On July 12, the Permanent Court of Arbitration in the Hague is set to hand down its verdict regarding the Philippines claims against China in the South China Sea. Should the verdict go against China’s self-proclaimed interests, then the possibility of a military confrontation - particularly with the United States, as self-proclaimed guarantor of global freedom of navigation - would escalate dramatically. China claims the majority of the South China Sea as its historic waters, with a nine-dash line extending all the way down to the Natuna islands in Indonesia - more than two thousand kilometres away from the Chinese mainland.
Beijing has not only rejected the authority of the Permanent Court of Arbitration to deal with the South China Sea issue, but has also expanded its territorial claims by building islands in areas falling in the Philippines’ exclusive economic zone. Since 2013 when the case was first filed by the Philippines, China has built seven islets by piling sand on reefs. It has constructed port facilities, military installations and airstrips on these artificial islands, and these bolster China’s foothold in the South China Sea. An influential Chinese paper, the state-run Global Times has said that China should prepare for military conflict - the Global Times is known for its strident nationalist views, and whilst it does not represent government policy it nevertheless has the effect of inflaming Chinese public opinion.
At the same time American officials are concerned that the ruling could prompt Beijing to declare an Air Defence Identification Zone (ADIZ) over the East China Sea - when China did the same thing in 2013 over the disputed Senkaku/Diaoyu islands the American response was to fly two B-52 bombers over the islands as a show of resolve.
It is no surprise that Chinese President Xi Jinping is a much more nationalistic leader than his two predecessors and has been using nationalism as a means for garnering support for the Chinese Communist Party (CCP). The ‘China Dream’ has become the political manifesto and signature ideology of Xi Jinping’s administration. In more concrete terms the phrase refers to the rejuvenation of China - the Chinese see themselves as returning to greatness or past glory, and the various humiliations from the Opium War to the Second Sino-Japanese War as a mere blip in its long and glorious history. Behind it though, stands a China unsatisfied with the United States led global status quo. It should be noted that the post-war international order was built by the victorious Western powers without the input of China.
The Chinese economy is currently undergoing a shift from an investment led economy to a consumption based one, and it is not a given that the transition will be smooth. Indeed, if anything, given China’s gargantuan debts it is indeed possible that a massive debt bust is likely. Given that the Chinese Communist Party’s legitimacy is predicated on economic growth and national unity it is not inconceivable that in the face of an economic crisis, the CCP will revert to raw nationalism to bolster what little legitimacy it has left.
The result of this verdict, and China’s reactions to it, will have tremendous implications for not only East and South-east Asia, but also for Australia and the entire world. Currently $5 trillion of annual shipping passes through the South China Seas and whilst it appears unlikely that China would seek to disrupt this trade, a belligerent China which tries to exert its suzerainty over an international body of water has profound negative implications for the very basis of freedom of navigation through international waters - other countries could very well try to press their claims on open bodies of water too.
Should China choose to ignore the ruling, and continue with its island building and blatant bullying of smaller countries, then the United States will be confronted with a dilemma - either allow China to continue to have its way, putting the whole international system of freedom of navigation of international waters into question, or confront China militarily with the risk of igniting a major conflict. Both options are distinctly unpalatable to the US - should it choose to allow China to continue to have its way, then this would signal to countries like Japan and the Philippines that US security guarantees are worthless (akin to the Western powers 1930s appeasement of the Nazis), and in such a scenario smaller regional countries may seek to acquire a much stronger military deterrent of their own. China may continue to press its claims, and it is already sending boats to Indonesian waters. Indonesian President Widodo has recently visited the Natuna Islands indicating that he will not stand by idly whilst China encroaches on its sovereignty.
On the other hand, the US risks the very real possibility of war with China should it decide to confront China militarily by sending US ships into the disputed waters. Given that Chinese public opinion is already strongly in favour of using force to resolve the South China Sea issue, it would be very difficult for Chinese leaders to back down in the face of an unfavourable ruling. In part the US faces this dilemma because of the Obama administration’s unwillingness to previously confront China over the issue - had it stood up to China earlier on, it could very well have avoided this problem. Should conflict erupt between China and the United States, then it is indeed possible that it could escalate into a gargantuan conflict - both powers are nuclear armed. How China reacts in the next few days and weeks could very well determine the course of world history.
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