Global companies operating in South East Asia should pay attention to rising tensions between China and some of its neighbours over disputed islands. These dynamics, if not properly managed, could impact their business and shipping operations.
China is investing in a ‘modern maritime military force’ to protect the country’s ‘maritime rights and interests.’ The force will assist in asserting China’s claims over the disputed islands in the South China Sea. In May 2015, Beijing released its first ever White Paper on military strategy. The Paper outlines plans to build military forces with expeditionary capabilities, including naval and air platforms that can operate over long ranges.
Beijing aims to move from ‘near seas defence’ to a combination of ‘near seas defence’ and ‘far seas protection,’ which would involve at least a limited power projection capability. The force would allow China to show resolve at points of contention, such as disputed islands in the South China Sea. China has long said that it owns most of the reefs and islands in the South China Sea, buttressing pretensions to more vaguely defined rights to most of the Sea itself.
In recent years, Beijing has intensified construction on islands of military installations, some of which could be used for offensive purposes against other claimant states. These facilities include an airstrip, garrisons, air-defence batteries and radar and communications equipment. The new infrastructure boosts China’s ability to patrol surrounding waters and monitor the activities of other claimants.
Beijing seems intent on making enforceable the strongest possible claim to civil control of the disputed areas, leading eventually to formal legal control. This can be achieved by asserting physical control at specific points through the use of coastguard vessels to protect fishing rights and to ward off others. Moreover, China is deploying flotillas of trawlers and patrol vessels to protect the interests of its national oil company, which is drilling in disputed waters and now physically enlarging and developing atolls in the Paracel Islands.
At the end of June, Beijing announced that it had completed some of its land reclamation activities on the Spratly Islands, which are also claimed by other countries in the region. Before January 2014, the Chinese presence in the Spratlys consisted of a few concrete blockhouses perched on top of seven coral atolls. Today, these reef-based constructions have grown from five acres to an area covering 2,000 acres.
By asserting, in no uncertain terms, that it considers this area to be its exclusive domain, Beijing is heightening tensions with its neighbours and the United States. As a result, military spending in the region is increasing. The Stockholm International Peace Research Institute (SIPRI) has found that major South East Asian naval powers have increased their defence spending by more than one and a half times since 2003, while China’s spending has grown more than fivefold in the same period. China’s South Sea Fleet has more major surface ships than all the South East Asian countries combined.
The waters of and the airspace above the South China Sea are filling up with military hardware as the dispute for islands heats up. Companies operating in the area should pay close scrutiny to these dynamics, including the potential impact of rising tensions for their business.
An enlarged version of this article was published in World Review