Why China has the upper hand in the South China Sea

June 3, 2015
Employees work inside a LCD factory in Wuhan

Employees in a LCD factory in Wuhan, Hubei province, May 8, 2013. REUTERS/China Daily

Washington’s failure in recent years to keep careful watch over what goods are made where — especially when it comes to such vital items as electronics and drugs — means the United States now depends far more on China than vice versa.

Back in the 1990s, advocates of liberalizing U.S. trade with China said economic interdependence would inevitably lead to peaceful coexistence. But one-sided dependencies invite adventurism, as China’s growing belligerence today proves.

Washington must now address the fundamental flaws in the international trade system that gave China such a big advantage. The White House claims the proposed Trans-Pacific Partnership will help offset China’s increasing heft. Unfortunately, the pact, which includes 11 Pacific Rim allies but excludes Beijing, will do nothing to fix the problems.

To match Analysis LED-CHINA/

Employees measure the aging levels of low-energy consumption light bulbs at a factory in Nanjing, Jiangsu province, May 18, 2012. REUTERS/Sean Yong

The fact that the global trading system is not working as promised is most dramatically evident in the seas around China. Beijing is engaged in a pattern of provocation bordering on recklessness. In late 2013, China unilaterally imposed an “air defense declaration zone” covering portions of the East China Sea. Earlier this year, the Chinese navy set about transforming a reef in the Spratly Islands into a military base.

International relations in East and South Asia are tenser than at any time since the 1960s. Japanese Prime Minister Shinzo Abe last year compared the situation to 1914 just before World War One. The U.S. Navy recently began to directly challenge China’s claims of sovereignty over large swaths of the South China Sea.

This is the opposite of what was supposed to happen when the United States and its allies created the World Trade Organization in the mid-1990s and then invited Beijing to join. President Bill Clinton asserted that “growing interdependence would have a liberalizing effect in China.”

Worse, the extreme industrial interdependence fostered by the World Trade Organization appears to have put powerful levers into China’s hands.

During the Cold War, the United States promoted high degrees of integration with allies, including Japan, Germany, Britain and Canada. Washington did this to promote mutual prosperity and peaceful coexistence. Yet even though each of these nations was smaller than the United States — and all were more or less democratic — Americans chose not to rely entirely on any of these close friends for any vital good.

To match Analysis LED-CHINA/

Employees work at a production line of low energy consumption light bulbs at a factory in Nanjing, Jiangsu province May 18, 2012. REUTERS/Sean Yong

Today, the United States depends on China for myriad items that U.S. citizens need every day. These include 100 percent of key electronics and chemical components. They even include basic ingredients for some of the nation’s most important drugs, including antibiotics. Given that supply chains often run on a just-in-time basis, in which goods are produced only as fast as they are consumed, there are often no backup supplies nearby.

China, by contrast, depends on the United States for little of vital importance. For what it does import in quantity, like energy and metals, it holds large stockpiles.

And unlike Washington’s main trading partners of the past two decades, China’s economy is bigger than America’s and growing fast. China is also by no means a democracy. Quite the contrary. The United States finds itself increasingly dependent on the good will — and stability — of the world’s most powerful and sophisticated autocracy.

The World Trade Organization freed U.S. corporations and foreign nations to restructure every assembly line on which Americans depend in almost every respect, such as by concentrating production wherever and however they wished.

Washington’s challenge now is to understand what this revolution means in the real world. Most specifically, how exactly does Washington’s asymmetrical dependence on China affect U.S. sovereignty and freedom of action? Might it, for example, lead Beijing to conclude that the United States will not use force in response to Chinese aggression?

The proposed Trans-Pacific Partnership, at best, amounts to a doubling down on a strategy that failed. At worst, it sets Americans to fighting with one another at a time when the international threats they face grow ever more complicated and dire.

Globalization is a smart and viable strategy. U.S. trade policy from the end of World War Two to the mid-1990s proved that.

Rather than waste more time on the Trans-Pacific Partnership, Washington must figure out how the extreme changes of the 1990s upset those balances. More to the point, it must swiftly figure out how to live and trade peacefully with China in what is fast becoming a post-global world.


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

Yup, and unfortunately our nation now lacks the leadership, drive, sacrifice, determination, and intelligence to face the challenge and make the hard choices to rectify the situation. Baring some highly unforeseen swift election of an unknown candidate, restructuring of Congress, and revolution of the average American’s mindset, China won.

Posted by summerofgeorge | Report as abusive

What I think is, if we all work together we will be able to create heaven on the earth. Nearly whole world depends on China for electronics product , so its beneficial to keep good relationship with Chinese. :)

Posted by Bestmobitech | Report as abusive

Who cares what China does in the South CHINA sea. It’s not called the south Texas sea. It’s not ours, never has been, never will be. Relax and worry about your own problems.

Posted by Solidar | Report as abusive

Appeasing China’s aggression in the S China Sea isn’t working. The comments by Chinese military and diplomatic personnel clearly indicate a sense of entitlement, and having the “right” to seize territory and sea lanes .
The US and its allies cannot appease China any further. Miltray and naval forces need to be shifted into the area. China needs to be TOLD that
further claims regarding sovereignty in the S China Sea will be regarded
as illegal aggression and the seizing of international waters.
Attempts to intimidate threaten control or coerce US Navy ships and aircraft should include a statement that the waters and airspace are interntional, that China has zero right to attempt to assert control and that such actions will result in trade embargoes, expulsion of diplomatic personel, China bank sanctions, the seizure of assets in the US and a complete lack of tolerance for hinese claimds, coercion and threats against US naval forces.
We need to move multiple attack submarines into the region, begin tracking all of the ir naval forces in the region and to be prepared to sink, seize or destroy all of them if China continues its preposterous and outrageous aggression and ridiculous claims.
CNOOC drilling rigs should be shut down/seized or derstroyed and until the Chinese stop this idotic behavior they need to be severely, severely punished.
Period. The end.

Posted by ochwill | Report as abusive

China employs Bush doctrine. Bush supporters begin to cry.

Told you so.

Posted by Solidar | Report as abusive

The free market will fix this. Just quit buying Chinese goods. Throw your cell phone away, your lap top, your clothes, your TV…. all made in China.

Hahaha. Should have kept the import tariffs in place. China did.

Posted by Solidar | Report as abusive

It’s all fun and games ’til someone puts an eye out.
When American jobs were offshored there was nothing we could do about that. Now that those corporations have had their butts handed to them in China, you’ll be hard pressed to find much sympathy.

Posted by Laster | Report as abusive

We have to get into free trade agreement with free countries like the EU that follow the rule of law, not the rule of the Communist Party of China.
The sooner, the better…
http://abcnews.go.com/GMA/video/year-lon g-investigation-counterfeit-goods-310665 34
http://abcnews.go.com/WNT/video/counterf eit-goods-make-china-store-31098364

Posted by UauS | Report as abusive

Chinese currency manipulation, complete control of the court system decisions, product dumping to destroy targeted foreign industries, domestic protection from foreign product sales, zero foreign intellectual property protection, jailed free speech advocates, SORRY but China as a trading partner simply couldn’t be worse. Regarding the US government they are traitors to the common working US citizen, plain and simple.

Posted by tribeUS | Report as abusive

al Reuters forgot to mention the three main reasons China has the upper hand (in the S. Sea and everywhere else): Obama, Boehner and McConnell. There isn’t a single test-tickle among the three of them.

Posted by CyberLiberty | Report as abusive

Besides the usual propagandist indictments against China, what are the facts? Philippines reclaimed island with military airstrip on Thitu island‏; Vietnam has built a fort on Southwest Cay island‏.

Posted by ChasLSeattle | Report as abusive

UauS wrote:
We have to get into free trade agreement with free countries like the EU that follow the rule of law, not the rule of the Communist Party of China.
The sooner, the better…

These are what informed comments look like, read the comments at the bottom of the article.
http://blogs.reuters.com/great-debate/20 15/05/28/who-doesnt-want-123-billion/

Posted by Laster | Report as abusive

China has solid historical claims and has earned the right to leadership in the South China Sea region by long suffering at the hands of foreign powers. They have expressed a willingness to take a shared approach to the undeveloped resources. America blew any chance of being trusted in the ASEAN region by invading Vietnam, but should play a role, because of their extensive trading partnerships with its members.

The Philippines has a bad record of corruption. Japan has a dirty closet from WWII. No one has stepped up to a leadership role. They’ve all been whining and pointing fingers. By asserting itself, China is assuming leadership in a void, forcing others to the table.

People can run around barking like dogs or grow a longer spine and walk toward a conference table. Trust is earned only by spending time together face-to-face.

Posted by Wordist45 | Report as abusive

@Laster: “The only source of knowledge is experience.” – Albert Einstein

Posted by UauS | Report as abusive

UauS wrote:

@Laster: “The only source of knowledge is experience.” – Albert Einstein

Obviously a poignant quote. I’m reading that in light of what..?

Posted by Laster | Report as abusive

the WTO was not created to “free US corporates …. to restructure assembly lines “.

Posted by putinV | Report as abusive

too late China is full steam head, and US customers are hooked on cheap Chinese mirrors and beads

Posted by Jingan | Report as abusive

The ever escalating tension in the WEST PHILIPPINE SEA is reaching beyond its boiling point which paints the whole region with blood due to China’s invasion of the tiny islets that illuminates her desperate motive for oil extraction to satisfy her insatiable greed for energy. The balance of power is fast disappearing in the Asia-Pacific region which sooner or later will culminate into armed confrontation when China’s greed will simply eradicate every inch of patience due to her intolerable actions of stealing territories for her energy starved economy. China ignored any peaceful means of resolving territorial disputes and as a matter of fact she unilaterally resorted into a disgusting aggression which will be the very reason of a full blown nuclear war to annihilate mankind. China is suffering from a dreadful disease of national autism, she does things violently without realizing that somebody out there will be affected by that violence, perhaps she is living in a cage with full of rage without knowing that her plundering action might lead into a global warfare at the expense of humanity.
To all freedom loving people across the globe, resist China’s invasion of the West Philippines Sea!!!
To all who long for the survival of mankind on earth, resist China’s aggression that would lead to nuclear war!!!
To all the environmentalists out there, resist China’s destructive exploitation of the atolls and reefs!!!

Posted by Pansensoy | Report as abusive

So why is the establishment just now waking up to this?

It’s not like this just started yesterday.

A lot of people been screaming about this for over 20 years, and nothing was done.

Critics, to the extent that they were even acknowledged, were dismissed as fearmongers and isolationists.

Stupid or evil, that’s your choice, personally I think they are equal parts of each.


Posted by LGLken | Report as abusive

This is remarkably misguided. There is no “asymmetrical dependence” by the U.S. on China. Rather China is much more dependent on the U.S, Japan, and the EU for investment and technology transfer and to sell the low valued added products they export (the high value added components of which are made in other countries). The U.S. market provides jobs and with it social stability in China as Chinese farmers head to the urban areas. Without the U.S. and EU markets, China would have real problems on its hands. If the U.S. is so dependent on China, then why is the Obama Administration taking such a forceful stand against Chinese encroachments in the South China seas? Sixty percent of U.S. naval assets are now deployed to the region.
And trade cannot eliminate geopolitical maneuvering but it has tamped down conflict between Japan, the U.S, and China.

Posted by Cassiopian | Report as abusive

There is nothing that the US or the West can do to stop China’s legitimate right to self defense.

What are we gonna do now, sanction China????
Go right ahead and see who is going to suffer most, hahahahahahahahahaha!!!!!!!!!

Posted by No_apartheid | Report as abusive

Depending on Chine will ruin our future!

Posted by jump2top | Report as abusive

We should be happy for China, they are working hard and making some Islands. Kind of cool for them.

Posted by Solidar | Report as abusive

One of the other things the US has inadvertently ‘exported’ to China is its gold reserve – as well as the gold reserve held for other countries like Germany. That alone puts the USA firmly behind a very obvious economic ‘8 ball’ should the dollar ever need to be backed with something more substantial than red, white and blue paper.

Posted by Charlesequine | Report as abusive

Is the author going to work on a production line like that LED bulb one pictured in the story?

Posted by ic555 | Report as abusive

Americans are smart. They are not stupid as described in this article.

Posted by Kailim | Report as abusive

“Beijing is engaged in a pattern of provocation bordering on recklessness. In late 2013, China unilaterally imposed an “air defense declaration zone” . Rubbish. Beijing instituted its small ADIZ years after Japan unilaterally imposed a MUCH larger ADIZ that included islands traditionally belonging to China.
This piece is constructed around omissions like that. It is special pleading or, if you wish, propaganda.

Posted by godfree | Report as abusive

Not America’s ocean. Not America’s problem.

Posted by Solidar | Report as abusive

I vote for the trolls here to get double pay from PRC govt, and continuing education to improve the quality of these postings (oh sorry forgot people can’t vote in China)

Posted by SaigonQ2 | Report as abusive

Natural resources such as oil and gas extracted from the china sea can only be beneficial, ….as long as China does not charge toll fees on ships passing, who cares. America has outposts in the pacific at Hawaii,a relatively recent acquisition, and in the Marshall islands to name just 2 places far from her borders.

Posted by wondering_too | Report as abusive

The proposed Trans-Pacific Partnership, at best, amounts to a doubling down on a strategy that has failed at balancing the trade deficit for the past 40 years. This asymmetrical trade with China benefits only the multi-national corporation who have systematically moved factories and jobs out of the United States for cheaper foreign labor.

This dislocation has resulted in the United States depending exclusively on China for myriad items that U.S. citizens need every day. This includes 100 percent of key electronics and chemical components, including the basic ingredients for some of the nation’s most important drugs and antibiotics.

Rather than waste more time on the Trans-Pacific Partnership international bankers scam, (1.) Speaker Boehner should resign immediately; and (2.) without giving away the farm (both literally and figuratively speaking) disingenuous Republicans in Congress must begin figuring how to deal with our nation’s asymmetrical dependence on China which is adversely affecting all U.S. small business, our continuing massive manufacturing loss and resulting unemployment, our national sovereignty, and our very freedoms as Americans. And, “auditing the Fed” would be a an excellent start as Rand Paul has repeatedly stated.

Posted by SameulAdams | Report as abusive