CHINA’S CAMPAIGN of expansion in the South China Sea (SCS) threatens the core economic and national security interests of the United States, its partners and the international community. Beijing’s actions in the SCS are not an isolated challenge, but rather one component of a larger effort to push U.S. and allied military power further back from mainland China. Without a timely, comprehensive and robust response by the United States and its partners, the People’s Republic of China’s (PRC) aggression may grow more acute.

While the PRC has raised alarms on both sides of the Pacific with its attempted power grab in Hong Kong, its routine violations of human rights, its trade conflicts with the United States and its cyber activities, Beijing’s continued campaign of expansion and intimidation against its SCS neighbors remains a matter requiring urgent attention. China’s numerous provocations in the SCS threaten the free and open system of trade and commerce essential to the prosperity of the United States and its partners. As noted in the Pentagon’s strategy for the Indo-Pacific, one-third of global shipping transits the SCS. Indeed, the broader Indo-Pacific region accounts for two-thirds of global economic growth in gross domestic product. Should Beijing establish military hegemony in the SCS, the PRC could dictate which nations could and could not transit associated trade routes.

On multiple fronts, the PRC has embraced combative tactics in the SCS, ranging from the illegal construction of military island-bases to spurious legal claims regarding the outer limits of its Exclusive Economic Zone (EEZ). China’s SCS strategy also includes the outright intimidation of neighbors and the dangerous, unprofessional harassment of vessels operating in international waters.

The U.S. response to Beijing’s coercion campaign will need to draw on capabilities from across the full spectrum of federal agencies. It must begin by strengthening America’s military position in the region, which plays an important role in reassuring allies and increasing political leverage. The United States should also further formalize its public affairs and information strategy in order to regain the initiative on the information battlefield. Washington should also lean on executive branch instruments such as the U.S. International Development Finance Corporation (IDFC), foreign military sales (FMS) and potentially even explore a modified foreign military financing (FMF) program focused specifically on the Indo-Pacific region. America should support these goals in conjunction with its regional partners that likewise have a vested interest in keeping the South China Sea free and open.

The current administration has done much to move U.S. policy in the SCS forward, yet Beijing has done even more to escalate the challenge. America must close the gap between current and optimal U.S. policy.

A MAJOR component of China’s strategy in the SCS involves the use of “gray zone” operations, which, according to the congressionally-mandated National Defense Strategy Commission, take place in the “space between war and peace” and “include everything from strong-arm diplomacy and economic coercion, to media manipulation and cyberattacks, to use of paramilitaries and proxy forces.” Gray-zone tactics aim to “confound or gradually weaken an adversary’s positions or resolve without provoking a military response.”

A common feature of China’s gray-zone gambits is the use of spurious legal claims, often supported by concerted propaganda campaigns. A notable example is that, despite a 2016 Permanent Court of Arbitration ruling that firmly rebuked China’s claims in the SCS, Beijing continues to flagrantly and systematically assert its “indisputable sovereignty” over the SCS. In practice, this means that China seeks to dominate its SCS neighbors by quashing the competing claims of weaker powers such as Vietnam, Taiwan, the Philippines and Malaysia. For instance, Chinese vessels were caught sabotaging Vietnamese underwater cables in 2011 and seized the Scarborough Shoal from the Philippines in 2012. In 2014, the PRC sent an oil rig into disputed offshore territory claimed by Vietnam—an incident during which Vietnamese and Chinese ships rammed one another. Various EEZ disputes between China and its neighbors remain unresolved, as demonstrated by the 2019 flare-up between Beijing and Hanoi. Most importantly, China has illegally claimed features in the South China Sea by building and militarizing numerous artificial islands despite its pledge not to do so. 

The PRC’s irregular maritime militia, the People’s Armed Forces Maritime Militia (PAFMM), implements many of Beijing’s maneuvers in the SCS. The PAFMM, using numerous ostensibly civilian vessels, harasses the vessels of countries with rival territorial claims while using the PAFMM’s “civilian” legal status as a shield against action. The militia was involved in the harassment of Vietnamese survey ships in 2011, the Scarborough Shoal incident in 2012, the Chinese oil rig deadlock in 2014 and a significant incursion near the disputed Senkaku Islands in 2016. According to a 2019 Defense Intelligence Agency report, the PAFMM “plays a major role in coercive activities to achieve China’s political goals without fighting.” These activities are incompatible with international law and norms, and are at odds with the interests of the United States and our regional allies and partners.

China feels empowered to take these actions based on Beijing’s apparent belief that the military balance of power in the region has shifted in its favor. A comprehensive 2019 report by Australian researchers Ashley Townshend, Brendan Thomas-Noone and Matilda Steward at the United States Studies Centre documents the shift. Recent decades have seen the PRC pursue a massive military buildup, including an ambitious maritime modernization program. Today, the size of its navy rivals that of the U.S. Navy. Although still qualitatively inferior to its American counterpart, the PRC Navy boasts more hulls, and its shipyards are churning out modern ships at breakneck rates that far outstrip U.S. naval output. 

In addition, the PRC uses geography to its advantage. For some time, China has been pursuing an Anti-Access/Area Denial (A2/AD) strategy in the SCS via the deployment of a layered cruise and ballistic missile system that threatens U.S. and allied forces operating in the region. In May 2018, China deployed anti-ship cruise missiles and air defense systems to three of its man-made islands to expand this A2/AD envelope. In 2019, the PRC conducted a number of military exercises in the SCS, including the test of an anti-ship ballistic missile from one of its man-made islands against a maritime target. Moreover, while the U.S. Navy is spread around the world in support of its global missions, the People’s Liberation Army Navy is largely concentrated in the Indo-Pacific region. Thus, China could likely bring more ships to bear in the opening stages of a conflict—an advantage compounded by its in-theater, land-based combat aircraft, anti-ship missiles, and command and control infrastructure. 

The collective result of these factors is to diminish America’s strategic footing relative to the PRC and invite future conflict. Washington must reverse this trajectory through prompt and coordinated policy action.

BY MEANS of a nimble combination of diplomatic groundwork, conventional military power, development finance and punitive economic measures, the United States can begin to slow and perhaps eventually halt China’s advances in the SCS. To this end, the United States must deploy increased combat power to the SCS, strengthen the multi-nation coalition confronting Beijing’s illegal actions and set the U.S. Treasury Department’s sights on China in the SCS.

The critical first step toward countering Chinese aggression is to reassure and mobilize allies in the region. Absent reassurance, countries in the region may be inclined to move away from the United States and make the best deal they can with an assertive China, as was the case with the Philippines when Washington failed to support that country in its dispute with China over Scarborough Shoal.

To its credit, the Trump administration has worked with allies to ramp up multilateral maritime patrols in the SCS, sought to increase the size of the U.S. Navy and publicly chastised Chinese officials over PRC conduct in the region. While laudable, these moves have not checked China’s brazen and, at times, reckless behavior. Contrary to international law, China continues to assert its exclusive sovereignty over extensive areas within the SCS.

China’s regional tactics are most effective when it can take advantage of the highly asymmetrical power differential between Beijing and each of its neighbors. The United States can effectively counter this strategy by creating and strengthening a network of capable allies that are unified in their opposition to the PRC’s aggression. In other words, Washington should seek to make the competition multilateral wherever possible. China’s activities, after all, threaten the stability of the entire region and of the broader international community. A response to its actions should reflect that.

Secretary of State Mike Pompeo provided a strong example of how to reassure allies in the region during his visit to the Philippines. There he reinforced the U.S.-Philippines Mutual Defense Treaty of 1951, stating that the United States considers the treaty’s obligations to encompass the SCS: “Any armed attack on Philippine forces, aircraft or public vessels in the South China Sea will trigger mutual defense obligations.” These positive diplomatic signals, however, must be backed up with tangible action.

Moving forward, the United States can, in conjunction with allies, deter China by threatening its ability to operate beyond the “first island chain”—the series of islands running parallel to the Chinese coast. If the PRC seeks to deny access to the South China Sea, the United States and its allies can return the favor by making it clear to the PRC that in the event of a conflict, the United States is capable of and has the will to deny China’s access to the wider Pacific and the Indian Ocean. 

As an extension of this concept, the United States could seek to expand the range of allied ports, bases and airfields through which it rotates, stations and supports American military assets in the region. For instance, the Indian-controlled Andaman and Nicobar Islands are strategically located and hold tremendous potential due to their proximity to the vital sea-lane that runs through the Strait of Malacca, which ships often transit when entering and exiting the SCS. The United States and India should explore opportunities for joint investments and perhaps the rotational stationing of U.S. vessels and aircraft at Indian bases in the islands.

In Australia, the United States is already planning to expand its military infrastructure, increase the number of U.S. Marines in-country and intensify joint U.S.-Australian training exercises. These laudable initiatives should enjoy bipartisan support going forward. However, the United States needs its military footprint to be more than just an expensive training location—it should facilitate U.S. and ally power projection in the region.

 Of course, any steps by the United States and its allies must be predicated on the recognition that Beijing responds primarily to power. If the United States and its regional allies and partners fail to deploy and sustain sufficient military power in the SCS, Beijing is unlikely to change course. Deterring China means that America and its partners must make sufficient investments in defense. 

At the highest level of policy, the United States must implement the Navy’s fiscal year 2020 shipbuilding plan, which will allow the service to deploy more vessels to the SCS over time. If possible, the Navy’s shipbuilding plan should be accelerated. Under the current plan, the Navy will not reach its 355-ship target until 2034. 

In addition, it is essential that the Pentagon continue to prioritize developing technologies and systems that will be pivotal to U.S. and allied military supremacy in the SCS. These include hypersonic weapons, stealth bombers, ground-mobile missile delivery systems, long-range anti-ship missiles, improved ballistic missile defenses and underwater unmanned vehicles. These systems will depend on cutting-edge artificial intelligence-enabled software and innovative warfighting doctrines.

The administration took a positive step towards enabling improved Indo-Pacific deterrence when it formally withdrew from the Intermediate-Range Nuclear Forces Treaty. With the restrictions the treaty imposed now gone, the United States is free to produce ground-based intermediate-range missiles (500km–5,500km) and deploy them to the Indo-Pacific region—a capability crucial to countering China’s overwhelming missile advantage in the region. Secretary Esper indicated this past August that the United States plans to do just that. Indeed, that same month, the Department of Defense successfully tested a new ground-launched cruise missile which accurately hit its target after more than 500 kilometers of flight. If missiles of sufficient range are properly positioned, they could bring significant additional American deterrent capability to the SCS and surrounding areas. 

In the short term, the United States should increase combined military activities. The 2019 U.S.-Japanese exercise in the South China Sea—involving the USS Ronald Reagan strike group and the Japan Maritime Self Defense Force’s largest carrier, the JS Izumo, and its escorts—is a model for such combined operations. Plans to deploy U.S. Marine Corps’ F-35s aboard a British aircraft carrier in 2021 represent another positive step toward integrating U.S. and friendly forces within the Indo-Pacific. European allies that depend on the free flow of commerce in the SCS should be encouraged to increase their military presence in the region and expand their participation in U.S.-led multilateral patrols and exercises. Vietnam and other countries in the region are also important players that the United States should seek to integrate into these efforts. 

Working with these allies and partners, the United States should also implement a robust public diplomacy campaign related to the SCS. Ideally, the United States and its allies and partners would carry out this public relations battle, whenever possible, to make clear that Beijing’s actions are a threat to many nations. After all, China can advance in the region more easily when its intimidation is met with silence or the protest of only a single country. It is essential that the United States and its partners together highlight China’s strong-arm tactics, so it is forced to consider the impact of reputational damage before embarking on a South China Sea gambit.

An effective media campaign would create a stronger international awareness and consensus regarding the PRC’s malign activities in the SCS. It would also help build a more robust international coalition to push back against China’s actions, increasing the diplomatic costs of aggressive actions in the SCS. Congress would be wise to require the administration to submit a public diplomacy strategy for the SCS.

IN ADDITION to these military and diplomatic measures, the United States must also employ economic tools of national power. The administration should thus prioritize the Indo-Pacific region for investment through the newly created U.S. International Development Finance Corporation.

The IDFC is the U.S. government’s revamped development finance organization as mandated by the build Act of 2018. It mobilizes and facilitates private sector capital for overseas projects in support of U.S. foreign policy interests. Though currently funded at a fraction of the size of China’s efforts, which include the Belt and Road Initiative (BRI), the IDFC nevertheless has an important role to play in securing American regional support. In particular, its market-oriented initiatives—focused on transparency, sustainability and anti-corruption—provide a sharp contrast to the neo-colonial Chinese approach focused on resource extraction and debt as a means of control. From a development perspective, partners in the region do not want Washington to force them to pick sides in the struggle with PRC. They do, however, welcome a choice. The United States seeks independent and prosperous partners. Beijing seeks dependent and indebted vassals for exploitation. If the United States can present that choice, Washington will undercut Beijing’s ability to utilize debt to coerce, control or intimidate countries in the broader SCS region.

The PRC has long used BRI resources to advance China’s strategic footing, such as when it attempted to bribe its way into lucrative railway and pipeline projects in Malaysia. Revelations surrounding a possible Chinese naval base in Cambodia serve to underscore Beijing’s infrastructure ambitions in the SCS region. To provide a transparent alternative, Washington should prioritize the SCS as a target location for IDFC resources. This would provide local countries with an alternative to PRC debt, including the political influence that comes with it, and help thwart PRC attempts to acquire vital SCS infrastructure through financial coercion.

To supplement this effort, Washington should consider leaning on policy instruments that blend economic and military power, such as the foreign military sales, and potentially even foreign military financing programs. The United States should actively encourage and enable regional partners to purchase U.S. military equipment through FMS and potentially a modified version of the FMF. This would increase the capability and capacity of partner militaries—reducing the burden on the U.S. military and increasing deterrence vis-à-vis the PRC. FMS and FMFs also strengthen the U.S. economy and defense industrial and innovation base, decreasing the unit cost for the Pentagon and U.S. taxpayers while depriving countries like Russia of desperately needed revenue. Though FMF has historically been primarily a grant initiative, the Trump administration has considered shifting aspects of the program to include a lending function with modest interest rates designed to cover costs rather than to create long-term indebtedness. Revisiting this question might make sense if the overall FMF portfolio is to enlarge. 

Common equipment permits the United States and partner militaries to operate together more effectively in training and in conflict. Given the focus of the National Security Strategy and the National Defense Strategy on the Indo-Pacific, combined with the benefits detailed above, it would be appropriate to look for opportunities to bolster the U.S. FMF and FMS program in the region. This could put the purchase of U.S. weapons within the reach of regional countries, such as Vietnam and the Philippines, and could redound to America’s benefit militarily, politically and economically—particularly if tailored to the overall U.S. SCS strategy.

Finally, the U.S. Treasury Department may have a role to play in blunting China’s SCS gray zone strategy. Treasury’s formidable Office of Foreign Assets Control (OFAC) has the power to designate entities and impose sanctions on them—effectively cutting them off from the U.S. economy and access to the U.S. dollar system. OFAC has been used to devastating effect against a litany of U.S. adversaries from Iran to Venezuela. If applied to the SCS, U.S. sanctions policy could impose an economic cost on China for its misconduct.

According to the Defense Department, the PAFMM has raised its fleet by renting fishing vessels through a combination of private individuals, companies and state-owned entities. Beijing has now built a state-owned fishing fleet to form part of its maritime militia. All of these parties represent pressure points and potential OFAC targets. Today, the PRC has little incentive to show restraint in its use of the PAFMM. The specter of a U.S. sanctions campaign might convince decisionmakers in Beijing to proceed with more prudence.

To this end, the Treasury Department and the White House should first assess whether current legislation and executive orders provide OFAC with the necessary authorization to target the PAFMM. Next, Treasury should identify the chokepoints within the PAFMM or its extended networks whose effectiveness may be impaired by sanctions. Potential targets may include collaborating financial institutions, fuel-providing companies and administrative organizations. OFAC should also consider designating key officials within the Chinese navy and government associated with the PAFMM program. 

Two important questions for Treasury to address will be whether the PAFMM’s enablers interact with the U.S. financial system and whether Beijing could easily find substitutes for the targeted firms or entities. 

While a portion of PAFMM’s enablers likely lack U.S.-dollar exposure—thus U.S. sanctions would be of limited use in directly impairing their operations—many senior political and military officials do have substantial assets abroad. The United States should carefully weigh the utility of targeting them. While practical hurdles would no doubt exist, a focused sanctions campaign would nevertheless signal U.S. resolve in the SCS and could create a chilling effect for would-be PAFMM collaborators. To help implement such a strategy, Congress should consider allocating additional resources to OFAC to ensure this new effort does not detract from the office’s ability to meet its substantial existing obligations. 

Chinese fishing vessels are already unpopular for the role they play in the PAFMM and through their illegal fishing practices. The Philippines, for example, filed two diplomatic protests in August against the presence and conduct of China’s maritime militia. Standing up to PAFMM’s audacious behavior is an area of common interest amongst the United States and its regional partners. Tangible action by the United States against the PRC’s illegal maritime activities might have the added benefit of bringing Washington closer to its Indo-Pacific partners more broadly.

THE UNITED States has always been a seafaring and trading nation. The prosperity and way of life Americans enjoy depend on the unfettered flow of commercial vessels and the products they carry. Based on this, Americans have learned, sometimes painfully, that what happens in seemingly obscure corners of the world can hurt us at home. Consequently, Americans dismiss Chinese activities in the SCS at their own peril.

The 2017 U.S. National Security Strategy recognized the stakes. It noted that China’s “efforts to build and militarize outposts in the South China Sea endanger the free flow of trade, threaten the sovereignty of other nations, and undermine regional stability.” However, strategic documents and pronouncements mean little if they simply collect dust on the shelf. Washington must more effectively translate such strategies into tangible actions to shift Beijing’s cost-benefit analysis in the SCS. By working with allies and partners and implementing a comprehensive approach that employs all tools of national power, Washington can do just that.

Mackubin Thomas Owens is a research fellow at the Foundation for Defense of Democracies (FDD), where he contributes to FDD’s Center on Military and Political Power (CMPP), focusing on Indo-Pacific military and naval affairs. A former Naval War College professor, he is also the editor of the journal Orbis.

Bradley Bowman is Senior Director of the CMPP at FDD. He has served as a National Security Advisor in the U.S. Senate to members of the Senate Armed Services and Foreign Relations Committees, as well as an active duty U.S. Army officer, pilot and assistant professor at West Point.

Andrew Gabel is a research analyst at FDD.