South China Sea Dispute and ASEAN-China relations

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Asian Affairs

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THE SOUTH CHINA SEA DISPUTE AND CHINA-ASEAN RELATIONS

Zhao Hong

To cite this article:Zhao Hong (2013) THE SOUTH CHINA SEA DISPUTE AND CHINA-ASEAN

RELATIONS, Asian Affairs, 44:1, 27-43, DOI: 10.1080/03068374.2012.760785

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THE SOUTH CHINA SEA DISPUTE AND

CHINA-ASEAN RELATIONSZHAO HONG

Zhao Hong is senior research fellow at the East Asian Institute (EAI), NationalUniversity of Singapore. Before joining EAI, he was professor at the ResearchSchool of South East Asian Studies, Xiamen University, China, teachingInternational Political Economy, Big Power Relations, and ASEAN Economy.His latest published book, China and India: The Quest for Energy Resources in

the 21st Century, was published by Routledge in 2012,

Introduction

From the late 1990s until only a couple of years ago, Chinas approach toSoutheast Asia in general and to its various territorial and maritime dis-putes in particular was to pursue a good neighbour policy and engagein bilateral negotiations. This reflected Beijings concern for the views ofothers about Chinas rise and the China Threat. So Beijing tried hard tobe benign and adhere to Deng Xiaopings previous guidance to shelveterritorial differences for the later generations, while engaging in jointdevelopment. But more recently Beijings actions have become moreassertive in terms of energy exploration and military activities in theSouth China Sea. The concerns of some ASEAN countries aboutChinas creeping assertiveness and the China Threat has led them

to deliberately invite the involvement in the area of other big powers,in particular to welcome renewed American efforts to revitalise bilateralsecurity ties with Japan, the Philippines, Indonesia and Vietnam. This,taken with Indian and Japanese involvement, has resulted in the SouthChina Sea increasingly becoming a focal point for big power rivalry,thus complicating the issues. While most of the rival claimants areASEAN member states, traditionally China has tried to discuss theissue bilaterally with each of the rival claimants, not wanting it tobecome an issue in the China-ASEAN relationship, which is essentially

economic.

# 2013 The Royal Society for Asian Affairs

Asian Affairs, 2013

Vol. 44, No. 1, 2743, http://dx.doi.org/10.1080/03068374.2012.760785

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The Territorial disputes

Figure 1 (the nine-dash line map) shows the extent of Chinas claim inthe South China Sea, which has for many years been a thorn in

Chinas bilateral relations with those countries with counter-claims.China and Vietnam claim the entire area of the South China Sea andthe islands within it, while the Philippines, Malaysia, Indonesia, andBrunei have overlapping claims to significant areas (see Figure 2 forthe overlapping claims).

But while all these claims in theory give rise to at least eight separatedisputes, this article is mainly about the Chinese claim to the islandsand other land features in the South China Sea, which is based on histori-cal surveying expeditions, fishing activities, and naval patrols as far backas the 15th century.1 As early as 1914, modern Chinese cartographersincluded within maps of Chinese territory most of the area of theSouth China Sea, delimited by the so-called nine-dash line.2 The areawas included in an official map drawn in 1947 by the Republic of

Figure 1 The nine-dash line

28 THE SOUTH CHINA SEA DISPUTE

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China under the Kuomintang government, and the nine-dash line contin-ued to be included in official maps published by the Peoples Republic ofChina after 1949

While the Philippines claim to the Spratly Islands (Nansha Islands toChina) was first submitted to the United Nations in 1946, its involvementdid not begin in earnest until 1956 when Filipino adventurer TomasCloma proclaimed the founding of a new state, named Kalayaan. ThePhilippines claims of sovereignty over the Spratlys are based on resnullius (nobodys property) and geography. When Japan renounced

its sovereignty over the islands in the San Francisco Treaty in 1951,the islands becameres nulliusand available for annexation. The Philip-pines maintains that, geographically, all the islands it claims lie within

Brunei

Maritime Claims

China

Malaysia

Philippines

Spratly Islands

Vietnam

Figure 2 Overlapping maritime claims in the South China Sea

THE SOUTH CHINA SEA DISPUTE 29

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the countrys archipelagic baselines, in accordance with the 1982 UnitedNations Convention on the law of the sea.

Vietnam similarly insisted on a historical claim to the South China Sea

based on contact with islands there during the Nguyen dynasty, from the16th through to the 19th century. In 1956 South Vietnam claimed thatthe Paracel Islands became Vietnamese when Vietnam was unified bythe Nguyen dynasty in 1802, and that the Spratlys had been incorporatedby the French into Cochin China in 1929. South Vietnam also claimedthe right of succession for the entire South China Sea from French colo-nialists as rightful heirs. Not wishing to provoke China, on 14 September1958 Premier Pham Van Dong in a diplomatic note accepted Chinassovereignty over both the Paracels and Spratlys. Reunification in 1975gave Vietnam the confidence to deal with China from a position ofstrength. It repudiated the earlier acknowledgement of Chinesesovereignty. Prompted by the ongoing UNCLOS negotiations,Vietnam on 12 May 1977 declared a 200 nautical mile Exclusive Econ-omic Zone, and included the Paracels and Spratly Islands in its territorialwaters.

But in spite of the many overlapping claims, the South China Sea dis-

putes only became a more serious issue in the early 1970s when it wasdiscovered that the region may contain significant deposits of oil andgas and, significantly, it was in 1972 that the Marcos Government offi-cially incorporated Kalayaan into Palawan island. ( The fishing opportu-nities also started to loom larger. In 1988 the South China Sea wasbelieved to account for 8 per cent of world fishing catches.) But it wasthe United Nations Convention on Law of the Sea, which came intoeffect in November 1994, which sparked more intense conflict in thatit set a deadline for the submission of claims.

Recent incidents

The Philippines, which has had several recent run-ins with China, wasone of several ASEAN claimants to protest against Chinas 2009 sub-mission to the UN of a claim to the South China Sea, based on thenine-dash line. The Philippines was also one of the more vocal suppor-

ters of US Secretary Clintons defence of maritime security and call forresolution of disputes according to the international law at the 2010ASEAN Regional Forum in Hanoi.


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The Philippines latest confrontation with China was the April 2012standoff over Scarborough Shoal (Huangyan Island), in which Chinesegovernment vessels blocked a Philippine naval ship from arrestingChinese fishermen accused of illegally harvesting coral and poaching

sharks in the disputed waters. Both China and the Philippines used theincident to more boldly assert their sovereignty over the area. Chinatook the opportunity to normalise its claims of sovereignty over theSouth China Sea area, while Manila used the showdown to spark nation-alist fervour, to internationalise the issue and draw the USA, Japan andASEAN into the dispute to counter Chinas growing strength.3

Vietnam also has had problems with China. On 26 May 2011, twoChinese maritime surveillance vessels cut off the exploration cables ofa Vietnamese oil survey ship searching for oil and gas deposits in Viet-nams EEZ some 120 kilometres off the southern Vietnamese coast. TheVietnamese Foreign Ministry released videos of a Chinese vessel actu-ally breaking the cable attached to the Binh Minh, a Vietnamesevessel.4 Jiang Yu, the Chinese Foreign Ministry spokeswoman, declaredthat the Chinese vessel had engaged in completely normal marineenforcement and surveillance activities in Chinas jurisdictionalarea.5 On 9 June 2011, a Chinese fishing boat similarly rammed the

survey cables of another Vietnamese survey vessel.

Is China getting more assertive? And why?

Beijings recent actions are seen by some countries in the region andbeyond as a departure from its previous approach. The Philippines andVietnam have been the most vocal and shrill in decrying what they con-sider to be Chinese assertiveness. A prominent Filipino intellectual and

legislator, Walden Bello, stated We are entering a post-Deng Xiaop-ing era of greater assertiveness, whereby you have a big neighbor thatis laying claim to the whole South China Sea.6 Tokyos 2011Defence White Paper also states China is widely and rapidly modernis-ing its military force, and it has been intensifying its maritime activitiesin the surrounding waters, and China is expanding and increasing itsactivities in waters close to Japan.7 The Pentagon also found that inrecent years China has demonstrated occasional signs of assertivenessin Asia, particularly in the maritime domain.8

But while the Huangyan Island dispute is a reflection of the underlyingtension and competition between China and the Philippines over


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sovereignty, resources and security in the South China Sea, there aredeeper strategic drivers beyond the immediate zone of potential conflict.For China, energy security is the main consideration. The recent ArabAwakening in North Africa and the Middle East has affected Chinas

overseas energy strategy, posing potential constraints and raisingcosts. China was propelled to further implement an energy diversifica-tion strategy, and shift its oil and gas development focus to the ocean,particularly to the South China Sea, which is believed to be a reservoirof energy, with some estimates of 130 billion barrels of oil and 900 tril-lion cubic feet of gas.9

Domestically, the Chinese government faces increasing nationalism andpressure. Some Chinese scholars believe that the previous somewhatpassive approach of China in the South China Sea is largely due to itsslow resource development process there. They believe that whileChina abides by the maxim of shelving territorial differences and enga-ging in joint development, Vietnam and the Philippines do not followthis principle. This gives rise to statements like In the face of bigexploration of oil and gas in the South China Sea by those concernedcountries, China must accelerate the speed of its development in theSouth China Sea.10 If China has achieved effective development and

management of the maritime resources within the traditional intermittentline, the possibility of the increase in the frequency and deterioration ofthe South China Sea dispute would likely have been much lower. 11

Under such circumstances, it was perhaps inevitable that China would stepup the search for energy resources in those waters and increase support forthe participation of its oil companies in the development of offshore oiland gas projects. The importance which the relevant ministries and oilcompanies in China attach to the development and utilisation of oil and

gas resources in the South China Sea suggests that the South China Seawill undoubtedly become a main source of Chinas oil and gas supplyin the future, particularly if environmental awareness and energy diversi-fication cause natural gas to gradually replace coal in China.

China is currently Asias largest offshore energy producer, followed byMalaysia, Vietnam and Indonesia. Currently, Chinas offshore oil pro-duction reaches more than 600,000 barrels per day, accounting forabout 15 per cent of Chinas total oil production.12 In recent years,

Chinese oil companies have made great breakthroughs in developingoil and gas resources in the South China Sea. Currently, most of this pro-duction comes from undisputed areas. The Bohai Gulf is currently


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Chinas core offshore production zone in terms of oil output. However,as Chinese oil companies become more proficient and ambitious in deep-water operations, the South China Sea is set to become an important oiland gas source. China is targeting oil and gas production of 500,000

boepd (barrels of oil equivalent per day) by 2015 and 1 million boepdby 2020 in deepwater areas of the South China Sea at depths up to3,000 metres.13 In May 2012, CNOOC began its first deep-sea projectin an undisputed area of the South China Sea, southeast of HongKong. According to Down Erica, an American scholar with BrookingsInstitute, the deployment of CNOOCs new rig indicates that CNOOCis beginning to close the gap with major international oil companies inthe area of deepwater drilling.14

In reality, China is not the only country which is assertive in exploitingenergy resources in the South China Sea. Vietnam is the major oil pro-ducer in the disputed area, with the state-owned oil company, PetroViet-nam, producing 24.4 million tons, or 26 per cent of Vietnams totalproduction, from three fields in the South China Sea in 2010.15 With pro-duction in established fields declining, PetroVietnam has concluded 60oil and gas exploration and production contracts with various foreigncompanies in an effort to exploit new fields. But these Vietnamese

attempts raise the possibility of renewed clashes with China, whichhas consistently opposed Vietnams attempts to conclude explorationagreements with international oil companies in the South China Sea.

The Philippines also has ambitious plans and has attempted to boost self-sufficiency in oil production. It intended to offer 15 exploration contractsover the next few years for offshore exploration off Palawan Island in anarea claimed by China.16 Despite Chinese objections, both the Philip-pines and Vietnam plan to go ahead with gas exploration projects invol-

ving foreign companies. PetroVietnam will work with Talisman Energyand will begin drilling in an area that China awarded to Crestone Corpor-ation in 1992, which is now operated by Harvest Natural Resources.ExxonMobil also plans exploratory drilling off Vietnam, while the Phi-lippines intends to drill in the field where Chinese vessels harassed itssurvey vessel in March 2011.17

The Philippines strategic response

Among the ASEAN countries, the Philippines was particularly affectedby threat perceptions arising from the drastically changed post-Cold War


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strategic environment. In October 1995, former Philippines PresidentRamos delivered a speech at the East-West Center in Hawaii postulatingthat China posed a threat to regional security and calling on the USA toretain its military presence in Asia. He said even if Beijing does not

have the capability to expand beyond its borders, China will inevitablybe a political and military threat to Southeast Asia.18

The Philippines believes that Chinas control of Mischief Reef and otherreefs after the late-1990s constitutes a threat to its national security, andis thus impelled to rely on the US military to balance Chinas behaviourin the South China Sea. 19 It is clear that after President Aquino III tookover power in June 2010, the Philippine-US relationship has topped hisgovernments foreign policy agenda. In addition to supporting Ameri-cas policy of returning to Asia, the Philippines has changed its previousstated attitude that the South China Sea negotiations should be limitedbetween ASEAN countries and China, and the US or any other thirdparty should not get involved.20 In February 2011, Aquino dismissedformer Foreign Minister Romulo, who holds a moderate position inthe South China Sea issue, appointing Del. Rosario, a former ambassa-dor to the USA, as the new Foreign Minister. He has stated that US isthe sole strategic partner of the Philippines, signalling a gradual path

back into the US sphere of influence after years of drifting towardChina during the previous Arroyo administration.21

During the height of Manilas territorial row with China early in 2012,the Aquino administration raised the prospect of invoking the 1951 Phi-lippine-US Mutual Defense Treaty (MDT) if armed clashes were to eruptin the Spratlys.22 In response, the USA sent a strong signal of support forthe Philippines. In January 2012, Manila announced that it was likely togrant the US military greater access to its territory for re-supply, refuel-

ling and repairs. Indeed, without some measures of US backing, theAquino administration would be in no position to seek to challengeChinas claims in the disputed waters.23 This situation presentsserious challenges for Beijing in trying to keep the tensions fromrising and prevent US involvement in the dispute.

Subsequently, in line with the Obama administrations return to Asiastrategy, the Philippines has been trying to demonstrate that it accordsa high priority to relations with the USA. In 2011, the USA benefited

from the tensions in the South China Sea, holding a series of high-profile naval exercises with the Philippines and other ASEAN countries.At the height of Manilas territorial disputes with China in the first half


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of 2012, the USA sent a strong signal of support for the Philippines,speaking out on the issue at several ASEAN forums, selling the Philip-pines a decommissioned Hamilton-class coast guard cutter in October2011 and promising another in 2012, increasing troop rotations and

joint training in the Philippines, and committing to expanding portvisits and joint exercises between US and Philippines navies. All thesehave led to a new plateau of distrust and tension in Philippine-Chinarelations.

The hedging strategy of other ASEAN countries

Vietnam also regards the USA as an important counter-weight to China.Although Vietnam-US relations cannot go much further beyond the con-straints imposed by both Vietnamese concerns over Chinese reactionsand the US Congress, which has hindered the governments effort tobuild closer ties with Vietnam, a number of notable visits have takenplace. In August 2010, the Aircraft-Carrier George Washington travelledalong Vietnams coastline and received visits from high-ranking Vietna-mese military officials.24 The US Navy has sought service and re-supplyfacilities for its vessels in Vietnam, with three such vessels having been

repaired there over the past years, the last being the USNS RichardE. Byrd, serviced in Cam Rang Bay in August 2011. In that samemonth, the two countries concluded their first military agreement sincethe Vietnam War; though this was limited to cooperation in health andresearch collaboration in military medicine, it is likely to open thedoor to other and wider agreements.25 In June 2012 when visitingVietnam, US Defense Secretary Leon Panetta urged Vietnam to hostmore US military craft as the US would shift emphasis to Asia byworking with partners like Vietnam.26

Indonesia has also moved to strengthen military relations with the USAas a result of its concerns over Chinas regional role and policies inSoutheast Asia, especially its behaviour in the South China Sea and itsgrowing military capability.27 Although Indonesia does not have a terri-torial dispute with China in South China Sea,28 it was also concernedthat Chinas claims there might infringe upon Indonesias sovereigntyover Natuna Island. Thus Indonesia welcomes American involvement.On 23 July 2010 Washington terminated the ban on ties with the Indo-

nesia Special Forces unit called Kopassus. This ban was introduced in1997, prohibiting the USA from having contact with foreign militaryunits that have a history of human rights violations.29 In September


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2010, Indonesian Foreign Minister Marry Natelagawa rejected Chinasview that the USA should not become involved in the South ChinaSea dispute..

Indian and Japanese involvement makes the situation more

complex

As the tensions in the South China Sea increased, India as an externalplayer was welcomed by ASEAN countries, especially Vietnam. On22 July 2011 the Indian naval vessel the INS Airavat moved to NhaTrang in southern Vietnam and was warned by a Chinese message tokeep out of Chinese waters. The Indian Foreign Ministry respondedthat India supports freedom of navigation in international waters,including in the South China Sea, and the right of passage in accordancewith accepted principles of international law.30 Meanwhile, China hasprotested against the exploration activities of Indias Oil and Natural GasCorp (ONGC) around the Paracel Islands (claimed by Vietnam), aboutwhich the Chinese are particularly sensitive. ONGC takes the viewthat Vietnamese claims are in accordance with international law, andit will continue with exploration projects in two blocks near the

Paracel Islands.

31

Subsequently, on 12 October 2011, during Vietnam President TruongTan Sangs visit to New Delhi, a three-year agreement for cooperationin oil and gas exploration and production was concluded betweenONGC and PetroVietnam. Significantly, this agreement was concludedwhile the Vietnamese Communist Partys general secretary, NguyenPhu Trong, was touring Beijing and professing friendship with hisChinese counterpart.32 By contrast with some other ASEAN countries,

Vietnam was using its traditional approach to dealing with China stressing commonalities and friendship while seeking counterbalancefrom other powers.

Japan is another big power getting involved in the South China Sea issue.Though a non-claimant state in the South China Sea, Japan has greatconcern about the dispute. The Japanese medias interpretation is thatChinese assertiveness in the South and East China Seas is a sign ofChinese expansionism.33 There is a Japanese perception that there is

a linkage between the South China Sea and East China Sea dispute,and that Beijings strategy and actions towards the claimant states inthe South China Sea may have implications for the East China Sea


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and the Diaoyu (Senkaku) dispute. Hence, in seeking a more active pol-itical role in the South China Sea dispute, Japan is strengthening its dip-lomatic and defence ties with the Philippines and Vietnam, usingmultilateral institutions like the ASEAN Regional Forum (ARF) and

the East Asian Summit (EAS) to check perceived Chinese assertivenessin the South China Sea.

For example, in 2012, as the South China Sea dispute got tense, Tokyodecided to strengthen its military cooperation with the Philippines andplanned to provide the Japan Coast Guards oldest 1000 ton patrolvessels to the Philippines. According to media report, [t]he easing ofthe arms export restrictions in 2011 may have played a role in the agree-ment to transfer these vessels for the purpose of helping the Philippinesin enhancing their maritime security.34 Japan has also undertaken thetraining of Filipino coast guard personnel. Prime Minister Nodaagreed with visiting Philippine President Aquino in Tokyo in September2011 that both countries would increase bilateral vice-minister strategicdialogue and would help Manila bolster its coast guard.35

Japan is also providing personnel training and material assistance toVietnam to strengthen its maritime capability. In October 2011, the Japa-

nese media reported that Tokyo and Hanoi have agreed to reinforcetheir defense cooperation in light of Chinas increasing influence inthe South China Sea.36 When Foreign Minister Gemba met with Viet-namese counterpart Pham Binh Minh in Hanoi in July 2012 after attend-ing ASEAN-related ministerial meetings in Phnom Penh, Vietnamrequested Japanese assistance to help train coast guard personnel andimprove its coastal defence capabilities. In exchange, Hanoi may pur-chase Japanese nuclear power plants and extract rare earth mineralsfor sale to Japan.37

Besides strengthening ties with the Philippines and Vietnam, Japan hasalways sought to use the ARF and EAS to deal with the South China Seadispute. For example, in October 2011, Japanese Foreign MinisterGemba Koichiro floated a proposal for a maritime regime for the EASmeeting to be held in Bali, Indonesia, the following month.38 The keyJapanese idea was a multilateral approach, to include Japan andASEANs other dialogue partners, to construct a maritime regime inthe South China Sea based on the freedom of navigation, international

law and peaceful settlement of disputes. Not surprisingly, Tokyosattempts to build a new maritime architecture for the South China Seahas been viewed as muddying the water by Beijing.39


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Thus, Indian and Japanese involvement in the area and their developingties with Vietnam and the Philippines are making the situation in theSouth China Sea more difficult and increasing the risk that there willbe a miscalculation by one of the parties.

Will ASEAN-China economic relations be affected?

Given the intractable nature of the problem in the South China Sea, thestrategic approach of the ASEAN claimant countries is to depend on theUSA for the maintenance of the regional security order to check Chinathrough the USA. Yet, economically, most ASEAN countries haveChina as their major trading partner and largest foreign investor. Thisstrategic dual dependency on the USA and China has led to a strategicambivalence and a dilemma for ASEAN as a regional organisation andfor the individual countries. This has inevitably complicated their econ-omic cooperation with China.

The Philippines is a good example. Throughout most of the 1980s, thePhilippines was beset by political instability and economic malaise,and was in dispute with China over the South China Sea. Therefore it

was not in a position to take advantage of Chinas economic liberalisa-tion. The country fell behind most of its ASEAN neighbours, whosetrade and investment ties with China expanded remarkably during theperiod. The situation did not change until 2000 when former PhilippinePresident Estrada visited China, signing a joint declaration on the Frame-work of Bilateral Cooperation in the 21st Century. After that, China-Phi-lippines bilateral trade rose more rapidly. Between 2003 and 2011,bilateral trade rose steadily from US$9.4 billion to $32.3 billion, anincrease of 244 per cent, making China the Philippines third largest

trading partner after the USA and Japan. 40

Yet compared with other ASEAN countries, the growth in Philippinestrade with China was much slower. In 2011 Philippines trade withChina was lowest among ASEAN-4, only about one-third that of Malay-sias trade. For the degree of wariness toward China increased as thetension on the South China Sea heightened. In the Philippines therewas an increasing worry among the countrys business and economicleaders that economic competition from China could spell trouble for

certain sectors of the Philippines economy. This perception has largelyconstrained the expansion of its economic cooperation with China interms of trade and investment.


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In bilateral investment, although the Philippines was one of the earliestforeign investors in China, its FDI value in China was insignificant whencompared with that of other ASEAN countries. For example, in 2010 thevalue of the Philippines FDI in China was US$138.1 million, account-

ing for only 2.2 per cent of ASEAN-6s total value of FDI in China.41For China, its overall investment in the Philippines also remains com-paratively small. In 2011, Chinas total outward FDI reached US$74.7billion, while its FDI in ASEAN reached US$5.9 billion, a 63.3 percent increase from that of the previous year; on the other hand,Chinas FDI in the Philippines was US$294 million, accounting foronly 4.5 per cent of Chinas total FDI in ASEAN.

Compared with the Philippines, the other ASEAN claimant countrieshold more positive attitudes to economic cooperation with China, andeconomic integration has been deepening. From 2008, especially afterthe global financial crisis, ASEAN has become an important destinationfor Chinas outward investment. In Vietnam, in 2011 alone, Chineseactual investment amounted to $0.2 billion, with the cumulativeamount being $1.3 billion. In fact, as a large proportion of VietnamsFDI inflows originate from Hong Kong and the British Virgin Islands,a considerable proportion of Chinese FDI in Vietnam was realised

through Hong Kong. In view of Vietnams foreign investment liberalisa-tion commitment following its entry into the WTO in 2007, the potentialis considerable.

Obviously, Vietnam has a comparative advantage in labour forces,mineral and agricultural sources; while China has a substantial compara-tive advantage in industrial products, capital and technology. Theseeconomic complementarities show that there is substantial intra-industrytrade, and that both sides are closely linked in the international pro-

duction chain. Hence, China exports capital goods and key industrialintermediate products to Vietnam to exploit cheap labour and rawmaterials there, while Vietnam exports finished products to the USAand EU. This result would actually suggest that Vietnam holds a positiveattitude to its economic relations with China, and this bilateralcooperation has actually helped this country by enhancing the regionaldivision of labour, strengthening its competitiveness, and expandingits export markets.

Unlike the Philippines, Vietnams rapid industrialisation process andgeneral optimism have restrained its domestic economic nationalismagainst the expansion of Chinese investment and trade. Vietnams


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self-confidence has been enhanced by its own economic achievementsand political reform, including rapid economic growth, trade expansion,inflows of foreign investment, and progress in the domestic politicalsystem. Apparently, Hanois strategy is not to restrict investment from

China but to develop new and expand existing export markets.Vietnam hopes, therefore, that in the long run it will upgrade its indus-tries, introduce more complementary FDI and enhance its competitiveedge over other Asian countries by using Chinese investment inflow.42

Conclusion

As China rises as an economic and political power, some ASEANcountries remain uncertain about Chinas long-term intentions in South-east Asia. This uncertainty, their rising domestic nationalism and theiractive search for energy resources in the South China Sea will continueto create tension in their bilateral relations with China.

Chinas economic rise has boosted national confidence to levels unpre-cedented since the Cultural Revolution. Chinese nationalists increas-ingly blame the government for perceived inaction and are pressing

for a more muscular stance, while the USA is reasserting its presencein the Asia-Pacific region and making efforts to strengthen ties withthe Philippines and Vietnam. The involvement of India and Japan hasalso served to raise the temperature. It is to be hoped that the increasingbellicosity of recent statements does not foreshadow a more difficultsituation on the ground, or rather on the Sea.

However, at this stage there is no reason to regard military confrontationas likely or inevitable. Economically, China and ASEAN countries have

become increasingly interdependent, as China is currently the secondlargest trade partner of ASEAN, and ASEAN is the third largest tradepartner of China. In the light of increasing economic ties and mutualdesire for regional peace and stability, China and ASEAN-relatedcountries are likely to make every effort to stabilise their bilateralrelations. President Aquino stated during his state visit to China inAugust 2011 that China-Philippines relations will not be affected bythe dispute over the South China Sea, reiterating the need to dealwith the disputes through peaceful dialogue, and to continue to maintain

regional peace, security and stability, creating a favorable environmentfor economic growth.43 And it is important to note that some proceduralprogress was made in 2011. In November 2011, China made a goodwill


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gesture of providing US$475 million to establish the China-ASEANMaritime Cooperation Fund, and there are several working groupsnow in place.

Indeed, the expansion of economic ties and the growth of common inter-ests have laid the foundation for partial settlement or management of theterritorial disputes. To move beyond the South China Sea dispute,Beijing and the ASEAN claimant countries need to focus more onenhancing mutual trust and bolstering economic cooperation, ratherthan on being assertive or displaying military muscle over territorialdisputes.

NOTES

1. Shen Jiangming, Chinas sovereignty over the South China Sea islands: a histori-

cal perspective.Chinese Journal of International LawVol. 1. Issue 1 (2002): 94

157.

2. Zou Keyuan, The Chinese traditional maritime boundary line in the South China

Sea and its legal consequences for the resolution of the dispute over the Spratly

Islands.International Journal of Marine Coastal Law Vol. 14. Issue 1 (1999): 52.

3. Taiwan should cooperate with China on South China Sea.Focus Taiwan, May 13,

2012.

4. Alex Watts, Tensions rise as Vietnam accuses China of sabotage. The Sydney

Morning Herald, June 2, 2011. http://www.smh.com.au/world/tensions-rise-as-

vietnam-accuses-china-of-sabotage-20110601-1fgno.html.

5. China reprimands Vietnam over offshore oil exploration.Reuters, May 28, 2011.

http://af.reuters.com/article/energyOilNews/idAFL3E7GS07E20110528.

6. Richard Javad Heydarian, USs pivots on the Philippines. AsiaTimes online,

September 27, 2012.

7. Tokyo concerned by Chinese build-up.The Strait Times, August 3, 2011.

8. Annual Report to Congress: Military and Security Developments involving thePeoples Republic of China, Office of the Secretary of Defense, May 2011, p.55.

http://www.defense.gov/pubs/pdfs/2011_cmpr_final.pdf.

9. Jane Perlez, Rising stakes in South China Sea.International Herald Tribune, June

1, 2012.

10. An ying-min, Lun nanhai zhengyi quyu youqi ziyuan gongtong kaifa de

moshi xuanze (On the mode of jointly developing oil and gas in South

China Sea). Journal of Contemporary Asia-Pacific (Dangdai yatai) No. 6 (2011):

124140.

11. Li liang, nanhai: jiakuai kaifa caineng huajie zhengyi (South China

Sea: further development can solve disputs). http://sdfa.chinajournal.net.cn/

EditorB/WebPublication/paperDigest.aspx?paperID=SDFA201104010&isCnki=

ck01[accessed July 23, 2012].


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