Beijing’s release of its new military strategy has surely captured the attention of many. Now, more than ever before, the Chinese military has made clear its intentions to develop maritime capabilities that will enable Beijing to assert claims to sovereignty in the South China Sea and project military reach far beyond their immediate periphery. In the South China Sea, over the last two years alone, Chinese efforts have expanded the islands around Firey Cross Reef and Mischief Reef by 2,000 acres – equivalent to nearly 1,500 football fields—and counting. This massive “territory” building and the significant Chinese military build-up coupled with the release of strategic guidelines for the People’s Liberation Army (PLA) has sent clear signals to the Pentagon and U.S. allies in the region. China is a global competitor aggressively pursuing their aims and threatening to upend regional stability.

Given news of Vietnam’s own land reclamation projects in the region, officials in Beijing have no doubt realized that they have some catching up to do. The latest Chinese military strategy will give further weight to their claims, revealing a willingness to use newly developed maritime capabilities as a means for asserting territorial sovereignty both in the South China Sea and well beyond. Each step in the Chinese establishment of greater territorial sovereignty has been individually too small to provoke a strong U.S. or regional military response.

This gradualist strategy is asymmetric from the perspective of value placed on the outcome. China cares immensely both about the specific objective of building islands perceived to be Chinese territory and the tangible goal of establishing sovereignty within the nine-dash line. Onlookers in Washington seem to care less about each individual minor link in the chain of manufactured territories and more about the broad strategic implications of Chinese military outposts in the South China Sea. Aside from the longer-term challenges posed for regional stability and U.S. alliances across Asia, policymakers and onlookers are also concerned by the implications island reclamation has for the principle of freedom of the seas and skies. Presumably because of this asymmetry of interests, the United States has done very little to date, beyond surveillance efforts, in response to PLA-led island reclamation.

As China continues to create a buffer zone along its periphery, the latest developments in island reclamation demand a close examination by policymakers—and a carefully crafted response from the Obama administration. Aside from the increased presence and focus upon the region that comes with the rebalance to Asia, the United States lacks an operable strategy in response to the goals of China’s incremental but relentless territorial grabs. Washington has become all too preoccupied with a military response, often overlooking the necessity of folding other policy responses into the toolkit of the U.S. regional strategy. A heavy military response could lead to miscalculation and conflict, endangering the stability vital to U.S. interests and those of our allies that we seek to preserve. And while maintaining a strong forward based presence to prevent and deter conflict remains central to any strategy, other elements of a hybrid approach should be considered.

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One feasible alternative requires turning to the economic realm. While policymakers remain fixated with island-building, Washington must be cautious not to undervalue tools of economic leverage in the U.S.-China relationship. China is already quite adept at wielding economic instruments alongside a military presence in pursuit of policy objectives. In 2012, for instance, Beijing suddenly restricted banana imports from the Philippines in retaliation for a flare-up in disputed waters near Scarborough Shoal. The Chinese edict—expanded to include other tropical fruits—dealt a heavy blow to Filipino farmers dependent upon exports to China for their income. As soon as a bilateral agreement was reached to simultaneously pull vessels from the Shoal, so too was the fruit embargo lifted by Beijing.

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For the United States, the possibility of using economic leverage as a policy tool toward China should focus less upon specific goods and more broadly on bilateral trade flows. U.S. companies have more than $70 billion invested in China, with many choosing China as their Asian hub. China imported $124 billion of goods and services from the United States even as Americans imported $466 billion worth of Chinese goods. There is no doubt that U.S. trade flows with China have shaped China’s own economic growth; and, with the Trans-Pacific Partnership (TPP) and a U.S.-China Bilateral Investment Treaty (BIT) queued up for completion, it is probable existing trade levels will further increase, giving a needed boost to a slowing Chinese economy.

The Chinese economic engine should thus become a focal point for U.S. strategy. While the TPP and BIT are broader than the U.S. and China, increased economic integration with China may not have the highest utility in quelling geopolitical challenges in the South China Sea and elsewhere. Instead, policymakers should turn toward the business community to explore alternatives that would curtail U.S. trade flows into China’s expansionist engine.

With labor costs and resource constraints increasing in China, businesses are faced with an existential decision: stay or go? Already, the greater Mekong sub-region and Indonesia offer cheaper alternatives for American businesses.  TPP and BIT can enable other Asian and Latin American nations to compete with China for exports to America. Advances in 3-D manufacturing can also contribute to trade reductions with China and a return of manufacturing to the U.S.

Trade is China’s strategic center of gravity. Trade flows, if comprehensively and strategically re-conceptualized, could undermine China’s regional dominance strategy over the longer term. If trade is not part of an American and allied strategy, imports to China will continue to finance China’s expansion.

Beijing has a strategy that works well in blending military posturing with economic carrots and sticks; Washington, in contrast, has the rebalance. Ultimately, calibrating a strategy toward China that accounts for both military and economic components requires a whole of government approach. To be effective in its strategy toward China, a comprehensive policy would entail the integration of State, Treasury and the Pentagon efforts as well as engaging top management from the private sector in developing a strategic long-term response to the ever-evolving challenges in the Asia-Pacific. That should start with a Pacific Commerce Strategy.

Even as we seek to divert American and global trade flows to take some steam out of China’s engine of expansion we must engage China in expanding and significant ways. Competition with China need not result in military conflict. A strong defense and a military strategy that prudently deters China from aggressive military action are necessary. But beyond economic and military competition, we are in a struggle to better understand each other and this requires engagement politically, economically, militarily, and socially. This engagement should not be seen as leverage to force China to alter its course; this broad engagement should not be conditional on Chinese actions. It should be seen as a critical line of operation within a broader strategy to deter through strength, to reduce Chinese capacity through adjustments in global trade and an integrated commerce strategy, and to reduce the chance of misunderstanding and miscalculation through engagement.

Captain Robert A. Newson is a Naval Special Warfare (SEAL) officer who spent twenty-two months in command of Special Operations Command (SOC)—Forward Yemen. He recently led strategy and concept development for the Naval Special Warfare Command. Previously, he  served as director of the Joint Interagency Task Force—Counter Terrorism. Newson is a graduate of the University of Kansas and the Naval Postgraduate School (with distinction.) He is a PhD candidate at the University of San Diego. The conclusions and opinions expressed are his own and do not reflect the official position of the U.S. government.

Lauren Dickey is a research associate for U.S. foreign policy at the Council on Foreign Relations.

Image: Wikicommons.