- An estimated $3.37 trillion worth, or 21% of all global trade, transited through the South China Sea in 2016, according to the United Nations Conference on Trade and Development.
- Territorially, there are seven claimants to the South China Sea: China, Brunei, Indonesia, Malaysia, the Philippines, Taiwan and Vietnam. But to whom does the South China Sea matter most?
- Analysts name the top five countries, other than China, that are most dependent on the South China Sea: Vietnam, Singapore, Indonesia, Japan and South Korea.
The South China Sea is a vital trade route connecting the main arteries of trade in Southeast Asia, linking waterways from Singapore and Malaysia to Indonesia, the Philippines and Taiwan.
Combined with an abundance of hydrocarbon reserves and marine life — the primary source of animal protein for the region's dense population — this body of water is critical beyond its boundaries.
According to the United Nations Conference on Trade and Development, an estimated $3.37 trillion worth, or 21% of all global trade, transited through the South China Sea in 2016.
Territorially, there are seven claimants to the South China Sea: China, Brunei, Indonesia, Malaysia, the Philippines, Taiwan and Vietnam.
But to whom does the South China Sea matter most?
Analysts name the top five countries, other than China, that are most dependent on the South China Sea.
Vietnam, home to to 95.5 million people, saw its economy grow to $362.64 billion in 2021, World Bank data showed.
"Vietnam occupies more than three thousand kilometers of coastline on the South China Sea and occupies the largest number of features in the Spratly Islands," according to Euan Graham, Shangri-La Dialogue Senior Fellow for Asia-Pacific Security with the International Institute for Strategic Studies.
"What makes it interesting is its geography in Southeast Asia, which allows for a continental or maritime orientation and creates pressure in both directions," said the military and geopolitical expert.
"At the grand strategic level, Vietnam is doubling down on its maritime strategy to become an export-dependent economy dependent on freedom of navigation for prosperity."
Graham said this was a reversal of Vietnam's history in the last century when it was landward-focused and reliant on continental allies — chiefly the Soviet Union and China. Vietnam was also bogged down by land conflicts with China and Cambodia at that time.
Vietnam, which shares a border with China, has benefited from the supply chain problems in China exacerbated by Beijing's strict Covid-zero policy and supply dislocations.
"The opportunity is in the prosperity that exports and foreign investment have brought," Graham said.
"Organizations are re-orientating supply chains out of China, and South Korea now heavily invests in microchip production in Vietnam. This further benefits Vietnam by giving other countries a stake in its survival."
As the primary sea link for markets in Europe, Asia and the Americas, the 105-kilometer-long Singapore Strait sees about 1,000 vessels pass through daily.
Most conversations emphasize resources such as oil, gas and fisheries that everyone competes over —but "the freedom of the sea is what keeps Singapore alive," said Blake Herzinger, a civilian Indo-Pacific defense policy expert.
"Without the free South China Sea on the other side of Singapore, that becomes a different proposition for their value and national survival," said the co-author of "Carrier Killer, China's Anti-ship Ballistic Missiles and Theater of Operations in the early 21st Century."
The freedom of the sea is what keeps Singapore alive.Blake Herzingercivilian Indo-Pacific defense policy expert
With a population of 5.64 million, Singapore's GDP is estimated at $337.5 billion in 2020, making it the 17th largest goods trading partner with the U.S., according to the U.S. trade Representative Office.
"Although Singapore is not a claimant to any South China Sea maritime features, they sit on the most critical sea lanes of communication (SLOCs) – the Singapore Strait, and the beginning of the Malacca Strait," said Charlie A. Brown, a regional maritime domain awareness expert and consultant.
The tiny Southeast Asia nation depends heavily on free trade passing safely through their country and the adjacent waters.
"Singaporean leadership is clear that they are a state that existentially depends on free seas and rules-based order. Absent that, places like Singapore are in a lot of trouble."
The Straits of Sunda and Lombok in Indonesia, together with the Straits of Malacca and Singapore, are major gateways to the South China Sea.
Indonesia's archipelagic Natuna Islands overlap China's nine-dash line — a set of line segments on maps that accompany Chinese territorial claims.
"Indonesia heavily depends on the resources from the North Natuna Sea [within the South China Sea]," said Brown adding that a significant commercial traffic transits its waters.
"Although Indonesia states there are no territorial disputes with China, that is a rhetorical claim contrary to the actual," he added.
China has pushed claimant states such as Vietnam out of traditional fishing waters and more into the South China Sea, causing excessive overfishing.Blake Herzingercivilian Indo-Pacific defense policy expert
Herzinger highlighted that, like the other claimant states, Indonesia's population of 280 million relies heavily on food security from fish.
Food insecurity in the South China Sea can quickly become national instability in Southeast Asia, said Herzinger.
"One underappreciated aspect is all the seasonal fishing bans that China patrols and has in the East China Sea," he said.
"Although they claim more than half of the South China Sea, China has pushed claimant states such as Vietnam out of traditional fishing waters and more into the South China Sea, causing excessive overfishing."
Brown added that it was especially true of Vietnam fishermen "who go into Malaysian and Indonesian waters, partly because China pushes them out of their own waters."
What happens when the fish stocks are exhausted?
"If that happens, countries will immediately be thrown into food insecurity," warned the defense policy expert. "And when that happens, you get government insecurity, where hungry people won't be going after China but rather the central government."
Southeast Asia's largest economy had an estimated GDP of nearly $1.2 trillion in 2021, according to World Bank data.
Some 42% of Japan's maritime trade passes through the South China Sea every year, according to the Association of Accredited Public Policy Advocates to the European Union.
By 2020, Japan was the largest liquefied natural gas buyer in the world, importing nearly 74.5 million tons.
Brown argued that because of Japan's oil imports from the Persian Gulf region, "they have a long-standing interest in the vulnerability of the sea lanes dating back well before World War II."
"In modern times, their regional activities support capacity building on issues such as maritime safety and security, protection of resources and infrastructure, and freedom of navigation with countries that border the South China Sea," Brown added.
Japan has also been sending strong signals to China.
Japan's largest newspaper, the Yomiuri Shimbun reported that the Japanese navy's destroyers have sailed past the South China Sea waterway repeatedly, near artificial islands and reefs claimed by Beijing.
An unnamed senior defense ministry official was quoted by the newspaper as saying that the maritime patrols were "meant to warn China, which is distorting international law, to protect freedom of navigation and law and order of the sea."
Those operations under the Maritime Self-Defense Force started in March last year, the Yomiuri Shimbun said.
On July 22, the Japanese government released the Defense of Japan 2022 white paper accusing China of attempting to unilaterally change the status quo in the East and South China Seas.
China's Ministry of National Defense responded with a strong rebuke, charging that the document made "irresponsible remarks."
South Korea is "intentionally quiet about the South China Sea" as it wants to "maintain favor with China," Graham said, citing Seoul's primary focus on the North Korean issue.
"Geographically, compared to Japan, it is harder to divert trade," he said. "In recognition as a trading nation, and to secure supply lines, including its investment into Vietnam, South Korea has an active ocean-going navy."
Asia's fourth largest economy – estimated to be about $1.8 trillion in 2021 – is more economically dependent on energy imports than Japan, according to Graham.
As the world's 8th largest energy consumer, South Korea imports almost 92.8% of its energy and natural resources consumption, government data showed. In 2021, South Korea spent $137.2 billion on energy imports, the equivalent of nearly 22.3% of its total imports.
According to figures from the U.S. Energy Information Administration, the Middle East accounted for 69% of South Korea's 2019 crude oil imports, down from more than 80% before 2018.
With a majority of South Korea's crude oil imports transiting through the South China Sea, its present strategic importance to national security cannot be understated.
"With the June 2022 launch of China's domestically designed and built aircraft carrier, Fujian – named after the province closest to Taiwan – dominance and naval supremacy in the Pacific hasn't been challenged like this since WWII," Brown said.
"The European conflict has raised concerns about the global trading system," he said. "Warnings of the effects of a conflict on the South China Sea should be taken seriously. We should all listen to the calls from countries like Singapore and South Korea to avoid it and reduce the tensions."
Growing importance of South China Sea
From a historical perspective, the South China Sea is the epicenter of the Indo-Pacific. But its significance extends far beyond the region.
Given diplomatic tensions and an expanding global economy, the South China Sea's strategic importance is expected to continue rising.
In 2021, the United Nations Conference on Trade and Development (UNCTAD) said that more than 80% of the volume of international trade is carried by sea, with 54% of world maritime trade occurring in Asia. However, pandemic uncertainty still carries over in the form of supply chain disruption, changes in globalization patterns, transportation costs, and congestion in ports.
Overall, UNCTAD estimates that world maritime trade recovered by 4.3% in 2021. It also predicted that trade volumes could grow at an annual rate of 2.4% between 2022 and 2026.