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The South China Sea game

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Rafael M. Alunan III

To Take A Stand

Panos Mourdoukoutas, a contributor to Forbes magazine, wrote a commentary entitled “China will lose the South China Sea game.” Let me quote him verbatim in the succeeding paragraphs.

He said, “China wants to control the entire South China Sea. Every inch of it. That’s why will lose all of it, one day.”

In the South China Sea game, China is one player playing against all the rest: The Philippines, Brunei, Malaysia, Taiwan, and Vietnam. China is also playing against the navies of US, Japan, France, the UK, and Australia. These navies seek to enforce the freedom of navigation in the vast trade waterway. Close to $5 trillion in merchandise moves through every year.

Why is China playing against everyone else?

For a couple of reasons. One of them is that the waterway is very important to its vision — becoming the next global economic leader. It’s the beginning of China’s maritime silk road.

“Insofar as China is concerned, its maritime silk road begins from the South China Sea,” says Vijay Eswaran, Malaysian entrepreneur and Chairman of QI Group of Companies. “It sees itself playing a more significant role in maritime trade in the future.”

Another reason is that China sees the South China Sea as its own property.

“Historically, China has always viewed the South China Sea (SCS) as its own,“ adds Vijay. All of it, and the resources that are hidden beneath, which China wants to exploit. That’s why it is building artificial islands.

And that feeds Chinese nationalism, needed to support and reinforce the political status quo.

What about the overlapping claims from neighboring countries? “China does not see any of the other overlapping claims from the neighboring countries to the South China Sea as a threat,” adds Vijay.

And it uses intimidation to make sure that this won’t happen.

When China lost a United Nations-linked tribunal international arbitration to the Philippines on the South China Sea disputes a year and a half ago, Beijing took a couple of steps to make sure that Duterte wouldn’t do anything with it.

The first step was to threaten Duterte with war should he dare to enforce the ruling. The second step was to promise a generous investment to help the Philippines deal with its many problems. And it worked. Duterte quickly flip-flopped, and forgot all about the ruling, as was written in previous pieces here.

More recently, China applied “Duterte’s model” to intimidate Vietnam.

Last July, Vietnam announced that it will stop its oil exploration efforts, following a stark warning by Beijing that it will attack Vietnamese oil and gas bases.

Still, there are multiple navies that are prepared to challenge China’s ambitious mission. “It is the potential Western influence, i.e. the US, France and the UK and their navies that are having more of an impact on Chinese policy in the region.”

Is China prepared to fend off this challenge? It’s hard to say. What isn’t hard to say is that countries that play a game against all end up losing.

That’s what happened in neighboring Japan in the past, and it could happen to China in the future.

Meanwhile, investors in the financial markets of the region should closely watch any developments that will bring China closer to an open confrontation with America and its allies.”

One such development is the nascent trade war between the US and China. CNN Money reported last week that a consequence of that would be a spillover to Asian economies. I’m abridging the report for brevity. Read on.

“The fallout from a trade war between the United States and China will hurt other economies in Asia.

President Donald Trump accuses China of unfair trade practices and is threatening to put new tariffs on as much as $450 billion of exports from China. The world’s second-biggest economy has vowed to retaliate.

A worsening tit-for-tat would be bad news for export powerhouses such as Taiwan, South Korea and Malaysia, which sell goods to China that are used to make products exported to the United States — from automobiles to consumer electronics — industries that require technologies that come from a complex global supply chain.

This interwoven trade is crucial to regional economies. Asia is an export dependent region. If this escalates, it would have a material impact on the region. Tech components such as computer chips are among the products most vulnerable to trade turmoil. That could put Taiwan, South Korea, Malaysia and Singapore in a precarious position if the US-China fight intensifies.

The scale of the damage to Asian economies depends on how bad the trade war gets.

The United States has so far announced 25% tariffs on $50 billion worth of Chinese exports, the first wave of which will take effect on July 6. But if Trump goes through with his threat to respond to China’s promised retaliation by hitting a further $200 billion of Chinese exports with 10% tariffs, that could send shock waves through Asian economies.

America risks killing the global growth it needs. Businesses around the region would feel the effects. There’s clearly a downside if everyone needs to rethink their manufacturing locations and sourcing strategies. In the meantime, analysts say some companies in Asia are looking to shift more manufacturing to other parts of the region, such as Thailand and Vietnam, to try to reduce their exposure to tariffs on China.”

That’s a red flag for us.

Are we prepared for military confrontation among the big powers in the South China Sea, or for a global trade war, where everyone loses?

Obviously not, which is why accelerating credible deterrence, expanding our economy, and creating new trading routes are crucial for our national security and survival.

The incumbent administration is doing all that within its power. It is under time pressure because the winds of war, be it military or economic or both, are blowing harder. We must forge national unity to weather mounting challenges to our survival.

 

Rafael M. Alunan Iii served in the cabinet of President Corazon C. Aquino as Secretary of Tourism, and in the cabinet of President Fidel V. Ramos as Secretary of Interior and Local Government.

rmalunan@gmail.com

map@map.org.ph

http://map.org.ph