Chinese Economy and Trade in 21st Century

“South China Sea Dispute: Security

Conflict and Economic Opportunities”

Ugyen Tshering
Bangkok: Thailand
28 July 2017
 Introduction

1.1 Background

The heated and contentious dispute between China, Taiwan and four members of

ASEAN namely Philippines, Vietnam, Malaysia, and Brunei have been for decades

over territory and Sovereignty in the South China Sea. The dispute emerged when

China claimed territorial in South China Sea based on the “Nine-dash line”, a U-

shaped area that covers about 3.5 million square kilometres or up to 90 percent of the

South China Sea (Breene, 2016). China’s claims overlap with its neighbour Taiwan

and four Southeast Asian countries, Philippines, Vietnam, Malaysia and Brunei which

they claimed various reefs and islands in the Spratlys. The dispute between the

Philippines and China is about the Scarborough Shoal and Vietnam and China is

about the Paracel Islands. The main reason for the argument in South China Sea is

about the existence of rich resources such as hundred of islands, reefs, atolls and the

presence of abundant reserves of oil and natural gases, fisheries and a key shipping

route considered as some of the world’s busiest shipping lanes passing through the

worth of $5.3 trillion in trade each year (Breene, 2016).

For decades, they have been in dispute over territory in the South China Sea but in

recent years the tensions became intense over the claim as China became assertive and

more aggressive by building artificial island and exercising military despite

International tribunal in the Hague favouring Philippines. Beijing rejected

international tribunal ruling South China Sea and started become more aggressive

towards South China Sea Claimants.

In 2014, China installed an oil platform in the Paracels Island and has also deployed a

surface to air missile defence system and was building a helicopter base there

(Breene, 2016)

However, Southeast Asian’s ally US, to reassure its allies and to ensure access to key

shipping and air routes in South China Sea, US stepped up flying and sailing military

aircraft vessels across the sea proclaiming the freedom of navigation rights under

international law.

1.2 Statement of the Problem

The long-standing dispute between China, Taiwan and four Southeast Asian countries

over South China Sea are very contentious, all these countries claiming over territory

and sovereignty. China claimed and reiterated that South China Sea belongs to China

by mapping the nine-dashed line that covers almost the entire Scarborough Shoal,

Paracel and Spratly Island since 1947. China’s claim in South China Sea has

overlapped its neighbor’s claim of reefs and atolls in the Spratly Island. However, by

1970s the dispute become more intense between Vietnam and China when the

Chinese seized the Paracels from Vietnam, killing more than 70 Vietnamese troops,

followed by losing 60 sailors in Spratly island in 1988 (BBC News, 2016). Since then,

it became more troublesome for disputants when they started spending more budgets

for military defense. In recent year, Manila (Capital of the Philippines) took South

China Sea case to UN Convention on the Laws of Sea to challenge its claims but

despite International tribunal rejecting the claim of China, China still asserted their

rights in South China Sea by building artificial island and exercising military. Both

sides have accused each other of militarizing the South China Sea (BBC News, 2016).
As regional bloc ASEAN non-claimants could not come to consensus with claimant’s

members, further weakening its claimant members against economically powerful

China. The disarray of ASEAN has made hard for claimant members to fight back

against assertive China. This issue presents a security risk and conflict to the region as

China is becoming more assertive and four Southeast Asian countries are allocating

more budgets for military defense. China’s economic power has provided the

foundation for the modernization and transformation of its armed forces (Rustandi,

2016). Apparently, the intense tension in South China Sea have made both sides to

strengthen their military defense making peaceful settlement far more feasibility.

Definition of terms

1. South China Sea (SCS) – In Chinese it is Called Nan Hai, arm of the Western

Pacific Ocean that borders the Southeast Asian mainland and currently six

countries are claiming their area (Consist of Paracel Island, Spratly Island And

Scarborough Shoal) (LaFond).

2. ASEAN – The Association of Southeast Asian Nations, is a group of 10

countries formed in 1967 to promote political and economic cooperation and

regional stability (Indonesia, Philippines, Malaysia, Thailand, Singapore,

Vietnam, Cambodia, Brunei, Myanmar and Laos)

3. UNCLOS – United Nation Convention on the Laws of the Sea, a

comprehensive regime of law and order in the world’s oceans and seas

establishing rules governing all uses of the oceans and their resources NI

(OCEANS & LAWS OF THE SEA UNITED NATION, 2017)

4. Claimants – are those who claim their areas in the South China Sea (six

claimants)
5. Non-Claimants – are those who does not claim the areas in SCS but they are

affected by the existing dispute (stakeholders)

6. FDI – Foreign Direct Investment, is an investment made by a company or

individual in one country in business interests in another country, in the form

of either establishing business operations or acquiring business assets in the

other country, such as ownership or controlling interest in a foreign company

(INVESTOPEDIA)

7. Nine-dash line - a U-shaped area that covers about 3.5 million square

kilometres or up to 90 percent of the South China Sea and it is mapped by

China.

8. Reefs – a ridge of jagged rock, coral, or sand just above or below the surface

of the sea (Oxford University Press).

9. Atolls – a ring-shaped reef, island, or chain of islands formed of coral (Oxford

University Press).

10. Silk Road Project – is the project initiated by Chinese President Xi Jinping,

the idea of two new trade corridors, one by overland and other by sea, which

will connect the Eurasia from Central Asia to the Middle East and to Europe

11. Exclusive Economic Zones – is an area beyond and adjacent to the territorial

sea, subject to the specific legal regime established in UNCLOS, under which

the rights and jurisdiction of the coastal State and the rights and freedom of

other States are governed by the relevant provisions of this Convention

(United Nations Convention on the Law of the Sea).

1.4 Research Questions

This research paper embarks on three questions:

1. What are they fighting for and is it worth it?

2. What are the security conflict and economic opportunities in South China Sea

dispute?

3. How can they resolve this contentious dispute?

1.6 Conceptual Framework

The main concept of this study is to know how South China Sea dispute happened and

how it became more intense and troublesome and what are the security conflicts and

economic opportunities. The following conceptual framework in figure 1 will

illustrate the comprehensive scenario of dispute in South China Sea.

 Figure 1 South China Sea Dispute

South China Sea Dispute

UN International
Convention on
the Laws of the
Sea

China
United
and
States
Taiwan

Non‐
Claimants
Claimant countries
Countries ASEAN

Security Conflict South China Sea Economic Opportunities

1. Economic concentration rather than allocating budget for military defense.

3. Joint Resources4.
2. Silk Road Project
2. More confrontation, inflicting all the disputants Bilateral economic
development
1. Increase in Defense budget
1.6.1 South China Sea Dispute

The South China Sea dispute involves the claim over island by six sovereign states

within the region. Initially, China claimed the South China Sea by mapping nine-dash

line, which it is believed to be overlapping with the other claimants. The dispute

includes Island, reefs, islets and atolls in South China Sea, including the Spratly

Islands, Paracel Island and Scarborough Shoal and it is believed to have abundant

reserves of oil and natural gas, fisheries and considered as one of the world’s most

busiest shipping lanes worth $5.3 trillion. For decades, neighboring countries have

vigorous claim over territory in the area but recently after the Philippines took the

South China Sea case to International Convention of the law of the sea, China rejected

the rule and built artificial island near South China Sea making that area for launching

military exercise. Since then, the disputes become more intense as disputants

increased their budget spending in military defense.

The following figure will show what is at stake in South China Sea.

Figure 2 Why South China Sea is worth for argument?

(Source: World Economic Forum, 2016)

1.6.2 UN International Convention on the Laws of the Sea

The UN Convention on the Laws of the Sea, in abbreviate called as UNCLOS is the

international agreement that defines the rights and responsibilities of nations with

respect to their use of the world’s oceans for businesses of natural resources, trade and

the environment. The Convention on the Laws of the Sea came into force in 1994 and

represents the codification of international law regarding territorial waters, sea-lanes,

and ocean resources. The Convention introduced significant issues covering

navigation, archipelagic status, exclusive economic zones (EEZs), continental shelf

jurisdiction, deep seabed mining, exploitation regime, protection of the marine

environment, and each sovereign territorial water extend to a maximum of 12 miles

(22km) beyond its coast, but foreign vessels are granted the right of innocent passage

through this zones (Churchill, 2017). Moreover, beyond its territorial waters, every

coastal country may establish an exclusive zone (EEZ) extending 200 miles (370km)

from shore and within the EEZ the coastal state has the right to exploit and regulate

fisheries, construct artificial islands and installations, use the zone for other economic

purpose and regulate scientific research by foreign vessels (Churchill, 2017).

The International Convention on the Laws of the Sea played an important role when

the Philippines have sought out international arbitration instead of bilateral. In 2013,

the Philippines announced it would take China to an arbitration tribunal under the

auspices of the UN Convention on the Laws of the Sea, to challenge its claims (BBC

News, 2016). In July 2016, Court ruled in favor of Philippines over China and said

China has no legal basis to claim historic rights to the bulk of South China Sea within

its nine-dash line which extended hundred of miles to the south and east of its island

province of Hainan covering some 90 percent of the disputed waters and also said it
has violated the Philippines’ sovereign rights (Hunt, 2016). However, China rejected

the decision by the Court and boycotted the proceedings.

1.6.3 Actors in South China Sea

Who all are the actors in South China Sea dispute and how are they distinct from each

other? Basically, there are 6 main actors or claimants but there are also other actors

who are present not as claimants but part of their regional partnership and one actor

proclaiming for free movement in South China Sea. The following paragraph will

explain who are the claimants and non-claimants in South China Sea dispute.

1.6.3.1 Claimants

Who are the claimants? China is the most expansive claimant, by far the largest

portion of territory - an area map by the nine-dash line in South China Sea, which

reach hundreds of miles south and east from southern province of Hainan. And its

neighbor Taiwan, know as Republic of China have commonalities with China on the

South China Sea. Both China and Taiwan claim the legitimacy of nine-dash line and

their sovereignty from a historical perspective. But in terms of their status in the

international community and their interpretation of international standards, the two

positions vary. Taiwan claims that the Nansha (Spratly) Islands, Shisha (Paracel)

Islands, Chungsha (Macclesfield) Islands, Tungsha (Paratas) Islands, as well as their

surrounding waters, their respective seabed and subsoil belong to them but they does

not recognize any claim by other countries (Kim, 2016). It is believed that Taiwan has

slightly adjusted the claim, when they recently focused more on the islands,

surrounding waters and continental shelf, rather than the whole areas of water in the

nine-dash line and moreover, in December 2005 they suspended its claim to the entire
waters’ within the line (Kim, 2016). Other claimants, those who are engaged in

conflict with China and Taiwan are from ASEAN (Southeast Asian regional bloc)

members such as Vietnam, Philippines, Malaysia, and Brunei. The major disputes

areas are the Paracels and Spratly Island claimed by China, Taiwan and Vietnam and

likewise, both the Philippines and China claim Scarborough Shoal (Huangyan Island

in Chinese) located more than 160km from the Philippines and 800km from China.

Moreover, Malaysia and Brunei also claim several of the Spratly Island, reefs and

atolls nearby stating that this island falls within their economic exclusion zones

(Defined by UNCLOS). Literally, there are six sovereign nations namely, China,

Taiwan, the Philippines, Vietnam, Malaysia and Brunei who all have claims on South

China Sea.

The following figure will show the nine-dash line mapped by China and the claim

overlapping other claimant’s area.

Figure 3 Islands claimed by six nations

(Source: BBC, 2016)

1.6.3.2 Non-Claimants (ASEAN Members, Japan and South Korea)

On the other hand, South China Sea disputes got non-claimant countries’ attention as

the South China Sea maritime and territorial dispute caused alarm for them, with

leaders from India and Japan asking all parties to settle the issue peacefully (THE

STAR ONLINE, 2015). In fact, as a regional bloc, ASEAN discussed the South China

Sea (SCS) issue with China and in 2002, China and ASEAN signed the declaration on

the South China Sea to safeguard peace and stability (Yongkun, 2015). As a regional

integration, ASEAN has tried to manage the dispute multilaterally through dialogue

and consultation with China but has not yet been successful in playing a mediating

role because of a lack of consensus among its member states on how to address

sovereignty disputes (Rustandi, 2016).

As ASEAN members, China and Taiwan are centered on maritime boundaries,

protecting sovereignty and the right to exploit the region’s resources, by contrast other

states are interested to secure Sea Lines of Communications (SLOCs) and in ensuring

their national geopolitical strategies. These countries are Japan and South Korea

whose interests are to secure SLOCs for trade and oil transportation and in fisheries,

with roughly two-thirds of South Korea’s energy and nearly 60 percent of Japan’s

crude oil imports and 80 percent of china’s coming through the South China Sea

(Rustandi, 2016).

1.6.3.3 United States

Meanwhile, the contentious dispute has also dragged the US into South China Sea and

heightened rivalry with China because of its demand for freedom of navigation

through the South China Sea under UN Convention on the Laws of the Sea

(UNCLOS), its interest in South China Sea and also the supports that it provides to
ASEAN Claimants such as Philippines. The dispute between China and other non-

claimants become more visible and contentious because of China’s assertiveness in

South China Sea as they felt China is undermining their national interests such as

freedom of navigation.

The United States has sought to uphold freedom of navigation and support other

nations in Southeast Asia that have been affected by China’s assertive territorial

claims and land reclamation efforts. They believe that countries should have freedom

of navigation through Exclusive Economic Zones (EEZ) in the sea and are not

required to notify claimants of military exercise. Hence, they encouraged all claimants

to conform their maritime claims to international law and challenge claims (Peace

Palace Library , 2017)

1.6.4 Security conflicts

The evolution of South China Sea dispute started with the security conflict when

China published a map of South China Sea with nine-dash line which its neighbor

Southeast Asian countries such as Philippines, Vietnam, Malaysia and Brunei claim

that this nine-dash line is overlapping their area of Exclusive Economic Zones

(EEZs).

Initially, this nine-dash line was brought up by the Republic of China (Taiwan) in

1947 as eleven-dash line but later China removed two dashes and redefined as nine-

dash line. Thereafter, in 1956, Taiwan claimed Taiping Island in the Spratly Islands

and stationed permanent troops on the Island. Subsequently, in 1970, The Philippines

claimed the western portion of the Spratly Island called Scarborough Shoal and

occupied that Island and soon Vietnam also claimed the Spratly Island and occupied

six features (Thayer, 2011).

In 1974, China control of the Paracel Islands from Vietnam, killing more than 70

Vietnamese troops (BBC News, 2016). In 1983, Malaysia also claimed part of Spratly

Island and occupied three features and later in 1986 claimed additional two. These

contentious disputes turned into violent in 1988 when China attacked Vietnamese

forces on Johnson South Reef and moreover, in 1997, China compete with the

Philippines for ownership of Scarborough Shoal by placing flags and building

markers. This perpetuated into China annexing Scarborough Shoal by deploying

maritime law enforcement vessels there on a permanent basis in 2012 (Thayer, 2011).

In the same year, Chinese navy wrecked two Vietnamese exploration operations in

late 2012, which led to large anti-China protests in Vietnam. Two years later in 2014,

when China introduced a drilling rig into waters near the Paracels Island it led to

several collisions between Chinese and Vietnamese ships (BBC News, 2016).

The most intense conflict in South China Sea is between Vietnam and China and

vigorous stand-offs between China and the Philippines. The SCS dispute became

more intense when China built artificial Island and exercised military defense of

submarine and helicopter. These brought attention to UNCLOS because such man-

made constructions are not within legal framework and this created complicated legal

issues under international law, which might take long time to settle.

The following figure 4 and 5 will show the artificial Island built by China in South

China Sea
Figure 4 Artificial Island built by China in South China Sea

(Source: International Business Times, 2015)

Figure 5

(Source: SouthFront, 2015)

China’s rapid economic development has made them to modernize their military

defense and indeed with more military power they became assertive in South China

Sea dispute.
Hence, causing Southeast Asian countries to modernize their military defense with the

help from United States, Japan and South Korea who are also part of non-claimants

(these three states are concerned about the free movement in South China Sea). These

three non-claimants are concerned about the security of movement, which will have

significant implications for their global trade, commerce and shipping within South

China Sea when disputants built arms in the region and as tensions rise, becoming

more risky. Recognizing this security concern, United States, Japan and South Korea

sided ASEAN members and ASEAN moved forward by adopting the 1992

declaration on the South China Sea which urged all parties to exercise self-restraint

(Rustandi, 2016).

China’s regular conduct of major navel exercises in South China Sea became the

major concern for non-claimant ASEAN members. In 2010, China deployed long-

range sixteen warships and conducted live firing exercises north of the Philippines.

Following year, they again conducted naval exercises in the Western Pacific. Thus,

the deployment of submarines including ballistic missile submarine, has created a new

dimension to the regional balance of power (Rustandi, 2016).

This security issue from South China Sea dispute has accelerated China, Taiwan and

Southeast Asian countries to race for arms by increasing their defense budget. The

national defense growth rate for China has increase by 170 percent between 2003 and

2013 with current military spending estimated at $188 billion (Luedi, 2015).

For Southeast Asian countries such as Vietnam have the most modern defense

systems among ASEAN members and mostly Vietnam procure more than 72 percent

of its equipment from Russia (Gauba, 2015).

Its defense budget has increased dramatically in recent years estimated to be $5

billion in 2016 from $1 billion in 2005 (Ya, 2016). Another claimants the Philippines

have increased its defense budget more on maritime weapons with annual budget

increasing from $38 million in 2001 to $2.6 billion in 2014 and estimated to increase

to $500 million in 2021 (GlobalSecurity.org, 2017).

The following figure will show the budget spending by ASEAN members from 2000

to 2015.

Figure 6 Budget spending by ASEAN members from 2000 to 2015.

(Source: Asian Review, 2016)

1.6.5 Economic Opportunities

South China Sea is considered as the one-third of global maritime traffic with an

estimation of around $5.3 trillion worth of trade passing through annually and have

abundant of fisheries and contain 11 billion barrels of Oil and 190 billion cubic feet of

natural gas. Taking account of all these rich resources, it is not very favorable for all

the claimants to dispute about South China Sea by exercising military and increasing

defense budget. What should be their focus is to economically cooperate and

negotiate regarding the dispute. Realistically, China and ASEAN don't want to get

into conflict because both need each other for economic growth, as ASEAN is the

fourth largest trading partner for China and China as the ASEAN’s largest trading

partner. South China Sea is not only vital for economic survival for Southeast Asian

countries such as the Philippines, Vietnam, Malaysia, and Brunei but also for non-

claimants such as U.S., Japan and South Korea because SCS is their shipping lanes.

Historically, the relations between China and ASEAN were positive and have

progressed significantly over the past 15 years. The possibility of solving their dispute

through economic relations can be substantiated by their involvement in free trade

agreement and other cooperation. Since late 1990s China has influenced ASEAN

when Asian faced financial crisis and Beijing helped Thailand and other member

states to recover from crisis by loaning $1 billion and not devaluing the Renminbi

(Chinese currency, Yuan). This clearly explains how China was successful in

building diplomatic relations. China was able to stay in balance when financial crisis

occurred because they enjoyed reliable inflow of FDI around 4 percent to 6 percent

and investor behind FDI inflows made a long-term commitment that their assets will

not quickly liquidate so greater share of patent capital in FDI left it less

vulnerable to
financial crisis even though they were exposed to volatile flows like Southeast Asian

countries (Naughton, 2007, pp. 405, 422).

We can examine what are the key factors that have contributed to the positive

developments in bilateral ties specifically how they have managed the territorial

disputes through negotiation and compromises. Looking at the expansion of economic

ties between China and ASEAN member states through rational choice of establishing

a free trade area was the factor that limited security conflict. Moreover, another factor

was the security cooperation when China and ASEAN developed defense and security

ties by military educational exchange programs and multilateral dialogues. Beijing

has established security dialogues with six ASEAN member states such as

Philippines, Singapore, Thailand, Malaysia, Indonesia and Vietnam and also has sold

military equipment to these six members states since year 2000 and in 2006 China and

Vietnam conducted joint maritime patrols in the gulf of Tonkin (Yuan, 2006).

Another major development between China and ASEAN is China-ASEAN Free Trade

Area (Economic agreement) after the end of Cold War. In 4 th November 2002, both

China and ASEAN signed the Framework Agreement on Comprehensive Economic

Cooperation moving toward regional economic integration. Since then, China and

ASEAN have institutionalized 48 regular mechanisms to facilitate closer economic

cooperation, namely ASEAN+1, the China-ASEAN Senior Officials Meeting, the

China-ASEAN Joint Cooperation Committee, ASEAN-China Committee on Science

and Technology, the ASEAN Beijing Committee, the Mekong River Development,

and mutual investment.

Such economic ties and arrangement could facilitate a more peaceful regional security

with continuous economic rise and energize other external powers to see similar

arrangements they are opening up more opportunities in the areas of trade and foreign

direct investment (FDI). In fact, ASEAN member states have benefited from China’s

economic growth as the Asian giant’s growing demands also generate economic

benefits for the region as a whole and in 2004, ASEAN has roughly $20 billion trade

surplus with China (Yuan, 2006).

ASEAN’s alternative antidote for South China Sea dispute is to establish a joint

resource development, a means to share the resources in a way that is independent of

the relative strength of the claims. So this means an absence of a sovereignty dispute

(as distinct from a territorial claim) over Islands, joint development venture could be

considered by claimants and among the disputants would significantly enhance the

prospect for long-term peace and security in the SCS (Rustandi, 2016). And the most

recent economic ties they can benefit and reduce SCS dispute is the initiative called

“One Belt, One Road”. If ASEAN member states commit to this multilateral

agreement they might benefit the most as China is expected to become the largest

economy by 2030.

In 2016, during the ASEAN-China Summit to commemorate the 25 th anniversary of

the two parties’ dialogue relations, Singapore’s PM Lee Hsien Loong gave speech

about South China Sea crisis. He said, “South China Sea crisis presents opportunity

for ASEAN-China” and also said that SCS dispute can be harnessed into continued

economic growth. He hailed China’s proposal to formulate a framework for a Code of

Conduct for rules of engagement in the South China Sea by the first half of 2017, and

promised that Singapore – as coordinator of ASEAN-China relations would work

with Beijing to fast-tract negotiations (Ong, 2016).

 Methodology

2.1 Type of Research

This research type is explanatory research and intends to find the problem in South

China Sea and how it led to this conflict. Basically, it will help to identify and conduct

the extent and nature of cause and effect of South China Sea dispute and assess

impacts of specific changes on existing norms and other various processes. It will help

to provide current understanding of dispute and connect all the information by

providing empirical evidence about the cause and effect.

However, this research does not intend to offer final and conclusive evidence for

existing problem but it will provide readers to have a better understanding of the

problem.

2.2 Data collection and sources

The information collected for the purpose of this research and to fulfill the research

objectives are from secondary data. The reason for using secondary data is because

the research topic is very comprehensive and is about the contentious dispute in South

China Sea so the secondary source are based on the view from academician, scholars,

politician and economists extracted from the website (internet), different books, and

journals.
 Literature Review

3.1 Scopes and Limitation

This research will help to expose how six states came to conflict in South China Sea

and further exploring the security conflict and economic opportunities in SCS. To

simplify the scope of this report is to understand how SCS disputed started, what are

they fighting for and can claimants reduce the contentious dispute in SCS. But, the

obstacles and limitation is about the source since, this research is based on secondary

data some information may be subjective (some of the argument in SCS by authors)

and limited information for economic opportunities as they mostly focus on security

conflict. So, the information and data that are extracted may not be accurate.

3.2 Theory Analysis (Realism and Liberalism)

The South China Sea dispute can be explained theoretically from international

relation’s perspective, why China became assertive. These two theories are realism

and liberalism (IR) and each theorist have different perspective. From realist

perspective, why China became more assertiveness in the South China Sea is because

of self-interested sovereign states. Realist believes that human nature is selfish and the

international system is anarchic. For them sovereign state is the central actor in the

world politics and this state will compete for power and security. So they compete for

a zero-sum game to seek advantage and achieve relative power. Since they don't

believe in international government, survival is the main theme and struggle for

power and security, which lead to conflict. So from the international perspective,

China is considered as the realist because they thrust for power and influence in the

South China Sea.

Moreover, the exercise of maritime (military), increasing military spending and

building artificial island shows more of struggling for relative power and the rejection

to comply UN Convention on the Laws of the sea’s rule also clearly shows they are

not in favor of international institution (anarchy).

On the other hand, liberalists are optimistic, they believe human nature is

fundamentally good and unselfish and conflict can be avoided. For them, sovereign

states are not the only central actors in the world but it is international institution or

system, Individuals, interest groups, intergovernmental and non-profit organization

(NGO) that are the main actors. Their main theme is interdependence (economic) and

cooperation and this will lead to positive sum game (win-win situation). Liberal

believes that China is assertive over SCS territorial dispute because of their stagnating

domestic economy, so they had to shift to territorial dispute to gain economically.

They also believe that international institutions could help overcome selfish state

behavior by increasing the economic and political cost of war. They pointed out why

ASEAN could not stand China’s aggressiveness, it is because ASEAN does not have

China as a member, does not have a military element such as NATO and is politically

weaker than their European counterpart. So they argue that if ASEAN were more

close to China, China would be less inclined to act aggressively in the SCS and

another possibility to solve conflict is to spread democracy (Grabowski & Freedman,

2016).

Liberalist’s answers to SCS conflict would be, to be economically dependent on each

other as it is less likely to go to war with each other because the cost of war are too

high so as a result trade benefit will increase and there will be change in the incentive

structure for the state.

Moreover they point out that the main reason for China to be assertive is because of

low levels of intraregional economic interdependence between China and ASEAN

(Grabowski & Freedman, 2016).

3.3 Data Analysis

Data analysis is the range of processes and procedures whereby it moves from the

qualitative data (Secondary data) that have been collected into some form of

explanation, comprehending or interpretation of the situation that needs to be

investigated.

Initially, this research started extracting information about how South China Sea

dispute began, what are the causes? why it is contentious and worth for, and what is at

the stake?. The second step of using secondary source was about who are the actors

involved in this dispute and who are the stakeholder (non-claimants) that are affected.

Subsequently, it will expose the situation of security conflict and what could be the

possible economic opportunities to reduce SCS dispute and benefit all these six

claimants economically. So these are few examples how this research extract

information to achieve its objectives.

3.4 Findings

Since this research report is based on secondary source and qualitative method, this

topic will describe the scenarios based on the research questions and what this paper

expect to have implication to readers?

Literally, this report’s main purpose is to dissipate the understanding of how conflict

in SCS has started, how contentious it is and security conflict and the possible
economic opportunities for ASEAN as well as for China to build further economic

ties (with ASEAN). As mentioned before, the main cause of SCS conflict was from

nine-dash line published by China, which overlapped the exclusive economic zone of

Southeast Asian countries. Since then there was security conflict among these

claimants (especially between China and Vietnam and stand-off with Philippines),

eventually increasing their military spending. To counter Chinese assertiveness,

ASEAN could not come to consensus (Consensus is the framework decision for

ASEAN to deal multilaterally) as they face cooperation challenges, ASEAN is in

Disarray in South China Sea (Khoo, 2016). However, ASEAN have the alterative

approach to reduce and solve long-term problem through economic ties. As I have

explained previously, China and ASEAN had a good relationship because of their

economic ties and joint military drill so it is possible for China and ASEAN to solve

their dispute in long term (in short-term it will reduce SCS dispute). The main

intention of this research report is to find from different angle what are the

possibilities to reduce and solve SCS dispute.

 Conclusion
South China Sea disput have undergone since China’s claim of nine-dash line. Since

then, the increasing escalation of the dispute have changed the policy and strategies of

disputant countries, by large the policy of China toward ASEAN claimants becuase

China claim the biggest area. Moreover, the SCS dispute became more intense when

China built artificial Island and turning this Island into military and logistical bases.

Beijing already has at least seven such bases, equipped with access channels,

helipads, radar facilities, gun and missile emplacements, piers, military facilities and

other objects of strategic importance (SouthFront, 2014). Chinese assertiveness in the

SCS has become an international issue prompting United States to get invloved and

other concerned stakeholders (Japan, South Korea and Australia). The United States

started patrolling in the SCS claiming for Freedom of Navigation and also supporting

ASEAN, especially arming the Philippines.

The long existing dispute of SCS has not resulted in any significant developments

because ASEAN member states could not come to consensus regarding this issue. In

2012, duing the ASEAN’s 45th Annual Ministerial Meeting in Cambodia, ASEAN

failed to agree in SCS dispute as Cambodia strongly support China’s core interest in

the SCS. The reason for Cambodia to support China is becuase of China’s influence

over Cambodia (economic relations). The long relation between China-ASEAN have

moved away from bilateral ties to suspicion and apprehensive but SCS dispute can be

an economic opportunities for ASEAN, if they pass through consensus meeting

(multilaterial approach).
 Recommendation
As the purpose of my research report is to understand the security conflict and

possible economic opportunities in SCS, the suggestion to reduce contentious dispute

in SCS is to approach China’s assertiveness multilaterally. However, ASEAN’s

multilateral approach to maintain centrality in the region’s security has failed so far

because they could not develop unity and cohesion. The disarray of ASEAN is

because of China’s bilateral influence in each members of ASEAN. This will

undermine ASEAN approach to promote regional autonomy and claimants by

bilateral negotiation with China seems more unlikely to win because of their relative

size which give them disadvantage.

Another recommendation is joining East Asian economic integration called “One

Belt, One Road”. Historically, the SCS has been a key shipping lanes for Maritime

Silk road and 21st century Silk road proposed by China is even bigger. China’s trade

is highly dependent on the shipping lanes of the South China Sea and taking this into

account, ASEAN is China’s imporant trade partners so, to some extent China is also a

victim in SCS dispute. So the only possibility for them to solve this long-term issue is

to build China-ASEAN relations which will fundamentally promote long-term peace

and stability in the region.

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