BUSINESS-ECONOMY
As geopolitical tensions escalate in the South China Sea, experts are raising alarms about the potential risks to global trade. The region, a crucial maritime passage for economic giants including China, Japan, and India, has seen a surge in confrontations that could disrupt some of the busiest shipping routes in the world as detailed in a report by CNBC. Recent incidents involving the Philippine Coast Guard and Chinese vessels highlight the growing friction. On August 26, 2024, the BRP Cape Engano was observed on a supply mission to Sabina Shoal while Chinese Coast Guard ships loomed nearby. This incident is part of a broader pattern of confrontations between China and its neighbours, particularly the Philippines and Vietnam, raising concerns about the implications for international trade. The South China Sea is not just a regional flashpoint; it plays a vital role in global commerce. Mark Papic, chief global-macro strategist at BCA Research, emphasised the strategic importance of this area, stating that it is "the most crucial shipping route in the world regarding the value of trade that passes through it." Any conflict here poses significant threats to maritime activities globally. Trade volumes through this region are substantial. Although precise figures are hard to come by, estimates from the CSIS China Power Project suggest that around $3.4 trillion in trade transited through the South China Sea in 2016 alone, accounting for approximately 21 per cent of global trade. Furthermore, the United Nations Conference on Trade and Development noted that about 60 per cent of maritime trade occurs within Asia, with one-third facilitated by this critical waterway. The geopolitical landscape is complicated by China's extensive claims over nearly the entire South China Sea, based on its controversial "nine-dash line." This assertion contradicts a 2016 ruling from an international arbitration court in The Hague, which found no legal basis for China's claims. The situation has led to heightened tensions with neighbouring countries accusing China of encroaching on their exclusive economic zones. Recent confrontations have included accusations from the Philippines that Chinese missile boats have pursued its vessels and targeted patrolling aircraft with lasers near Half Moon Shoal. This follows a series of incidents involving collisions and aggressive tactics that have left Filipino sailors injured. Philippine President Ferdinand Marcos Jr. has called for urgent discussions on establishing a code of conduct for the South China Sea during regional summits, urging an end to what he describes as Beijing's intimidation tactics. Similarly, Vietnam’s foreign ministry has condemned China's actions against Vietnamese fishing boats. Richard Heydarian, a policy advisor and senior lecturer at the University of the Philippines, warns that these escalating tensions may soon provoke responses from other ASEAN nations. He stated, "It’s only a matter of time before more ASEAN nations voice their concerns." Despite these rising tensions, experts believe all parties have strong incentives to avoid escalating into full-scale conflict. Analysts suggest that China is employing "gray zone" tactics—coercive actions that fall short of open conflict but exceed standard diplomatic practices—to gradually assert its claims without provoking direct military confrontation. Abdulacob, a Southeast Asia fellow at Lowy Institute, cautioned that if China were to restrict navigation freedoms in these waters, it could lead to increased US involvement. However, he noted that currently all parties appear keen to avoid escalating tensions into military conflict. As this situation develops, it remains imperative for global stakeholders to monitor these tensions closely and seek diplomatic solutions to ensure the continued flow of trade through one of the world's most vital maritime corridors. A journalist, writing for the WION Business desk. Bringing you insightful business news with a touch of creativity and simplicity. Find me on Instagram as Zihvee, tr None
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