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ORF CHINA WEEKLY
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Vol. II Issue. 44
Discerning Chinese claims in the South China Sea
Shaantanu Shankar
29 October 2012

ANALYSIS

The South China Sea joins the Southeast Asian states with the Western Pacific, functioning as a critical segment of international sea routes, between the straits of Malacca, Sunda, Lombok, and Makassar. More than half of the world's annual merchant fleet tonnage passes through these choke points, and a third of all maritime traffic. The oil transported through the Strait of Malacca from the Indian Ocean, en route to East Asia through the South China Sea, is more than six times the amount that passes through the Suez Canal and 17 times the amount that transits the Panama Canal. Roughly two-thirds of South Korea's energy supplies, nearly 60 percent of Japan's and Taiwan's energy supplies, and about 80 percent of China's crude-oil imports come through the South China Sea. The South China Sea has proven oil reserves of 7 billion barrels and an estimated 900 trillion cubic feet of natural gas, a potentially huge bounty.

This has also been a region of contention between China and nation-states in Southeast Asia. China, Vietnam, Philippines, Malaysia and Brunei all claim sections or a majority of the South China Sea and the islands within it. At the heart of this dispute are the Spratly and Paracel Islands. The Paracel Islands are a chain of islands in the northern area of the South China Sea, almost equidistant from Vietnam and Hainan Island, China. China has occupied these islands since the 70s, in spite of Vietnamese claims of sovereignty over the islands.

Since the 1990s, efforts have been made by the ASEAN (Association of Southeast Asian Nations) nations to stabilize the situation and seek the opportunities for cooperation in the region. The ASEAN Declaration on the South China Sea in 1992 and the adoption of the ASEAN-China Declaration on the Conduct of Parties in the South China Sea (DOC), have contributed to establishing institutional mechanisms to seek peaceful solution to disputes and maintain regional stability in the South China Sea.

Contrary to multilateral efforts, the Spratly Islands have emerged as the security flashpoint in the South China Sea in the contemporary security environment. A number of minor military flare-ups between Chinese and Vietnamese, Philippines or Malaysian have ensued since the ASEAN Declaration in 1992. China's signalling of intent was now targeted towards the ASEAN nations, especially with Vietnam's incorporation into ASEAN. The Mischief Reef incident in 1995, when China built infrastructure on a submerged reef within the Philippines' Exclusive Economic Zone (EEZ), was the first incident of hostility between China and an ASEAN member state. Additionally, China's insistence on bilateral mechanisms to deal with the issue has plagued ASEAN initiated multilateral efforts.

The risk of conflict escalating from relatively minor actions has increased in the region since the Mischief Reef incident. The situation has been complicated by the fact that fair shares of geographical features have been occupied by China and the ASEAN claimants. Already, the South China Sea has increasingly become an armed camp, with claimants building up and modernizes their navies, even as the scramble for islands and reefs in recent decades is mostly over. China has so far confiscated twelve geographical features, Taiwan one, Vietnam twenty five, the Philippines eight, and Malaysia five.

As China's navy becomes stronger and as China's claim on the South China Sea contradicts those of other littoral states, these other states will be forced to further develop their naval capacities. They will also balance against China by relying increasingly on the U.S. Navy, whose strength has probably peaked in relative terms, even as it must divert considerable resources to the Middle East.

The United States presently guarantees an extremely delicate counter balance to China in the South China Sea, limiting China's aggression in the region. What the United States provides to the countries of the South China Sea region is the prospect for balancing China's increasing power status in the region. Strategic rivalry with the United States has reshaped the dispute in such a manner that China is less concerned with ASEAN's policies and decisions and more with US influence and activity in the region. It is the very balance of power between the United States and China that ultimately allows Vietnam, the Philippines, Malaysia and Brunei able to play one great power off against the other, with the objectives of attaining a significant advantage at negotiating tables and forcing the mandate of a multilateral solution to the issue. Within that context, regionalism has emerged as a crucial tool for balancing power in its own right, in the form of the ASEAN.

China has taken a more assertive position in its approach towards the South China Sea. China's claims are based on a number of cumulative historical factors dating back to naval expeditions by the Han Dynasty (2nd century), Sung Dynasty (12th century), Ming Dynasty (15th century) and more recently the Qing Dynasty (18th century). In the 19th and 20th century, China has asserted claims to both the Spratly and Paracel Islands. In 1947, the Republic of China (now Taiwan), produced a map with nine undefined dotted lines claiming a majority of the region, excluding buffer zones of littoral states. The People's Republic of China (China) officially relied on the map for the first time in response to the 2009 Joint Submission of Vietnam and Malaysia to the Commission on the Limits of the Continental Shelf (CLCS). China's claims have the same basis as Taiwan's claims, but Taiwan is not a sovereign nation and does not have the legal right to maritime claims. China asserted that it had indisputable sovereignty over the islands in the South China Sea and the adjacent waters, and enjoys sovereign rights and jurisdiction over the relevant waters, seabed and subsoil. China justifies its claims through reasoning that the Spratlly Islands are fully entitled to territorial seas, EEZ and continental shelf. However, no official clarification has been given regarding the meaning of the U-shaped line map or made any specific claims in the Spratly's. China has effectively occupied the Paracel Islands, approximately thirty geographic features, and seven islands in the Spratly Islands.

China's assertiveness in the South China Sea represents a security threat to the ASEAN nation-states, who have contesting claims in the region. China's status can be interpreted as that of a regional superpower, whose military and economic capabilities far outstrip those of the ASEAN nation states. China's strategic interests in the South China Sea were especially highlighted with an evolution in China's maritime strategy. In 1985, Lui Huaquing, the vice chairman of the Chinese Military Commision, envisioned a maritime doctrinal shift from "Coastal Defense" to "Offshore Defense" envisioning China's rise as a preeminent world power in forcing a transformation of the Navy into a "blue water" force capable of extending its influence into the Indian and Western Pacific Ocean regions. "Coastal Defense" was directed towards the threats emanating from the Soviet Union and Taiwan. Since the end of the Cold War, China's military strategy was influenced by a new threat perception and the U.S became China's primary strategic competitor at a global level. "Offshore defence" is the maritime component of "active defence" in Chinese grand strategy. Today, The PLA Navy aims at a "gradual extension of strategic depth for offshore defensive operations and enhancing its capability in integrated maritime operations and nuclear counterattacks". China views the U.S as its primary strategic competitor, and Chinese doctrines, strategies and perception are responsive to American capabilities and presence in the Asia-Pacific. Offshore defence envisions the Yellow Sea and the South China seas as safe sanctuaries for basing naval platforms through extending strategic influence across the first island chain. The area under the first island chain around the South China Sea is consistent with the U-shaped dotted line map released in 2009.

It is worth noting that China has successfully resolved a majority of its land-based territorial disputes, except those related to China's borders with the India and Bhutan. However, maritime based territorial disputes are yet to be resolved. The economic significance of the South China Sea, both in terms of energy and as a sea route, seems to emerge as a major factor driving Chinese perceptions in the region. In this context, China's assertiveness in the South China Sea, and more recently in the East China Sea could be interpreted as a strategy to strengthen its bargaining position, buying time until resolution of the issue would strategically favour the nation. However, the arms race that has emerged has resulted in increasingly erratic state behaviour among the smaller Asia-Pacific powers, as witnessed with Japan in the Diaoyu/Senkaku islands of the East China Sea and Vietnam and Philippines in the Spratly Islands.

A number of prominent strategic analysts have presented the South China Sea as the major theatre for a future 'World War III'; however escalation of tensions to the level of military conflict seems unlikely after looking into Chinese political and military strategy in the region. The energy potential of the region itself influences a more prudent as opposed to rash Chinese perception. However, the ongoing arms race would nevertheless present a security threat due to delicate nature of the dispute. In this light, China's role as a rational decision maker would be a major determinant factor in the future of the dispute, as well as other unresolved territorial disputes at sea.

(The writer is a Research Intern at Observer Research Foundation)

ECONOMY

Ambitious economic reforms sought before leadership change

As the date for the leadership change comes closer, China's top leaders have asked policy think-tanks to come formulate their most ambitious economic reform proposals in an effort to curb state firms, giving more freedom to the setting of interest rates and currency.

Policy advisers involved in drawing up the reform proposal told Reuters that the agenda for reforms was sought by members of the State Council. Sources have also mentioned that there is an interest in looking at proposals from the provinces as well, indicating a desire to gain nationwide consensus on the content and timetable for the structural reforms.

As reported by Reuters, some of the authors of the proposal have suggested that the nascent rebound in the economic growth could hinder the reform agenda.

The focus of the reform agenda will be to contain government interference and to curtail the privileges gained by state-owned enterprises, such as access to bank lending and government contracts. Reforms will also include the allowing the market to set cost of bank credit, land and various natural resources.

Also on the cards are proposals to liberalise capital markets and to boost the yuan's use in global trade settlement.

Source (s): Business Standard, October 22, 2012-10-29

China becomes favourite for foreign investment

According to the Global Investment Trends Monitor, released by the United Nations Conference on Trade and Development on Tuesday, China has tipped the US as the world's largest recipient of foreign direct investment in the first half of 2012.

FDI inflows to China for the first half amounted to $59 billion, a three percent drop in year-on-year. However, the US saw a 39.2 percent decline from last year with only $57.4 billion FDI inflow in the first half of this year.

The low rate of decline indicates a continued confidence in China's economy despite the slowdown it has been facing for the last seven quarters.

FDI flows will, at best, level off in 2012 at slightly below $1.6 trillion because the slow and bumpy recovery of the global economy, weak global demand and elevated risks related to regulatory policy changes continue to reinforce the wait-and-see attitude of many transnational companies towards investment abroad," the UNCTAD report said.

Despite a five percent year-on-year decline, developing countries received more than half the world's global FDI inflows.

Source (s): China Daily, October 29, 2012

POLITICS AND SOCIETY

CPC to amend party constitution

The Communist Party of China (CPC) is going to amend the party constitution at its upcoming 18th national congress scheduled for November 8, according to a meeting of the Political Bureau of the CPC Central Committee on 22 October.

The Political Bureau of the CPC Central Committee decided to submit a draft amendment for the CPC constitution to the seventh Plenum of the 17th CPC Central Committee for further discussion on November 1, before it will be tabled for the national congress.

The 18th CPC National Congress is being held at an important time, as China is currently working to build a moderately prosperous society in an all-around way, deepening reform and opening up and accelerating the transformation of its economic development pattern.

The congress carries high significance in inspiring CPC members and people of all ethnic groups to continue to forge ahead with the building of a moderately prosperous society, as well as the development of socialism with Chinese characteristics

Source (s): Xinhua, October 22, 2012

New law on mental health lauded

The Standing Committee of the 11th National People's Congress adopted the Mental Health Law on Friday. This long-awaited national legislation on mental health will help improve patients' access to timely and appropriate treatment, a field in which the nation still lags behind most developed countries.

Currently, China can only provide around 1.6 hospital beds to every 10,000 people, compared to the global average of 4.4, according to statistics from the Ministry of Health. China has around 16 million people with serious mental health issues but less than half have received treatment, according to official figures.

Under the law, general hospitals are required to set up mental health departments and to help train medical workers in this field. In addition, the law will help to raise government spending on mental health and improve the standing of medical staff in this field.

The law will benefit patients in terms of access of treatment, their quality of life, and improve their chances of recovery.

Source (s): China Daily, October 27, 2012

Residence permit system urged for migrant population

A national residence permit system should be established to provide better services for the migrant population in China's cities.

Zhou Yongkang, a senior leader of the Communist Party of China (CPC), said at a meeting on social management that a system should be set up and implemented at the earliest possible date.

It would cover help with employment, health care services, housing, social security and migrant people's children's education, said Zhou, a Standing Committee member of the Political Bureau of the CPC Central Committee.These efforts would help to avoid a new discriminatory dual system in cities.

Source (s): Xinhua, October 26, 2012

FOREIGN AFFAIRS

China ratifies border agreement with Tajikistan, Afghanistan

The China-Tajikistan-Afghanistan agreement on the definition of the tri-lateral junction point for national boundaries was ratified on October 26, 2012 by China's National People's Congress.

The agreement is based on relevant border pacts with Tajikistan and Afghanistan and was reached through negotiations between the three nations. The ratification of the agreement represented great significance for maintaining peace along the borders, according to Chinese sources

Source (s): Xinhua, October 26, 2012

US, China hold consultation on Asia-Pacific

The US and China held their fourth Asia-Pacific consultation in San Francisco on October 23, 2012, with both sides agreeing on the continual use of the platform to keep close contacts and coordination on major issues in the region.

The two sides exchanged views on issues including bilateral relations, interaction in the region, as well as regional cooperation. The two nations held their first such consultation in Hawaii in 2011.

Source (s): People's Daily, October 24, 2012

Chinese company seals US shale gas stake

Chinese company, Haimo Oil and Gas LLC has reached an agreement on purchase of a 14.29 per cent stake in Houston-based Carrizo Oil & Gas's Niobrara shale oil and gas assets in Colorado for 27.5 million US dollars.

China is aiming to produce 6.5 billion cubic metres of shale gas by 2015. An estimated 400-600 billion yuan will be spent to drill 20,000 shale gas wells by 2020, according to the National Development and Reform Commission.

Source (s): China Daily, October 26, 2012

Australian White Paper on Asia

The Australian White Paper titled "Australia in the Asian Century" was released on October 28, 2012, placing China at the centre of Australia's so-called Asian century. The long-delayed paper lays out an ambitious plan to strategically engage the emerging Asian continent. As Australia's largest and leading trade partner, China emerges as a significant strategic partner in the future of Australia-Asia relations, as envisioned by the White Paper.

Source (s): Xinhua, October 28, 2012

SCIENCE AND TECHNOLOGY

China's space weather monitoring system operational

Codenamed the "Meridian Project" - China's space weather monitoring project has become fully operational. The project is expected to "enhance the country's competence in space and safeguard the security of the nation's space activities," according to Wu Ji, General Manager of the project and director of National Space Science Centre. The project which kick started in 2008 had provided early warnings and forecast information to China's Tiangong-1 and Shenzhou-8 & 9 space missions. A large-scale ground-based monitoring system composed of 15 stations will be set up as part of the project.

Source (s): China Daily, October 24, 2012.

Another satellite for Beidou navigation system launched

China launched its 16th satellite for the Beidou satellite navigation system on October 25. It was launched from the Xichang satellite launch centre using a Long March - 3C carrier rocket. Beidou is expected to deliver services to most of Asia-Pacific by early 2013. In December 2011, Beidou had started providing data on a trial basis. According to a spokesperson, it has been used in sectors in including transportation, weather forecasting, marine fisheries, forestry, telecommunications, hydrological monitoring and mapping. The navigation system, which is expected to be completed by 2020 will consist of 35 satellites offering global services.

Source (s): China Daily, October 26, 2012.



Progress in spaceflight research

The Science and Technology of Aerospace Flight Dynamics Laboratory of China has made significant achievements in spaceflight research. According to the director of the laboratory, Tang Geshi, progress has been made in spaceflight trajectory computation and analysis, orbital tracking, telemetry and command technologies for deep space probes and spaceflight planning and control. The laboratory, established in March 2012, is a central institution forwarding China's spaceflight research and currently employs more than 50 researchers.

Source (s): China Daily, October 24, 2012.

Contributors:

•   Rahul Prakash
•   Sadhavi Chauhan
•   Arvind K. John
•   Shaantanu Shankar