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China's Dangerous $5 Trillion Dollar Bet: A South China Sea ADIZ?

This week the annual report to the U.S. Congress on China's Military Power was released. It noted Beijing's use of “low-intensity coercion” across the South China Sea and East China Sea. Its assessment stated that:

“China often uses a progression of small, incremental steps to increase its effective control over disputed territories and avoid escalation to military conflict.”

Recently those “incremental steps” have been getting bigger. Southeast Asian states have reacted in turn. 

Beijing's well-reported land reclamation at seven sites in the South China Sea has quickened in pace. According to U.S. Defense Secretary Ashton Carter, China has “intensified the militarization" of these islands and reefs. This has included the construction of a military-sized airstrip and at least one other non-military airstrip.

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Reports last week that China is already 'practicing' an informal Air Defense Identification Zone (ADIZ) over waters disputed with the Philippines have raised the stakes. That report, by a Filipino Vice Admiral to a Senate hearing, noted that China had warned Philippine air force and navy aircraft from flying over disputed waters on at least six occasions.

The formal declaration of a South China Sea ADIZ would be a game changer.

The 2013 East China Sea ADIZ has, according to some analysts, effectively given China "co-administration" over the Senkaku/Diaoyu islands. Yet the East China Sea ADIZ isn't over a strategically crucial sea line of communication through which US$5 trillion of trade passes every year. In response, an unnamed Pentagon official said this week that the US was considering sending forces to secure freedom of navigation through the South China Sea. Such a move wouldn't be unprecedented; the US sent B-52s through the East China Sea ADIZ in 2013

China has previously deployed its navy to secure disputed territory in the South China Sea, including in 1974 in the western Paracels and the 1988 clashes around Johnson South Reef. Its seizure of Mischief Reef has led to development since 1995.

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But the recent assertiveness, including the ramming of Philippine ships around Scarborough Shoal, have enabled de facto control. An International Crisis Group report released this month suggests that the new forceful approach is largely down to Xi Jinping's 'Go big and go fast' foreign-policy style. Interestingly, the report noted dissenting voices among analysts in China who worry about the impact this approach will have on relations with the emerging economic bloc of ASEAN. One analyst said that “If China wants to have little brothers following it, its foreign policy needs to be consistent and predictable.” That consistency has gone missing since Xi Jinping's bullish and forceful approach has gained strength.  

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Southeast Asian states have struggled to respond to China's actions in the South China Sea. Concern grew rapidly after the East China Sea ADIZ, and was felt closer to home last May when Beijing moved the Haiyang Shiyou 981 oil rig, owned by CNOOC a state-run oil company, into Vietnamese EEZ. 

Since then tensions have run high, and Southeast Asian states have boosted military spending in response to China's growing assertiveness.

Data released by the Stockholm International Peace Research Institute showed steady growth between 2010 and 2014 (see Zach Abuza's graphics and summary here), with an average net increase of 37.6%. Total military expenditure among Southeast Asian states in 2014 stood at US$38.2 billion.  That spending has included a significant advancement of Vietnam's capabilities, most notably through the delivery of three  (out of six ordered) Kilo-class submarines armed with land-attack missiles under a US$2 billion deal signed with Russia in 2009. 

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