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South China Sea: Is Beijing making a new 'strategic strait'?

The South China Sea doesn't appear at first glance to be a geographical bottleneck. China can, however, effectively create a strait by locating sufficient military assets on two sets of land it controls.

A major test for the future of Asia is on the horizon, and it's centered on the South China Sea.

Within the next three months, a tribunal at the Permanent Court of Arbitration in The Hague is expected to rule on China's expansive and somewhat ambiguous territorial claims in the South China Sea, which the Philippines contends are invalid under international law.

That decision is important for a number of reasons, but among them, experts say, is that China's island-grabbing campaign may be designed to give Beijing a strategic headlock on one of the planet's most critical waterways.

Experts tell CNBC that China will likely lose some elements of the Hague case, "Philippines v. China." The world's most populous nation has already denounced the process, and opted not to participate, but the tribunal's decision will technically still be binding under international law.

Beyond the geographical claims themselves, the tribunal is also looking into whether Beijing is overstating the types of territory it controls — the air and maritime rights associated with rocks are different than those of reefs or islands — and the legality of other Chinese actions near the Philippines.

Experts who closely watch developments in the South China Sea tell CNBC that they expect China to lose at least some of the elements of the case, but the real test will come in how Beijing reacts to a ruling. It's possible that China will back off from its broadest claims, but it may also demonstrate a willingness to buck the international legal system.

"My speculation would be that China has basically calculated that it will take some near-term, rather assertive actions in the South China Sea, and pay short-term reputation costs in exchange for what it believes to be longer-term strategic gains," Mira Rapp-Hooper, a senior fellow in the Asia-Pacific Security Program at the Center for New American Security, said.

Beijing's real rationale for risking its global reputation over a handful of tiny islands remains open for debate. Most agree that China truly believes it has a historic right to the region — but the South China Sea's relatively paltry energy resources (especially with oil now so cheap) hardly justify such an assertive grab on a realpolitik basis.

Rather, many point to the geostrategic value of the South China Sea.

"The logical conclusion drawn from China's adding ... islands in the southern part of the South China Sea with military-sized runways, substantial port facilities, radar platforms and space to accommodate military forces is that China's objective is to dominate the waters of the South China Sea at will," Peter Dutton, professor and director of the China Maritime Studies Institute at the U.S. Naval War College, said in a February speech at London's Chatham House.

"Building the islands is therefore, in my view, a significant strategic event," he said. "They leave the potential for the South China Sea to become a Chinese strait, rather than an open component of the global maritime commons."

DigitalGlobe imagery of the nearly completed construction within the Fiery Cross Reef located in the South China Sea. Fiery Cross is located in the western part of the Spratly Islands group.
DigitalGlobe | Getty Images
DigitalGlobe imagery of the nearly completed construction within the Fiery Cross Reef located in the South China Sea. Fiery Cross is located in the western part of the Spratly Islands group.

Speaking with CNBC, Dutton explained that there are few circumstances where China would want to restrict commercial movement in the area, but "the real problem" is that Beijing could readily exercise that capacity in times of crisis or conflict.

And that's where the United States comes into play: The U.S. Department of Commerce estimates the United States exported $79 billion in goods to the countries around the South China Sea in 2013, and imported $127 billion from them during that period. Navy Adm. Robert Willard estimated that the region accounted in 2011 for $5.3 trillion in bilateral annual trade — $1.2 trillion of which is tied to the U.S.

"Free access for commercial trade is a vital interest of the United States, so we have to consider what it means when one country has the capability to shut other countries off" when it chooses, Dutton said.

In his Chatham House speech, Dutton likens such a Chinese "strategic strait" to the Strait of Hormuz — a critical choke point for global trade. A full 90 percent of East Asian energy imports travel through the South China Sea, he said.

The South China Sea, several hundred nautical miles wide, doesn't appear at first glance to be a geographical bottleneck. China can, however, effectively create a strait by locating sufficient military assets on two sets of land it controls: the Paracel Islands in the north and the Spratly Islands in the south.

Rapp-Hooper said she did not think the situation in the South China Sea was close to reaching the level of a strategic strait. China's current outposts could "greatly complicate U.S. operational planning" in the region, but it's "hard to see" the country locking down the region with the island bases it now operates.

In fact, she said, part of the Chinese buildup in the area may come from Beijing's own fears that other powers may attempt to shut down commerce in the South China Sea.

But whatever the rationale for China's island-building, the tribunal's coming ruling is "a real trigger" for the future of the region, Dutton said, and it may be causing China to build up its capabilities in the region faster.

"China realizes the pickle that they're in, so they're taking actions at sea to emphasize their physical control," he said. "It's operational coercion to change the power dynamics in their favor — in response to a peaceful dispute resolution process."