China’s reemergence as a wealthy and powerful nation is a fact. In recent decades its rise has been unprecedented, moving from the tenth-largest economy in 1990, to the sixth-largest economy in 2001, to the second-largest economy in 2010. According to the International Monetary Fund (IMF), China now surpasses the United States in terms of purchasing power parity. By the same measure, China’s economy was only half the size of America’s a decade earlier, and it is this trajectory that is molding assumptions about the future regional power balance and order across the Indo-Pacific. Recent declines in growth and rising questions about future stability have yet to alter most perceptions about tomorrow’s China.

China’s deepening integration with the regional and global economy underscore the difficulty of pushing back when China transgresses rules and norms. Take the issue of infrastructure. Infrastructure will gradually redraw the strategic economic and security connectivity of the twenty-first century, and China’s infrastructure prowess has been on prominent display of late. President Xi initiated the recent Asia-Pacific Economic Cooperation (APEC) forum with a speech touting the linear projection that China will invest some $1.25 trillion over the next decade overseas, and wants to invest $40 billion in re-establishing the old Silk Road while also building a new Maritime Silk Road. These sums are in addition to China’s proposal for a new $50 billion Asia Infrastructure Investment Bank. Like the New Development Bank (previously called The BRICS Development Bank), these schemes chip away at the existing Bretton Woods international economic architecture with bodies of uncertain governance. As Indian Union Commerce Minister Nirmala Sitharaman put it at a recent conference, “If Bretton Woods institutions will not provide infrastructure financing for emerging economies, then we will have to find alternatives.”

China is filling a vacuum in infrastructure financing. But rather than reflexively opposing and expecting friends in Indonesia, India, and elsewhere to turn aside opportunity, the United States would be far better off seeking to create opportunities through existing institutions. The United States should be reinvigorating existing economic institutions like the IMF, World Bank, and the Asian Development Bank, while ensuring that any new institutions adhere to transparent and based on agreed-upon principles.

The Difficulty of Trust-Building

To listen to some analysts, the focus of Sino-American relations should be on trust-building. But talking about trust is not the same thing as increasing trust. Not even confidence-building measures (CBMs) aimed at reducing military tensions are guaranteed to reduce such tensions.

Take the recent bilateral summit meeting between President Xi and President Barack Obama on the margins of the APEC summit. The atmospherics were cordial, there were no substantive changes over territorial and sovereignty issues—or for that matter, any of the most neuralgic security issues driving strategic competition in the Asia-Pacific. China committed itself to nothing specific or binding. The United States accommodated the appearance of improved military-to-military relations despite a lack of any substantive measure. Two confidence-building measures received a lot of press, but they are at best frameworks on which to build rather than new agreements. A CBM on Rules of Behavior for the Safety of Air and Maritime Encounters at this point creates a military-to-military dialogue on avoiding surface ship collisions, but neither side is committed to anything that it was not already obligated to under existing international accords. Over time, of course, as new annexes are added and dialogue progresses, perhaps this will provide the basis for more predictability in military operations. The other CBM on the Notification of Major Military Activities is more encouragement than direction, and what constitutes a major strategic development is totally vague. At best, the measures provide a basis for future cooperation. The same can be said with regard to calls for progress on moving from a Declaration of Conduct to a Code of Conduct, even while China continued to build artificial islands and potentially military installations from submerged features in the South China Sea.

At the Center for a New American Security, we recently hosted a delegation of officers and analysts from the People’s Liberation Army’s National Defense University. Conceding that nothing had been done to solidify a genuine reduction in maritime tensions, they asked for a list of practical steps China could take to reduce the prospect of escalation in the East and South China Seas. We provided them with specific ideas--from clarifying the 9-dash line claim, to including coast guard forces and not just naval forces in discussions on avoiding incidents at sea, to signing a binding code of conduct, to avoiding dangerous maneuvers around our ships and planes within their Exclusive Economic Zone. They responded: "No, give us realistic things we can do." It is difficult not to think that China wants the appearance of peaceful rise, not the reality. It does not wish to confront the United States, but it is happy to take advantage of our hesitation and indecisiveness. China appears to favor a “new type of major power relations” with the United States in order to compel the United States to recognize China’s core interests above the interests of its neighbors—even though when it comes to defining its maritime interests they appear to expanding, from control over near seas to extended global sea lines of communication.

Accommodate China, Not Bad Behavior

We have to accommodate a rising China, but we do not have to accommodate imprudent and even aggressive behavior. China’s increasing wealth is a fact, but so is its pattern of maritime coercion. China is seeking to use multiple levers of power to coerce its neighbors to give way to Chinese dominance. Indeed, China has recently resorted to a pattern of “tailored coercion” in maritime Asia. While engaging in protracted diplomatic discussions on a binding code of conduct or new confidence-building measures, China has systematically used public diplomacy, legal, and psychological instruments of power to redraw contemporary boundaries. Generally China has sought to do this incrementally, in salami slices less likely to trigger escalation or strong responses. Because so many neighbors lack the quality and quantity of Chinese coast guard, law-enforcement, and other paramilitary forces, it has been relatively easy to stake a claim in these often disputed areas.

It is tailored in its design to be forceful with minimal military force. The use of coast guard and other law-enforcement platforms, coupled with other power, however, and more its pattern of assertiveness that stirs anxiety and concern. A China that is both militarily and economically strong and determined to have its way unilaterally through coercion if necessary is a problem for those countries in the region that prefer an inclusive, rules-based approach to cooperation.

From unrelenting patrols in the contiguous and territorial waters of the Senkaku/Diaoyu Islands, to the declaration of an Air Defense Identification Zone (ADIZ) last November, Chinese vessels and aircraft in the East China Sea are posing a heightened risk of an incident with Japan and the United States. In two instances in the spring of 2014, Chinese SU-27 aircraft approached within 30 meters of Japanese surveillance aircraft. Similarly, in the South China Sea, China’s “cabbage strategy” around Scarborough Shoal and the Spratly and Paracel Islands plants Chinese maritime forces and then promotes their growth. Photographs taken in March show China’s reclamation of Johnson South Reef in the disputed Spratly Islands, and Beijing’s reclamation of land features in various parts of the South China appears to be intended to help China extend its power projection while bolstering legal claims. Johnson South Reef is also the site of a Vietnam-China naval skirmish that left more than 70 Vietnamese dead in March 1988.

Although China is not alone in seeking to advance its territorial claims and maritime interests, China’s behavior is uniquely escalatory. That is why U.S. Secretary of Defense Chuck Hagel singled out China’s “destabilizing, unilateral actions” against its maritime neighbors at this year’s Shangri-La Dialogue in Singapore. The placement of a drilling platform in disputed waters off Vietnam in May 2014, coming after months of concerted diplomacy to improve Beijing-Hanoi relations, is particularly perplexing to many in the region. Not only was it a reminder that in 1974 China used force to occupy the Paracels during a particularly vulnerable time for Vietnam; it also underscored the level of assertiveness China is prepared to use today. When Vietnam responded by trying to match the level of Chinese ships around the oil rig, China responded each time by upping the ante in the number, type and tactic of the ships.

Researchers at the U.S. National Defense University looked at more than 1,200 military, paramilitary, legal, economic, diplomatic, and administrative actions undertaken by claimants in the South China Sea from 1995 and 2013. Even based on unclassified data, Dr. Christopher Yung and Patrick McNulty found that China had dramatically escalated its assertiveness since 2009. With respect to all actions, China accounted for about 55 percent of the total actions, with a significant jump in assertive actions since 2009. Military and paramilitary actions followed the same trend, with a spike in military assertiveness in the South China Sea clearly seen over the past few years, peaking at 62 actions in 2012 alone. A more complete, classified accounting would likely show a similar spike but even far more actions.

It is less China’s rising power and more the prospect of how it might use that power that stirs anxiety among so many nations. Declaring a 9-dashed line in the South China Sea without any basis in contemporary law, moving deep-sea oil rigs into disputed waters near the Paracels—and then using ramming tactics and deploying PLA navy ships to enforce an illegal zone, commandeering Scarborough Shoal from the Philippines, reclaiming rocks an submerged features to create artificial islands that may become military installations, unilaterally declaring an Air Defense Identification Zone as though it were a threat, and conducting dangerous maneuvers with ships and aircraft—all of these and others steps have been seen as part of this growing pattern of coercion in maritime Asia, specially in the East and South China Seas. They create a fear that China will make more unilateral steps to create new facts in the water in the airspace and on the ground all around China’s periphery. India knows full well these steps have not been limited to maritime areas but to all those areas where China believes it has an advantage or where it might probe and find room to exercise its newfound capabilities and redress its longstanding grievances.

Summit diplomacy reinforced the immutable rise of China. In this respect, some of China's words should be taken at face value. Certainly President Xi's foreign policy aims to safeguard China's three core national interests: the Communist Party of China and its rule, territorial sovereignty and economic development. What those words downplay is the assertive manner in which a more powerful and nationalistic China is pursuing those goals. As President Xi made clear in a speech in October 2013, for instance, he is dedicated to helping China realize its “centenary goals” of wealth and power by 2020 and 2050, respectively. Specifically, he is dedicated to doubling GDP and per capita income by the 2021 centenary of the Communist Party of China and achieving “the great rejuvenation of the Chinese nation” by the centenary of the founding of the People’s Republic of China in 1949.

Less openly expressed, however, are the evolving ambitions and intentions of Xi and other Chinese leaders with respect to military power. Although Xi claims that the “Chinese people don’t have the gene for invasion or hegemony in their blood,” China’s future intentions may be altered by growing capabilities. Certainly others outside China often interpret China’s actions in a less charitable and more menacing light. First, they are often seen as China’s attempt to achieve the near-term ability to dominate regionally and ensuring China can deny and counter regional interventions by 2020. This includes but is not limited to an ability to dissuade and deter the United States from supporting Taiwan in a cross-strait crisis. Under Xi’s leadership, China is seeking to achieve this objective by harnessing all levers of power--improving anti-access and area-denial capabilities, combined with propaganda, legal argumentation and economic instruments. Secondly, China’s ambitions are also often perceived in the region as an effort to achieve hegemonic status in the Asia-Pacific by the middle of the century. This goal is far more vague and involves the equally amorphous doctrine of achieving “the Chinese dream.”

Actions Should Have Consequences

Actions should have consequences. That is why the United States and its allies and partners need to think together about cost-imposition strategies. This requires going beyond simple concepts of deterrence to concepts of dissuasion and compellence—ways to drive up the cost of coercive behavior and incentivize cooperation. Too often the regional way of imposing costs is to rely on reputational costs. We use diplomatic forums such as the ASEAN Regional Forum to register collective disapproval. Unfortunately, reputational costs will be insufficient to counter a clever campaign of creeping exertions of sovereignty. We need to think about a full-spectrum approach to levers of power to penalize bad behavior and reward good behavior. Failing this, we should expect more tailored coercion.

The United States government has been remarkably consistent under pressure and over time. After all, the United States has hewed to the principles of not seeking to take sides on sovereignty but focusing on behavior, insisting on no unilateral changes to the status quo through coercion or force, and pressing actively for peaceful resolution of disputes based on the rule of law. More recently, the administration has appeared to strengthen its rhetoric and willingness to use selective shows of force. But a principled approach has been far from obviously effective.

So the questions that those who would only promote lowest-common denominator accords refuse to address are these: What are the consequences of letting misbehavior go unpunished? And what should the international community do about those who commit provocations and stir disorder at sea? Some argue that China creates its own penalties by frightening the region, but those who argue this fail to come to grips with the reality that China is creating new facts in the water, on the ground, and in the air around the East and South China Seas. While avoiding the extreme positions of escalating conflict or doing nothing, clearly the United States and its allies and partners need to think through the full panoply of countermeasures available to help fashion a concerted strategy for countering coercion.

Cost-Imposition Measures

There are at least four types of countermeasures or actions that might constitute part of such a strategy. Responses can be categorized as military or nonmilitary. Military responses might be thought of as related to presence, operations, modernization and other steps designed to exploit another’s security weaknesses, and building partnership capacity. Non-military responses include informational, diplomatic, and economic measures. These categories of costs in turn need to be embedded in a comprehensive strategy.

Militarily, the United States is taking a number of steps to improve its long-term force posture and presence in the Asia-Pacific region. The U.S. policy of rebalancing is predicated on a strong, geographically distributed, operationally resilient, and politically sustainable presence is vital for demonstrating America’s long-term determination to preserve an open global commons in the Indo-Pacific region.

Ever since being evicted from the Philippines in the early 1990s, Singapore has provided the U.S. Navy with a valuable logistics hub. More recently, however, Singapore has offered to allow the U.S. Navy to base up to four littoral combat ships, the second of which is due to arrive shortly. As part of an updated realignment of U.S. forces in Japan, the United States and Japan are improving their integrated operational capacity and in some cases joint basing in Japan, but also trying to reduce the U.S. military footprint in Okinawa so as to make basing more politically sustainable. The Abe administration is forging ahead with the creation of a replacement of Marine Corps Air Station Futenma, and as a consequence the U.S. is slated to move some 9,000 Marines out of Japan, about 5,000 of which are headed to Guam. Of course, the latest election in Okinawa has raised new complications in the current plan for relocating Marine air assets located at Futenma.

In 2015, the United States will be expected to make more announcements about the pace and scope of solidifying U.S. presence at its Pacific territory in Guam. In the past decade, the United States had moved new bombers and three submarines to Guam, even prior to the 2011 announcement of a shift in naval and air presence in the Asia-Pacific region. With that announcement, the United States intends to shift the ratio of its air and naval forces from being split 50:50 in the Pacific and Atlantic Oceans to 60:40 with the Pacific taking the higher share. Of course, that may be part of a smaller overall force structure, which will require the United States to retain forward basing as well as to step up cooperation with allies and partners. The new Republican-led Congress may well work with the administration on ending sequestration, which could relieve some of the downward defense budget pressure.

In the Philippines, the United States has negotiated an enhanced defense cooperation agreement, which provides a legal framework for rotational force presence and other improved bilateral defense cooperation. A range of options includes everything from prepositioning equipment, supporting a new naval facility upgrade on Palawan facing the South China Sea, and rotating an air squadron through on more regular exercises and training missions.

In Australia, the alliance has agreed to rotate up to 2,500 Marines through Darwin in the Northern Territory. These rotational forces will enable greater bilateral and multilateral amphibious and, significantly, air training at Bradshaw Field Airbase. Further, the Australian government under Prime Minister Tony Abbott is interested in exploring possible follow-on steps, including the possibility of home porting U.S. Navy ships on Australia’s west coast at HMAS Stirling, near Perth. Other ideas might to be to make better use of the Australian Cocos Islands for intelligence, surveillance and reconnaissance missions with unmanned aerial vehicles. These and other ideas--including trilateral maritime cooperation among Japan, Australia and the United States an Australia, India and the United States—may well be aired in Abbott administration’s new defense white paper forthcoming in the first half of 2015.

A second way to impose military costs on bad behavior and otherwise strengthen military options is by conducting more military operations with more partners. The United States is already well on its way to doing this and now can look forward not just to more exercises with allies such as Japan, Korea, the Philippines, Thailand (looking beyond Thailand’s current political turmoil) and Australia, but also new partners such as Vietnam, Malaysia, Indonesia and India. Shows of force have already been used, whether B-52 flights after China announced an ADIZ in the East China Sea in November 2013, or having a submarine surface in Manila during the standoff in Scarborough Shoal in 2012.

A third military approach to imposing costs and otherwise preparing to deny maritime coercion is by exploiting the vulnerabilities and weaknesses of the provoking nation to exact a military cost. This approach could involve military modernization or other steps to highlight another’s security weaknesses. China is vulnerable because it lacks sea control over numerous narrow chokepoints, is threatened by superior ASW capabilities, and must worry about multiple geographical fronts, among other vulnerabilities.

Given China’s relative weakness with respect to antisubmarine warfare, the United States and its allies and partners can invest more heavily in submarine operations and, over the longer term, procurement, to force China to have to divert even more resources to shore up this weakness. Another approach to exploiting the weaknesses of China’s PLA would be to pose a missile threat and other asymmetric threats to China, much as China has been investing in systems that provide what is called in general anti-access and area-denial capabilities. The cruise missile, and not just the anti-ship ballistic missile program of China, is apparently seen within the People’s Liberation Army as a cost-effective defensive tool to force U.S. forces further away from its waters. But if the United States were to replace current missile warheads and arm drones with multiple reentry vehicles, this would pose a huge risk to China’s forces and force greater investment in air defense and missile defenses on land and at sea. Similarly the U.S. operational concept of Air-Sea Battle potentially forces China to invest in systems even without the concept being proven, adopted or implemented. Of course, these approaches would not be without risk and cost to the United States, whether to American credibility as the champion of peaceful resolution or the risk of escalation.

Politically, it is tempting for all leaders to speak of zero tolerance of belligerence. This is why gray-zone challenges such as maritime coercion are so difficult to challenge: they seldom pose a black-and-white situation in which a decisive response is called for. Japan’s new defense guidance calls for “seamless” whole-of-government responses to such incidents; South Korean Prime Minister Chung Hong-won has recently spoken of “water-tight security” to deter future North Korean provocations; and Indian Defence Minister Manohar Parrikar has called for zero tolerance of terrorism, suggesting that while people occasionally drop a glass, they never drop a child. Perhaps, but the nature of these unconventional, low-level challenges is that it is impossible to treat them all as though they were your children. At some point you are overwhelmed, a prime concern for the very capable of limited Japanese Coast Guard.

A fourth military tool for imposing costs, at least indirectly, is to bolster the capacity of allies and partners to help themselves. This can come in the form of deeper strategic dialogue, exporting professionalism and training, and especially in the form of arming and equipping. This applies to especially those countries with a large force asymmetry relative to China’s large, modernizing and growing coast guard, law enforcement and military forces. The United States transfer of former Coast Guard cutters to the Philippines, which is using them as part of their limited naval force, is a prime case in point; but so, too, is Japan’s offer of patrol boats to the Philippines and Vietnam to bolster their coast guards. Since Japan is funding these under the guise of more strategically directly foreign assistance, one might double classify this as an economic tool as well as a military tool for imposing indirect costs on China for its maritime assertiveness.

Another way to build partnership capacity, as implied by Japan’s patrol boat transfer, is to foster the growing Asia power web of intra-Asian security cooperation. In this vein, as Vietnam’s navy seeks to integrate six Kilo-class diesel submarines from the Russians, Japan, Australia and India might assist in exporting professionalism and helping with training for the use of submarines. Thinking regionally, the United States can work with appropriate allies and partners in creating transparency through an intelligence, surveillance and reconnaissance (ISR) regime for putting all actions—from ramming tactics to the reclamation of disputed land features or the movement of oil rigs in contested waters—on the internet. This same system can help nations prepare for disaster response and can also help them be ready to operate together and share a common operating picture. Even highly skilled and equipped allies, such as Japan, can make use of niche training, as in the recent training of Ground Self-Defense Forces for amphibious operations.

There are numerous policy instruments for imposing costs that are not directly related to military presence, operations and posture. Non-military cost-imposition tools might be categorized as informational: to impose reputational costs in particular (such as through an ISR regime to spotlight provocations); to create a shared information regime for possible coalition operations; and to contribute to a positive narrative that the political aim of the United States and its allies is not conflict and not even confrontation if it can be avoided. Rather, it is to draw a line under certain bad behavior and dissuade others from resorting to unilateral changes to the status quo through coercion or force. Granted the status quo is not clearly defined, but in Southeast Asia the onus is on the largest power, China, to demonstrate restraint and build cooperation. In the East China Sea, there is some pressure on both China and the Japan to exercise restraint and demonstrate statesmanship through measures to build confidence, avoid escalation and avert miscalculation.

In the South China Sea and throughout the Indo-Pacific, it would help to have a common operating picture. By that, I am referring to more broadly disseminated information to help enforce any code of conduct in the South China Sea or throughout the region. At stake is the maritime and air commons on which the global economy depends. A successful informational narrative needs to explain to the broader public what is at stake in the East and South China Sea and beyond, for even some seasoned defense analysts in the United States sometimes fail to appreciate how incremental changes could fundamentally alter the balance of power and regional order. The order can break down one reef at a time. Moreover, a narrative can spotlight China’s resort to a comprehensive toolkit of policies to press for more influence and attempt to exert greater influence and administrative control over both seas.

In sum, we need to think through China’s strengths and vulnerabilities, determine our best points of leverage, and then implement policies to apply that leverage. In thinking through these measures, we need to keep them proportionate to the coercion and mindful of our larger political goals of integrating a rising China in an inclusive, rules-based regime. While we should not delude ourselves that there can be zero risk, there is no reason why we cannot find non-confrontational ways to dissuade China from imprudent behavior. But one thing that seems likely is this: gray-zone challenges in the Indo-Pacific are not likely to disappear anytime soon and certainly not without appropriate actions on the part of the region’s most capable nations.

Patrick M. Cronin is Senior Advisor and Senior Director of the Asia-Pacific Security Program at the Center for a New American Security. You can follow him on Twitter: @PMCroninCNAS.

Image: Flickr/Official U.S. Navy/CC by 2.0