When talking about the South China Sea, US officials, especially those in the previous Obama administration, liked to emphasize the importance of the shipping route to global trade.
The figure often cited since late 2010 is that $5.3 trillion worth of goods each year transit through the South China Sea.
The waterway is clearly vital to world trade. The United Nations Conference on Trade and Development estimated that some 80 percent of global trade by volume and 70 percent by value is shipped by sea. Of that volume, 60 percent of maritime trade passes through Asia, with the South China Sea carrying an estimated third of global shipping.
Comments by US officials, scholars and news outlets have often suggested that China is most likely to disrupt global trade flow through the key sea route.
However, a report by the Center for Strategic and International Studies (CSIS) dated Aug 2 shows that this is highly unlikely, confirming the belief of many Chinese that China has a bigger stake in the peace and stability in the region.
Using its own calculations, the CSIS reports finds that the real figure for global trade through the South China Sea in 2016 was $3.37 trillion. Though it is 36 percent smaller than the original $5.3 trillion, it still accounts for 21 percent of global trade.
The report – How Much Trade Transits the South China Sea? – finds that over 64 percent of China’s maritime trade transited the South China Sea in 2016, while nearly 42 percent of Japan’s maritime trade passed through those sea lanes in the same year. The US is less reliant on the South China Sea, with just over 14 percent of its maritime trade passing through the region.
Based on those figures, the report says that China’s economic security is closely tied to the South China Sea. China’s reliance on the South China Sea leaves it vulnerable to maritime trade disruptions.
Given the significance of the South China Sea for Chinese trade, Beijing may be more inclined to take steps to preserve the free flow of trade than it is to disrupt it.
The CSIS report is probably its most balanced and objective report on the issue so far, given that its past reports on the issue have been almost all highly critical of China and regarded as biased by many Chinese, especially Washington-based Chinese journalists.
The report says that even under extreme hypothetical conditions where Chinese capabilities expanded to the point where it was capable of letting its own commerce pass while stopping that of other countries, such a move would be risky. Long-term interference with shipping traffic would increase insurance premiums on commercial vessels and force shippers to consider more expensive trade route alternatives.
Even during the height of tensions in the South China Sea a year ago, Chinese officials, including China’s ambassador to the US Cui Tiankai, cited the stability of insurance premiums to dismiss the hyped concern expressed by US officials over disruptions in global trade.
The report does not exclude an unlikely scenario. It notes that dire circumstances may compel China to take disruptive action, but this would come at a considerable financial cost to China, greatly degrade China’s standing among other countries, and could even precipitate an assertive response by outside powers.
Energy or commodity disruptions could have even more far-ranging economic consequences for the global marketplace. This is especially true for China – the world’s top crude oil importer, according to the report.
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