Implications of One Belt One Road on the South China Sea Territorial Disputes

Implications of One Belt One Road on the South China Sea Territorial Disputes

This post was the basis for a video essay, China's Bid for the South China Sea.

Even for the avid follower of world news, it's been tough to keep up with China's involvement in infrastructure projects in Malaysia.  

Originally, the contract to build the Kuala Lumpur-Kelantan line had been awarded to Chinese state-owned enterprise, Chinese Communication Construction Company (CCCC).  But after elections in 2018, the newly elected Prime Minister Mahathir bin Mohamad declared that the project would be scrapped, only to later flip-flop and announce that the project was back on, but to be renegotiated down to smaller cost and scale.  Mahathir had voiced worries that Malaysia couldn't pay for the project, that the original contract negotiations had been tainted by corruption, and that there was reason to be concerned over China's growing influence in Malaysia.  Apparently he is less worried about these problems now.

Suspicion of China's growing role on the international stage is increasingly common around the world.  China's growing influence via its Belt and Road Initiative (BRI) infrastructure projects, and especially the debt that countries are running up because of them, has been drawing increased attention.  Apart from its projects in Malaysia, China has been relatively restrained on its investment in Southeast Asia.  But China's activity in this area will have direct implications on territorial disputes in the South China Sea (SCS). 

Part of these implications has to do with the recent trend of governments incurring heavy debts to Chinese state-owned banks.  Ultimately, they're unable to pay off their debt to China in cash.  These countries end up using resources such as oil and iron ore to balance their books, or, in the cases of Sri Lanka and Pakistan, leasing ports to China for decades to come.  

China's investment in countries that dispute territory in the SCS has yet to truly take off, especially those countries with the most strident claims.  But it's not difficult to imagine a future in which territorial concessions or rights to resources in Southeast Asia become bargaining chips for China, taking the place of cash repayments on loans.

But what has China been up to in Southeast Asia?  Is there reason to believe that it's going to make a play for the SCS after indebting disputants to itself?

China has been slowly building up its investment activity in Southeast Asia, beginning in large part after Xi rose to his current posts within the Chinese government.  China announced its new Maritime Silk Road in Indonesia in 2013, and since then has pushed forward on its involvement in projects in that country.  These have mostly been in railway and power plant construction.  Between 2010 and 2016, Indonesia's debt to China saw a six-fold increase, a rate much higher than its debt to other investors.  

Indonesia challenges China's Nine-Dash Line and has marginal formal claims to disputed territory, most notably around the Natuna Islands.  China recognizes Indonesian sovereignty on the islands proper, but has claimed the sea area around the archipelago as traditional fishing grounds for Chinese vessels (a claim disputed by Indonesia). Despite these disputes, Indonesia on the whole aims to position itself as a bystander and objective arbiter of disagreement in the SCS.  But if China continues to gain influence in Indonesia, it will be increasingly difficult for Indonesia to maintain impartiality in discussions over territory disputes.

Malaysia occupies a somewhat similar position to Indonesia, in that it has been quite open to Chinese investment, and is less strident in its territorial claims. China originally had invested in projects in the country, as discussed above, but these projects are apparently being renegotiated and reduced.  That said, China will continue to maintain its presence in Malaysia and push for as much influence there as it can.

If Indonesia and Malaysia are parallel actors in their passivity towards China in the SCS then the Philippines and Vietnam are their more aggressive counterparts.  Both nations have major claims in the Sea.  Unsurprisingly, both countries also have yet to pursue the kinds of large-scale projects that Indonesia and Malaysia have initiated, but they seem to be slowly warming up to the idea.  Vietnam has had discussions over infrastructure development with China in the past, but has been slow to jump at the chance to partner with its neighbor to the north.

Notably, the Philippines brought a case against China's claims in the SCS to the United Nations Convention on the Law of the Sea in 2016 and won.  However, under President Duterte, some see the Philippines as more deferential to China on issues surrounding territory disputes (When China built a rescue center on an island claimed by the Philippines this past January, a Presidential spokesperson was quoted as saying "Maybe we should be thankful").  The Philippines has also moved closer to beginning infrastructure projects with China; in November of 2018, China and the Philippines signed deals that would involve Chinese cooperation on various projects in sectors like transportation, agriculture, irrigation, and fish ports.

In a word, the Philippines and Vietnam are a bit behind on cooperation with China, but could easily be moving in that direction.  Of course, China doesn't expect all of these countries to fall under its influence at once, but is willing to play the long game, and wait for these nations to fall more under its influence, one by one.

Lurking in the background of all of these events is the specter of corruption.  It's been shown that when China makes deals with other countries on infrastructure projects, opportunities for rent-seeking abound.  It seems to only take a few high-ranking officials to cave to offerings of huge sums of money for the interests of an entire community to be compromised.

The economic pressures of debt incurred from BRI projects may be too much for some nations to handle.  Even if countries are unwilling to permanently give up control of territory, long-term leases or rights to develop oil and natural gas reserves could be adequate alternatives from a resource-hungry Chinese perspective.  More broadly, the leverage that China gains in Southeast Asia will not just affect territorial disputes, but would also substantially affect the global balance of economic and political influence.