administration wants to mobilize private American capital for high-quality investments in the Asia-Pacific region.

As China inches closer to imposing a de facto exclusion zone across the South China Sea, it has sought to box the United States out of Southeast Asia. Having deployed state-of-the-art weapons systems to artificially created islands in the area, a Chinese Air Defense Identification Zone is more a matter of “when” than “if.” The Asian powerhouse has forged ahead with negotiating a Code of Conduct (COC) in the contested areas that could, first, consolidate its gains on the ground and, more importantly, drive a wedge between Southeast Asian countries and Washington.

In an unprecedented act of chutzpah, China has asked —as part of confidence-building measures (CBMs) in the South China Sea—Southeast Asian countries to cease joint military exercises with external powers unless they have received China’s permission. It also proposed regular naval exercises with Southeast Asian claimant states as well as resource-sharing regimes to govern the exploration of oil and gas resources in the area.

In short, China is pushing for a self-serving modus vivendi, which will effectively reduce its Southeast Asian neighbors to neo-tributary states. Wary of Beijing’s exclusionary intentions, and cognizant of Southeast Asian states’ preference for strategic space, the Trump administration has pushed back with gusto. It dispatched Secretary of State Mike Pompeo to a weeklong visit to the region, with America’s chief diplomat visiting key Association of Southeast Asian Nations (ASEAN), namely Indonesia, Malaysia and Singapore.

During his visit, Pompeo put forward a series of economic and defense initiatives, which are aimed at preserving American primacy in the region and strengthening Southeast Asian countries’ bargaining chip vis-à-vis China, whether in matters of investment or territorial disputes.

The Trump administration has sought to reassure its regional allies and partners about its commitment to a “Free and Open Indo-Pacific” (FOIP), a new geopolitical paradigm that seeks to diminish China’s centrality in the Eurasian landmass in favor of an emerging alliance among democratically-leaning naval powers, namely the United States, Japan, Australia and India.

Washington is keen on soliciting the support of key Southeast Asian states such as Indonesia and Vietnam to constrain China’s increasingly revisionist geopolitical assertiveness. The ASEAN has, so far, cautiously welcomed Sino-America rivalry, so long as it provides smaller regional states with alternative sources of capital, technology and defense cooperation. Still, there are growing concerns over the possibility of an all-out conflict between the two superpowers, as the United States and China jostle for naval and economic dominance in Asia.