China’s new island prompts fresh geopolitical fears

Geopolitical tensions in Asia show no sign of abating as new Chinese activity in disputed maritime territories reinforce Beijing's commitment to military expansion at all costs, experts said.

Beijing is building an island capable of hosting an airstrip near the Spratly Islands in the South China Sea, its largest project in the region thus far, defense publication IHS Jane's said on Friday.

"China believes the South China Sea is theirs; they're not willing to negotiate it with their neighbors," said Michael Raska, research fellow in the Military Transformations Program at the S. Rajaratnam School of International Studies in Singapore.

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"China is not heeding demands of the U.S. and Southeast Asia to freeze activity because its position is clear: Territorially, Beijing believes it will control the South China Sea. If there are issues, they will deal with it country by country on a bilateral basis, so a multilateral approach with ASEAN members is out of the picture for them," said Amarjit Singh, senior analyst, country risk at IHS.

The move comes amid signs of improving relations between China and its neighbors. During last week's G-20 summit, President Xi Jinping expressed his dedication to upholding regional peace through dialogue and consultation. Meanwhile, his meeting with Japanese Prime Minister Shinzo Abe during the Asia-Pacific Economic Cooperation summit a few days earlier was heralded as a diplomatic breakthrough.

China and Japan are in the midst of a long-standing feud over a separate group of islands in the East China Sea, which has greater potential for military conflict than the South China Sea, according to IHS' Singh.

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Chinese fishing boats
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Chinese fishing boats

"China is taking a position that tells the rest of Asia: You have to adjust and adapt to the reality that we're a powerful neighbor. We'll try to accommodate you as we go along, but on issues of territory, we draw a red line," Singh said.

China's great plan

Various Asian countries have made territorial claims over the Spratly Islands including Vietnam, Malaysia, the Philippines, and Taiwan. They lie south of the Paracel Islands, another area under dispute between China, Vietnam and Taiwan.

"This new island on Spratly is just one of many other installations China is putting into place as part of its strategy to build up a military presence in the region," said Raska. "Once these installations are completed, they will be power projection bases. China's air force will patrol the area, there will be more surveillance, all of which translates into greater political leverage over Asia."

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Beijing completed an airstrip in the Paracel Islands last month and is advancing with the construction of another island on the Johnson South Reef in the Spratly Islands. In August, Chinese state media reported lighthouses were being built in the Paracel Islands.

Potential for violence

While these maritime conflicts won't roil markets off the bat, investors need to keep them in mind should escalation occur, IHS warned. Given the close proximity of Japanese and Chinese vessels and airplanes in the East China Sea, an accident is waiting to happen, the group said.

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Both the Paracel and Spratly archipelagos lie in the midst of key shipping routes, vulnerable to confrontation between China and ASEAN nations. Energy supplies to Japan and Korea would also be impacted, IHS said, as well as unexplored oil and gas deposits.