Asia Economy

Is trade the answer to South China Sea tension?

Michelle Loh | News Assistant
How will geopolitical tensions impact Asia?
How will geopolitical tensions impact Asia?

As saber-rattling in the South China Sea increases, more trade could help to ease regional tension, according to IHS Senior Consultant for Country Risks Amarjit Singh.

"It creates the room for more dialogue and increases the costs if any of the countries try to provoke aggression. The deeper you're linked economically, the higher the costs of any aggression or threat of aggression," he said.

Any sort of conflict would inflict a heavy cost on the economies involved, and all sides would obviously "work hard to avoid it", he added.

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The South China Sea is home to rich fishing grounds and untapped seams of oil and natural gas. It's also a busy sea lane, with half the world's trade and 80 percent of crude oil supplies passing through its waters.

China has claimed the entire patch stretching from the tropical island of Hainan, through to waters off the coast of Malaysia but its claims have been contested by neighboring countries.

An opportunity for Japan

While the U.S. does not take sides in the territorial disputes, it has repeatedly stated its desire to see a multilateral resolution that maintains free passage through the South China Sea, and has expressed support for Japanese Prime Minister Shinzo Abe's recent offer to take a "greater and more proactive role" in regional security.

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Singh says that Japan will use its "financial wherewithal" to push for greater geopolitical strength and to ensure that it has "special relationships" in the region.

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"Japan has an interest now in making its trade links stronger as it helps them to further entrench their presence in the region," he said. "By pushing for more trade, it can deepen or lengthen its footprint in the region."

While trade with China will always be important to Japan, Professor Jeff Kingston, director of Temple University's Asian Studies program, said Japan will look to hedge its bets by increasing its well-established trade links with the rest of Asia.

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"From a Japanese perspective, there's growing political risk in China," he said. "We'll see Japan have an increasing commercial profile in India and Southeast Asia. It's not going to happen overnight, but in the next 5-10 years."

"Clearly, there's also a strategic angle here," he said. I think the current problems between Vietnam, Philippines and China provide an opportunity for Japan to strengthen relationships with those countries in the form of aid and trade and also arms exports."