The Haiyang Dizhi 8, a survey vessel belonging to a Chinese government-run corporation, began surveying a large swath of seabed on 3 July northeast of Vanguard Bank, which falls within Vietnam’s exclusive economic zone. The ship has been escorted by other vessels, including from the China Coast Guard and maritime militia. At the same time, China Coast Guard ships have been harassing Vietnamese drilling operations to the south.

Chinese incursions into Vietnam’s EEZ are by no means a new phenomenon. The most serious recent incident occurred in 2014, when China deployed an oil rig into Vietnam’s EEZ, sparking a diplomatic crisis between the two neighbours. The current situation near Vanguard Bank, however, represents a more serious challenge on several levels.

First, the Haiyang Dizhi 8’s survey activities pose a legal challenge: they demonstrate that China is persistent in pursuing administrative control within its ‘nine-dash line’. This is the first time it has engaged in such a survey since the nine-dash line was declared illegal by an arbitral tribunal ruling in 2016. Beijing is openly disputing the legality of continental shelf rights guaranteed by UN Convention on the Law of the Sea. The area has been subject to natural resource exploitation by Vietnam for decades. But Beijing is now trying to create a dispute over areas that were effectively undisputed in the past.

China’s actions also pose a diplomatic challenge: Beijing is testing not only Vietnam, but also the United States and the international community. Will the international response be as muted as it was after the 2016 arbitral ruling? China is openly insulting the peaceful pursuit of dispute resolution through the ongoing code of conduct negotiations with ASEAN. The progress heralded by that process, which has resulted in a single negotiating draft, evidently exists only on paper. China’s actions cast a shadow on the hope that a code of conduct would have a real impact on managing either the disputes or China’s conduct.

Finally, Beijing’s actions represent a very real economic challenge. China’s continuous coercion targeting other claimants’ natural resource exploitation is meant to force them into joint exploration schemes with Beijing, even in undisputed waters.

There’s never a good time to face coercion, but this test by China comes at a moment when Hanoi is particularly busy, preparing not only for the upcoming ASEAN chairmanship and its 2020–2021 term on the UN Security Council, but also for its 13th Party Congress and accompanying potential leadership change in early 2021.

Beijing has scaled up its pressure in the South China Sea not only on Vietnam, but also towards Malaysia and the Philippines. It’s unreasonable to expect that the tactics Vietnam adopted in 2014 will be similarly effective today, especially given the fact that Beijing now pursues its activities with an awareness of their reputational costs, which China seems prepared to accept.

Any attempt at so-called megaphone diplomacy this time around will have to be more concerted and include the United States, which has already made its views known, as well as other supporters of the rule-based international order. But even so, diplomacy alone is unlikely to lead to a sustainable resolution of the standoff.

Vietnam has thus far avoided pursuing close military ties with other powers or legal measures against China because that would antagonise Beijing. Hanoi also wants to control anti-Chinese sentiment in Vietnam and prevent potential protests or unrest. In 2014, Vietnam witnessed a violent series of anti-Chinese protests that led to vandalism and mob activities around factories owned by Chinese, Taiwanese, Japanese, Korean and even Vietnamese investors. The incident damaged Vietnam’s reputation as a safe environment for investment, and the government may be worried about similar reactions to the current standoff.

Unlike in 2014, Beijing is concurrently exerting pressure on more than one Southeast Asian claimant. These incidents are a real test for the willingness of both ASEAN and the international community to defend nations’ sovereign and economic rights under the rules-based order.

Unless regional countries are willing to look beyond their individual national interests and speak out in support of other claimants, transgressions of the maritime rules-based order will become a new normal that will no longer generate strong reactions. Respect for international law, including the rights guaranteed by UNCLOS, must be supported and defended by all, including non-claimants. So far, only the United States has taken a public and explicit stance on China’s activities near Vanguard Bank.

ASEAN—despite the defence and foreign ministers’ meetings that have happened during this period—has avoided naming the issue in its joint statements, but did reportedly debate the issue during the gatherings. At the recent strategic dialogue between the US, Japan and Australia on the sidelines of the ASEAN meetings, Secretary of State Mike Pompeo and foreign ministers Taro Kono and Marise Payne collectively expressed concern about ‘credible reports of disruptive activities in relation to long-standing oil and gas projects in the South China Sea’.

The AUSMIN consultations in Sydney last weekend came up with a statement supporting the authority of UNCLOS, the validity of the 2016 arbitral tribunal ruling, and the importance of freedom of navigation. While expressing a ‘strong objection to coercive unilateral actions by any claimant state that could alter the status quo and increase tensions’, the statement again avoided naming any country or incidents at the source of the tension.

The lesson of the muted international reaction to the 2016 arbitral ruling is too evident to allow for another weak response. The current standoff serves as proof that Chinese coercion will continue and that the code of conduct process makes no difference in Beijing’s plans to dominate the South China Sea. It might be a crisis for Vietnam individually, but it could also serve as an opportunity for the international community—beyond the United States—to react appropriately to the violations of UNCLOS and infringement on a littoral state’s continental shelf. That includes Australia—one of the key defenders of the rules-based order and Vietnam’s strategic partner.

Lou Jiwei may not be a household name in the West, but the former Chinese finance minister is well known and highly respected among financiers and economic policymakers. Yet, earlier this month, China’s government announced Lou’s dismissal from his post as chairman of the country’s national social security fund. The move reflects a change in the Chinese leadership’s approach to governance that is likely to have profound implications for the country’s future.

The removal of Lou from his post represents a break from precedent: his three predecessors served 4.5 years, on average, and all retired after reaching age 69. Lou is 68 and served for only a little over two years. China’s leaders didn’t provide a reason for sacking him, but a likely explanation stands out. Lou has recently emerged as an outspoken critic of China’s ambitious industrial policy agenda, calling ‘Made in China 2025’ a waste of public money.

Made in China 2025 had already aroused suspicion among China’s Western trading partners. They view the program as an effort by China to use unfair means—namely, government support for strategic sectors—to displace the West as the world’s leader in advanced technologies. The scheme was one of the factors that precipitated US President Donald Trump’s trade war with China.

Since the trade war erupted, China’s leaders have deliberately toned down the hype surrounding Made in China 2025, suggesting that they recognise the high cost of moving forward with the program. In this context, Lou’s criticism is not particularly scandalous—unless, of course, China’s leaders are merely pretending to back off the policy until trade tensions ease.

But the implications of Lou’s dismissal extend beyond Made in China 2025. Lou is a hard-charging reformer with an illustrious record of accomplishments. His dismissal underscores the extent to which, under President Xi Jinping’s leadership, China’s government has become intolerant of even the slightest internal policy disagreements, even on the subject of economics, which used to be debated quite openly among the leadership. It is an approach that could well prove disastrous.

Since Xi came to power in 2012, decision-making processes at the top level of the Chinese Communist Party (CCP) have changed beyond recognition. Previously, collective leadership allowed dissenting views to be aired, and decisions were reached largely by consensus—a slow process that sometimes resulted in missed opportunities. But it was also an important risk-management mechanism. Openness to a variety of perspectives helped ensure that impractical or dangerous ideas were rejected and the CCP made no catastrophic policy mistakes under Xi’s two predecessors, Jiang Zemin and Hu Jintao.

Xi, however, has replaced collective decision-making with centralised leadership. The space for legitimate differences of opinion has been crowded out by the expectation of political loyalty and conformity. In fact, the CCP has effectively criminalised voicing opinions that are at odds with the top leadership’s stance. That offence—called wangyi zhongyang, or ‘recklessly speaking about the party centre’—probably played a larger role than actual wrongdoing in Xi’s crackdown on official corruption in recent years.

The resulting lack of constructive opposition means that excessively risky or inadequately considered ideas can become national policies in Xi’s China. And so they have: in the past five years, China has made several major policy mistakes, owing to inadequate internal debate.

One such mistake was the hasty decision in the summer of 2015 to use public funds to support equity prices when markets plunged. That policy failed to stabilise prices, wasted trillions of renminbi and weakened the credibility of China’s new leaders.

Another major policy mistake was China’s construction of artificial islands in the South China Sea and subsequent installation of military facilities on them. This might have seemed like a smart strategic move to some in Xi’s government. But, by giving the impression that China is intent on dominating East Asia through coercion, it was a major factor contributing to the rapid deterioration of China’s relations with the United States.

Similarly, beyond being economically dubious, Xi’s massive Belt and Road Initiative—featuring more than $1 trillion in planned infrastructure investment in Eurasia and beyond—stoked Western suspicions about China’s geopolitical agenda. This mistake has ended up hurting relations not just with the US, but also with key allies, which view China’s involvement in developing countries—and, thus, their own relations with China—with deepening unease.

If the CCP continues to adhere to centralised decision-making, more—and more calamitous—mistakes are likely. China’s leaders could, for example, decide to attack Taiwan, risking a catastrophic war with the US. In such a situation, one can only hope that, somewhere in the government, there is still a bold figure like Lou willing to stand up to express dissent.

It has been just five years since China initiated its major land reclamation in the South China Sea, and the country has already shifted the territorial status quo in its favor—without facing any international pushback. The anniversary of the start of its island building underscores the transformed geopolitics in a corridor central to the international maritime order.

In December 2013, the Chinese government pressed the massive Tianjing dredger into service at Johnson South Reef in the Spratly archipelago, far from the Chinese mainland. The Spratlys are to the south of the Paracel Islands, which China seized in 1974, capitalising on American forces’ departure from South Vietnam. In 1988, the reef was the scene of a Chinese attack that killed 72 Vietnamese sailors and sunk two of their ships.

The dredger’s job is to fragment sediment on the seabed and deposit it on a reef until a low-lying manmade island emerges. The Tianjing—boasting its own propulsion system and a capacity to extract sediment at a rate of 4,530 cubic metres per hour—did its job very quickly, creating 11 hectares of new land, including a harbor, in less than four months. All the while, a Chinese warship stood guard.

Since then, China has built six more artificial islands in the South China Sea and steadily expanded its military assets in this highly strategic area, through which one-third of global maritime trade passes. It has constructed port facilities, military buildings, radar and sensor installations, hardened shelters for missiles, vast logistical warehouses for fuel, water and ammunition, and even airstrips and aircraft hangars on the manmade islands. Reinforcing its position further, China has strong-armed its neighbours into suspending the exploitation of natural resources within their own exclusive economic zones.

Consequently, China has turned its contrived historical claims to the South China Sea into reality and gained strategic depth, despite a 2016 ruling by an international arbitral tribunal invalidating those claims. China’s leaders seem intent on proving the old adage that possession is nine-tenths of the law. And the world, it seems, is letting them get away with it.

The Chinese did not leave that outcome to chance. Before they began building their islands in the South China Sea, they spent several months testing possible US reactions through symbolic moves. First, in June 2012, China seized the disputed Scarborough Shoal from the Philippines, without eliciting a tangible international response.

Almost immediately, the China State Shipbuilding Industry Corporation—which is currently building the country’s third aircraft carrier—published on its website draft blueprints for manmade islands atop reefs, including drawings of structures that have come to define China’s Spratly construction program. But the sketches received little international notice and were soon removed from the website, though they later circulated on some Chinese news websites.

In September 2013, China launched its next test: it sent the Tianjing dredger to Cuarteron Reef, where it stayed for three weeks without initiating any land reclamation. Commercially available satellite images later showed the dredger at another reef, Fiery Cross, again doing little. The United States, under President Barack Obama, did not push back, emboldening China to start its first island-building project, at Johnson South Reef.

As China has continued to build and militarise islands, it has taken a calibrated approach, gradually ramping up its activities, while keeping an eye on the US reaction. The final two years of the Obama presidency were marked by frenzied construction.

All of this has taken a serious toll on the region’s marine life. The coral reefs China has destroyed to use as the foundation for its islands provided food and shelter for many marine species, as well as supplying larvae for Asia’s all-important fisheries. Add to that chemically laced runoff from the new artificial islands, and China’s activities are devastating the South China Sea ecosystems.

Obama’s last defence secretary, Ash Carter, has criticised his former boss’s soft approach towards China. In a recent essay, Carter wrote that Obama, ‘misled’ by his own analysis, viewed as suspect ‘recommendations from me and others to more aggressively challenge China’s excessive maritime claims and other counterproductive behaviors’. For a while, Carter says, Obama even bought into China’s vision of a G2-style arrangement with the US.

Now, President Donald Trump’s administration is grappling with the consequences of Obama’s approach. Trump wants to implement a vision of a ‘free and open Indo-Pacific’. The free and open Indo-Pacific strategy is the successor to Obama’s unhinged ‘pivot’ to Asia.

But, from its newly built perches in the South China Sea, China is better positioned not only to sustain air and sea patrols in the region, but also to advance its strategy of projecting power across the Indian Ocean and the Western Pacific. How can there be any hope of a free and open Indo-Pacific when the critical corridor linking the Indian and Pacific oceans is increasingly dominated by the world’s largest autocracy?

China’s territorial grab, a triumph of brute power over rules, exposes the vulnerability of the current liberal world order. The geopolitical and environmental toll is likely to rise, imposing major costs on the region’s states and reshaping international maritime relations.

For very good reasons, maritime security concerns, particularly those centred on the South China Sea, have featured prominently in ASEAN member states’ individual and collective agendas over the last decade.

The 10 ASEAN nations face a complex array of maritime threats. Issues such as China’s aggressive maritime strategy, piracy, terrorism, transnational organised crime and illegal, unreported and unregulated fishing are consistently challenging their sovereignty, the rule of law and regional stability.

Today ASPI’s border security program released its latest special report, Mice that roar: patrol and coastal combatants in ASEAN, which explores the diverse approaches to maritime sovereignty in the region and the implications for Australian policymakers.

Over the past five years, there’s been an increase in coastguard and maritime border response capabilities across much of ASEAN. Admittedly, the growth has been uneven. Although in many cases the number of surface vessels has increased, there are serious ongoing concerns about most states’ capacities to deploy and maintain those vessels, and to use intelligence and surveillance effectively in coordinating them. There are opportunities to do more.

ASEAN states have focused their new capabilities mainly on enhancing physical presence patrols and response in their exclusive economic zones. In a general sense, they have an improving capability base from which to draw for near-shore maritime patrolling and response.

The emergence of greater regional cooperation, especially for hotspots, through mechanisms such as the trilateral air patrol between Malaysia, Indonesia and the Philippines, has strong potential to further enhance air and maritime security surveillance in the region.

It’s reasonable for external observers to ask whether the ASEAN trend of transferring maritime security from military to civilian jurisdiction in the form of coastguards strengthens or weakens sovereignty claims. Of the 45 major incidents in the South China Sea between 2010 and 2016, 71% involved at least one China Coast Guard ship or other Chinese maritime law enforcement vessel.

Southeast Asian leaders may well be torn by the lessons learned so far from the Chinese government’s actions in the South China Sea. On the one hand, the focus of exercises in maintaining sovereignty are efforts to constrain Chinese military construction on numerous islets and reefs in parts of the South China Sea. On the other hand, the assertion of sovereign authority will be tempered by a fear of the Chinese dragon’s wrath and a preference for not antagonising their neighbours.

In this context, the transfer of jurisdictional responsibility away from the military may allow ASEAN states to maintain sovereignty through a law-and-order focus while signalling an intent not to escalate to conflict. The risk is that it might indicate to an aggressor the very low likelihood that maritime security incursions will result in a military response, encouraging even more aggressive behaviour.

The report argues that coastguards have become important strategic cushions between navies in ASEAN. Coastguard vessels are less threatening, in terms of their potential use of force, to the captains and crews of other nations’ vessels during unplanned encounters at sea.

In practice, a coastguard ship escorting a vessel from its sovereign waters is seen as proportionate: it has less potential to inflame the situation than a naval warfare vessel performing that role. It isn’t all plain sailing for this model. Emboldening fishing fleets, coastguards or militias operating in contested jurisdictions may well be a negative for the maritime security of ASEAN nations. An increasing number of encounters are created by ever more crowded maritime border zones, and the associated law of the sea is complex.

The report highlights an opportunity for Australia to cooperate and collaborate with partners across the region on joint surveillance, maritime domain awareness, and maritime patrols. However, those efforts should be synchronised with the capacity-development programs already being undertaken by India, Japan and the US.

Countering transnational organised crime (including piracy; illegal, unreported and unregulated fishing; and other crimes at sea) remains an area open for continued inter-coastguard cooperation. Canberra’s strategic relationship with Washington ensures that Chinese leaders pay close attention to Australia’s diplomatic and military activities in ASEAN.

The promotion of greater regional coastguard cooperation won’t deeply offend Chinese government sensitivities. It will attract Chinese government attention because it is against the Chinese state’s preferred bilateral engagement model, and because it may be effective in creating regional cohesion in dealing with maritime security issues. This approach provides an additional policy lever, short of the deployment of naval warfare vessels. These efforts will send a clear message to Beijing that the region is taking measures to protect the sovereignty of its waters.

Australia’s shipbuilding and surveillance industries could well benefit from new markets resulting from regional developments in coastguards and interest in maritime domain awareness. However, ad hoc capacity development will make the nature and scope of those opportunities difficult to predict.

Sheryn Lee’s June 2015 analysis of Asia–Pacific naval competition characterised the region as ‘crowded waters’, which rings especially true for ASEAN. Unsurprisingly, the increased presence of coastguards is going to make the management of Southeast Asian maritime zones more arduous. The rising number of military and non-military actors in this environment will also create complex command and control relationships. This will drive a need for non-military coastguards and naval militias to have very high standards of training and clear command and control links to senior government decision-makers if they’re not to become part of the problem.

In coming years, it seems a very real possibility that Australia’s border command vessels will face increasingly aggressive encounters with illegal fishing fleets operating within Australia’s exclusive economic zone.

While such encounters are unlikely to be confrontational in a military sense, they’re likely to be politically volatile, with an attendant risk of escalation. And inter-naval-militia or inter-coastguard conflict can quickly result in the deployment of military forces. This again emphasises the importance of coastguard training and command and control.

In a highly provocative move, China has deployed anti‑ship cruise missiles (ASCMs), as well as surface-to-air missile (SAM) systems, to three disputed territories—Mischief Reef, Fiery Cross Reef and Subi Reef—in the South China Sea.

The deployment extends China’s military capability within the South China Sea and can be seen as another challenge to the findings of the Permanent Court of Arbitration. The Chinese actions also make a mockery of Xi Jinping’s promises not to militarise the South China Sea, and reinforce doubts about Chinese declarations that it doesn’t seek to become a hegemonic power.

The deployed ASCM system is the YJ‑12B, one of China’s most advanced anti-ship missile systems. With a 545‑kilometre range, it flies at Mach 3 and can manoeuvre to evade anti‑ship missile defence systems. Its range and speed combination makes it very difficult to intercept and deadly to modern naval surface combatants. It’s this type of ASCM that has driven US development of cooperative engagement capability (CEC), alongside allies including Australia.

CEC was most recently tested on HMAS Hobart and NuShip Brisbane. CEC combines data from sensors on several vessels to create a common operating picture that allows Navy surface combatants to more effectively counter such high-speed, long-range missiles. It also forms an integral part of the broader US Navy concept of Navy Integrated Fire Control—Counter Air (NIFC-CA), with Australia emulating this concept by integrating the E‑7 Wedgetail and the AIR 6500 Integrated Air and Missile Defence into the mix.

China’s deployment of such missiles, together with its long-range HQ‑9B SAMs, to South China Sea bases enhances its ability to defend these bases. The HQ‑9B is considered roughly equivalent to the Russian SA‑20 SAM, and is a highly effective air defence system, including against cruise missiles.

Together, these systems extend China’s anti‑access and area denial bubble deep into the South China Sea, giving China overlapping coverage of the Spratly Islands with the YJ‑12B ASCMs, and broad coverage over the Spratlys with its long-range SAMs.

The latest missile deployments don’t mark the end of China’s militarisation of the South China Sea. One possible future development could include steps to establish military facilities on the disputed Scarborough Shoal. China’s coast guard already controls the seas around the shoal, and China has asserted the right to establish an ‘environmental monitoring station’ on it.

Any future militarisation of the shoal, similar to what has occurred on Mischief, Subi and Fiery Cross reefs, would increase China’s ability to isolate Taiwan with a distant blockade without placing its naval surface combatants at risk close to Taiwanese territory. It would also place Chinese military forces a mere 350 kilometres from Manila.

For the moment, China appears in no hurry to extend its reach to the Philippines-owned Scarborough Shoal. President Rodrigo Duterte is playing a useful role for Beijing by accepting Chinese control of the fishing grounds around the shoal and arguing that China’s missile deployments ‘protect the Philippines’.

Duterte seems ready to accept Chinese claims in return for Chinese economic investment. However, Duterte’s term of office is up in 2022, and China could act more aggressively if his successor is not so compliant.

Secondly, it’s likely that China will deploy air combat capabilities onto established bases. China has already begun deployments of H‑6K bombers into the Paracels. Flying such aircraft from bases in the Spratlys would bring northern Australia into missile range. If accompanied by deployment of fighters into these bases, China could enforce any declaration of an air defence identification zone (ADIZ) over part or all of the South China Sea, and ensure local air superiority over the entirety of the sea.

At the strategic level, China’s creeping militarisation of the South China Sea gives it greater ability to control this vital waterway, potentially transforming it into what Richard Bitzinger refers to as a strategic strait that it would seek to control. This is occurring as Chinese academics are now promoting the idea of replacing the nine-dash line with a continuous boundary as part of a new ‘Four Sha’ doctrine.

That doctrine is changing how China views territorial disputes, moving from treating disputed islands as individual claims to regarding them as an integrated archipelagic body, with continuous baselines and their own exclusive economic zones. That would represent a new ambit claim that further contradicts the findings of the Permanent Court of Arbitration. A continuous boundary would expand China’s territorial claims effectively over the entirety of the South China Sea.

In a military context, the most recent missile deployments make it riskier for the US Navy to conduct freedom of navigation operations (FONOPs). Australia doesn’t do FONOPs, but does exercise its freedom of navigation rights via Operation Gateway, both in the air with RAAF P‑8 Poseidon maritime patrol aircraft and on the high seas with naval deployments.

China’s missile deployments increase the potential that any future incident—whether it be with the US or its allies, including Australia—could turn into a serious military clash. China specialist Andrew Erickson highlighted these concerns in Congressional testimony in 2015:

China is poised to ‘outstick’ the US Navy by 2020 by deploying greater quantities of missiles with greater ranges than those of the US ship‑based systems able to defend against them.

Even with the deployment of these missiles, there’s no suggestion that the US would cease exercising its right under international law to maintain freedom of navigation of the seas, and of the airspace above it. Yet China’s forward deployment of missile forces into the Spratly Islands does make such operations riskier, and increases the chance of escalation and tension.

In part 2 of this post, I’ll consider the likely US and allied military responses to China’ actions, and how Chinese control of the South China Sea directly affects Australia’s security.