January 30, 2012

This Weekend’s News: Chinese Economic Coercion in the South China Sea

Yesterday, China’s nationalist newspaper Global Times published a report arguing
that Beijing should make the Philippines pay for increased cooperation with the
United States, what Chinese officials perceive as a balancing act unfolding in
the region. According to the Global Times:

the recent active maneuvers of the US military in China's neighboring area, the
lack of a response from China would be inappropriate, though it is also
impossible to react strongly toward every move by the US
. It is thus
necessary to single out a few cases and apply due punishment.

The Philippines is a suitable target to impose such a punishment. A reasonable
yet powerful enough sanction can be considered. It should show China's
neighboring area that balancing China by siding with the US is not a good

The report adds that Beijing should use economic coercion to
compel the Philippines into suspending its ongoing activities with the United
States: “China
may consider cooling down its business ties with the Philippines. One step
forward in military collaboration with the US means a step backward in economic
cooperation with China.
In the long run, China may also use its economic
leverage to cut economic activities between ASEAN countries and the

The call from the Chinese national newspaper comes on the
heels of increased military cooperation between the United States and the
Philippines. In November 2011, the United States agreed to transfer
a second Hamilton-class cutter to the Philippines
to provide additional
resources for the Philippine Navy to conduct maritime security activities,
including in the South China Sea where China and the Philippines have ongoing
territorial disputes. Earlier this month, the United States announced that its
annual exercise with the Philippine marines will be conducted off of Palawan
island instead of the main island Luzon. (Increased Chinese oil and natural gas
exploration 50 miles off the island of Palawan has exacerbated tensions between
the Philippines and China in recent months.) Most recently, the United States
and the Philippines agreed last week to closer military cooperation moving
forward. According to The Washington Post
on Sunday, “The
Philippines said it is considering more joint military exercises and a greater
presence by American troops

To those familiar with the South China Sea
contest, it probably comes as no surprise that China would wield its economic
clout over its neighbors in order to achieve its objectives in the region.
Nevertheless, with the Communist Party’s Global
making explicit pronouncements that Beijing should use economic
leverage over the Philippines and others seeking closer ties with the United
States (Vietnam, for example), this is an issue that U.S. policymakers will
need to watch closely. China’s economic linkages in the region are huge and it will be difficult for the United States to assuage
the pain from China cooling down its business ties with its neighbors. But
there may be avenues for the United States to pursue that would help its
neighbors manage the pain from China as they pursue greater cooperation with
the United States. The Trans-Pacific Partnership – a
regional free trade agreement that would include Vietnam and Singapore, and
potentially the Philippines
– is one example. There are others.

U.S. policymakers need to continue to dispel Chinese concerns that U.S. security cooperation with its neighbors is part
of some grand containment strategy. It isn’t. The United States seeks
cooperative engagement with China, as well as deeper ties with its neighbors.
At the same time, the United States will need to look beyond security cooperation and
strengthen its economic ties with states in order to counter China’s economic
leverage, which could stall partnership building between the United States and
others in the region. Indeed, as the United States moves ahead with forging
these strategic partnerships, military cooperation is only part of the
foundation. Lasting partnerships by necessity need to include everything
from security cooperation to robust trade and development assistance.

This Week’s Events

On Tuesday at 2 PM, head to the Atlantic Council
for Nigeria on the Edge.

On Thursday at 9 AM, head to the George C. Marshall Institute
for a conversation on Effective
Energy Policy: Learning Lessons from 40 Years of Trying
. At 2 PM, Brookings
will host a discussion on Low-Carbon
Development in the United States and China

Finally, on Friday at 10 AM, the Information Technology
& Innovation Foundation will explore the idea of Applying
the DARPA Concepts to Energy Innovation: The Emerging ARPA-E Model