China: Three Trends to Watch This Summer

1. South China Sea – Will this Lead to Conflict?

China has forcefully dismissed the recent findings of an international tribunal that ruled against China’s sweeping claims over the South China Seas. Although China vehemently rejects any interference in its “internal affairs,” the findings raise questions: How will China’s international reputation be affected? How will China respond to this embarrassing loss of face over the coming months? Where will China’s strategy of expansion and militarization of reefs and shoals in the South China Sea ultimately lead?

So far, China has responded to the rebuke by refusing to discuss it, issuing ominous warnings of potential conflict meant to intimidate. On July 15th, for example, Chinese Premier Li Keqiang warned Japanese Prime Minister Shinzo Abe “not to interfere” in the issue. On the same day, the China state media stated that China aims to launch a series of offshore nuclear power platforms to promote development in the South China Sea.

Although Japan is not a party to the conflicting claims among regional countries, including China, the Philippines, Vietnam, Malaysia, Brunei, and Taiwan, Freedom of Navigation through the South China Sea is a key concern for the United States and others engaged in trade with Asia. France, for example, recently asserted its freedom of access to this critical transit area. The possibility of conflict in the South China Sea is, consequently, becoming increasingly risky at key flashpoints where China has been particularly active building upon reefs and shoals to create landing strips and harbors that can accommodate military aircraft and vessels, including nuclear submarines.

A complicating factor is the deep sense of national pride in ownership of the South China Sea that has been nurtured in popular opinion, particularly over the last 20 years. Combining the self-evident perspective that the South China Sea is China’s with an enduring sense of victimization for past wrongs and a concentrated focus on China’s own rise, make future discussions on the South China Sea issue extremely difficult.

 2. BREXIT – Does China Benefit?

Following the United Kingdom’s popular vote to leave the European Union, the Pound Sterling fell to its lowest level since 1985 and the UK lost its AAA credit rating, creating uncertainty that will continue to ripple through the UK and international economies.

For China, the UK’s decision to leave the EU has great significance, since the UK had positioned itself as a gateway for China to enter the EU market. The new UK Prime Minister, Teresa May, has recently said that Britain will leave the EU, but not Europe, but this offers little consolation to China’s trade objectives.  Further, this shift in the China-UK relationship occurs at a time of economic weakening in the UK that could make it more dependent on outside investment from China and others. So, while BREXIT supporters sought to decrease the UK’s dependence upon and entanglement with European countries, BREXIT may have inadvertently weakened the UK’s global economic and political position.

Philosophically, BREXIT runs counter to China’s successful approach to its own economic development. While many in the UK who voted for BREXIT fear they are losing out to the global economy, China has lifted more than 800 million people out of poverty since 1978 by embracing globalization, raising China to the second largest economy in the world. For now, popular anger in the UK has been focused on the European Union, but this could begin to shift as the UK’s influence declines and China is viewed increasingly as the more powerful and demanding partner in the China-UK relationship.

3. Counter-Terrorism – Will China Join Military Action Against ISIS?

 The Chinese government issued new anti-terrorism rules that went into effect early this year and are primarily directed at domestic threats.

Externally, China’s non-interference policy has helped China differentiate itself from the West, so far, avoiding the worst of the ongoing terrorist incidents that afflict the Middle East and other parts of the world. China’s tight borders and internal control minimize the opportunity for extremist attacks, but as the world’s second largest economy, and with Chinese nationals now working and traveling around the world, even Chinese nationals are encountering the effects of extremism. Executions, such as that of Fan Jinghui in November 2015 after China refused to pay ransom prompted verbal outrage but little action, but this could change over time.

In Iraq and Syria, China walks a fine line between supporting local regimes in their counter terrorist fight, while avoiding involvement in coalition forces. In Iraq, China has supported the government with intelligence sharing and counterterrorism capacity building, while avoiding any direct role.

In Syria, however, China may be forced to shift to a more active and direct role against ISIS out of fear of it penetrating into China’s western Xinjiang Province. Reports that China is considering joining Russian forces to assist the Assad Regime, if acted on, would signify a major shift in China’s defense against extremism.