As China continues to pour billions into its massive military buildup, a pressing concern is its territorial ambitions in the South China Sea. Within the next two weeks the Pentagon is expected to send U.S. Navy warships to the area that will steam past China's artificial South China Sea islands in the first direct challenge to China's claims in the region.
The stakes are high, and the U.S. naval action could drive them higher still. Trillions in global seaborne trade transit the South China Sea each year (including roughly $1.2 trillion in goods bound for U.S. ports), but the vast majority of East Asia's energy resources pass through the Strait of Malacca and South China Sea as well.
The sea itself could also be a source of vast mineral wealth. The U.S. Energy Information Administration estimates that there could be 11 billion barrels of oil and 190 trillion cubic feet of natural gas lurking in the seabed there.
If the naval maneuvers are approved, they would mark a material escalation in what, up to this point, has been largely a war of words between U.S. and Chinese officials.
During a state visit to the White House last month, Chinese President Xi Jinping and President Obama could not find common ground on this issue.
Xi was defiant in his defense of China's activities in the South China Sea, which include using a fleet of dredging ships to build a string of artificial islands atop various reefs in the region. Those islands have since become home to airstrips, helipads and other infrastructure. Beijing has also claimed the islands and a 12-nautical-mile radius surrounding each one as sovereign Chinese territory.
"We have the right to uphold our own territorial sovereignty and lawful and legitimate maritime rights and interests," Xi said during remarks in the Rose Garden, defiantly defending its territorial claims in the South China Sea and its building of artificial islands there with military buildings, ports and airstrips to support air and sea patrols of the area. Xi went on to add that China's activities in the strategically important waterway "do not target or impact any country, and China does not intend to pursue militarization."
Exactly how this latest escalation plays out will say a lot about how China's massive two-decade military buildup has altered the strategic landscape in the region.
It also heightens the risk of miscommunication, military accidents or other incidents that could have potentially volatile consequences in a waterway through which more than $5 trillion in global seaborne commerce passes annually.
"The likelihood of increasing tensions is high, in part because neither side has demonstrated a willingness to back down," said Roy Kamphausen, senior vice president for research at the Washington, D.C., offices of the National Bureau of Asian Research. "So the conditions for military accidents, the conditions under which that might occur, are increasing."
China's territorial ambitions in the South China Sea have long been a geopolitical sticking point for nations in the region. Several neighboring countries — including Vietnam, Malaysia, the Philippines and others — have made competing claims in the South China Sea, both for sovereignty over far-flung island chains and overlapping zones of economic control.
As China's economy has expanded, its security interests have ballooned as well, making the South China Sea a simultaneous source of financial, energy and security anxiety for Beijing. And while the U.S. has for decades asserted that it maintains the right to operate its navy anywhere in the world outside the explicit sovereign territory of another nation, Kamphausen says, China sees a range of national security vulnerabilities along its lengthy maritime borders.
"China is uncomfortable with the idea that the U.S. has freedom of movement inside the first island chain," says Mira Rapp-Hooper, a senior fellow with the Asia-Pacific Security Program at the Center for a New American Security, referring to the most immediate string of major islands off the east coast of the Asian mainland, including Japan, Taiwan and the northern Philippines. "The U.S. sees its security in the Pacific tied to having that access. The idea that China would be able to impede access to the U.S. Navy is what has U.S. military planners riled up."
China's military has spent the last two decades developing a military that can do exactly that.
Over the past 20 years China has increased its military budget by double digits almost every year. While that rate of growth appears to be shrinking alongside China's larger economic slowdown, analysts at security watchdog IHS Jane's predict that Chinese defense budget growth will continue to increase roughly 7 percent annually through the end of the decade.
By 2020, Beijing will be spending $260 billion on its military (compared with $145 billion in 2015). While the $612 billion 2016 U.S. defense budget working its way through Congress this week dwarfs China's own defense spending, that sustained growth means China will double its defense spending over the course of this decade.
Much of that spending has gone to Chinese naval assets and other standoff weapons designed to keep foreign navies — and especially the U.S. Navy — at bay. The People's Liberation Army Navy (PLAN) has added dozens of modern destroyers, frigates and submarines to its fleet and begun construction of its own indigenous aircraft carrier.
More worrisome to U.S. naval planners and their allies in the region are a range of new land-based ballistic missiles designed to sink naval ships or destroy airfields. One such missile, the DF-21D, is commonly known as the carrier killer. Security analysts believe another, the secretive DF-26C, has enough range to reach U.S. airbases on the Central Pacific island of Guam, thousands of kilometers away.
While China's growing military capability has not erupted into a regional arms race, it has impacted priorities in the region. This year Japan passed measures allowing it to take a greater military role in overseas conflicts, while proposing its largest national defense budget ever — largely to augment its naval and island defense capabilities. The U.S. is easing a longstanding arms embargo on Vietnam, sending new naval patrol vessels to the Philippines and considering reopening air and naval bases there.
How the U.S. Navy and others in the region choose to address China's ongoing island-building and other activities in the South China Sea will lend some insight into how much China's new arsenal has tipped the balance of military power in the region.
Two decades ago, in the aftermath of Chinese ballistic missile tests aimed at intimidating Taiwan, the U.S. registered its disapproval by parking two aircraft-carrier strike groups off the Chinese mainland. Following China's two-decade military buildup, such brazen displays of deterrent power are less likely.
The sending of U.S. warships through Chinese-claimed waters would send a similar if not so demonstrative message. "There should be no doubt that the United States Pacific Fleet remains as committed to freedom of the seas as ever," Admiral Scott Swift, commander of the U.S. Navy's Pacific Fleet, told an audience last Tuesday at a maritime conference in Sydney. He added: "We will continue to defend and protect it through routine presence, exercises with allies and partners, and freedom of navigation operations."
—By Clay Dillow, special to CNBC.com