LaowaiCareer
China international trade
Business and Innovation
0

China International Trade-Importance of the South China Sea

China has used international trade to bring in new technologies and equipment as well as to meet scarcities in the domestic economy since it sought to modernize its economy. Exports have stepped in as a way of producing foreign earnings to pay for the imports. To strike and maintain an even trade balance, the country has to pay for the imports rather than purchasing them on credit. Being the fastest growing economy in the world and with 1.2 billion people, China is arguably the market of all markets’ and it’s the enormous potential that has attracted investments from all over the world at a magnitude that places it second to the US as the largest foreign capital recipient.

China Export

China’s exports total up to $2.21trillion (2013), and the primary commodities include mineral fuels, footwear, machinery and equipment, textile and clothing, sporting good and toys. The US buys most of the China’s exports at 21%, followed by Hong Kong at 18% and Japan at 17%. South Korea, German, the United Kingdom, Taiwan, and Singapore are China’s other main export partners. Agricultural goods and commodities account for about one-third of the total assets while manufactured goods are about a half plus mineral products such as coal and oil. Industrial supplies including chemicals and crude steel account for 50% of the exports while foodstuffs account for around 6%, and the remainder is made up of costly capital goods such as transportation equipment, machinery, and precision equipment.

China Import

China’s imports total up to $2trillion (2013) with its primary commodities in importation being mechanical and electrical products, plastics, steel products, Petroleum Crude Oil and computer parts. Japan is the main source of China’s imports at 20% followed by the US at 12%, Taiwan 12%, and South Korea at 12%. Other notable trading partners include Hong Kong, Singapore, Russia, and German. China’s import commodities are essential materials to the modernization of China’s economy and opening up export-oriented industries.

The significance of South China Sea in International trade

China international trade

The South Sea China is located at the Pacific Ocean’s western edge to the southeast of Asia. It covers an area of around 1.4 million square miles and has a collection of atolls, reefs, and islands including Scarborough Shoal, Spratly Islands and Parcel islands.

Article continues after jobs recommendation

It is surrounded by some Southeastern Asian countries including the Philippines, China, Vietnam, Taiwan, Vietnam, Indonesia and Malaysia and all of them have at least made claims to the territory. China issued a map in 1947 to demarcate the country’s territorial claims which were quite vast that it covered almost the whole sea. To disagree with China, other Asian countries also launched their claims with Malaysia, The Philippines, and Vietnam claiming certain islets in the Spratly Islands. Vietnam claimed that it had maps which showed it’s sovereignty over the Spratly and Paracel Islands for hundreds of years while Taiwan believes just like China; it has rights over the sea.

Not All Trade Routes are Created Equal

As one of the most important trade routes in the world, the South China Sea has at least $5 trillion of commercial goods passing through it each and every year. It is such a critical commercial gateway for a significant portion of the world’s merchant shipping thus an important strategic and economic sub-region of the indo-Pacific. The recent economic surge in the Asian countries is majorly contributed by a large portion of the world’s commercial merchant shipping passing through these waters.

The Islands sit on the most lucrative fishing area in the South China and also the South China Sea is thought to have significant amounts of gas and oil reserves with the US Department of Energy estimating that there are about 190 trillion cubic feet of natural gas and11 billion barrels of oil in probable and proven reserves.

The islands are also important for strategic and political reasons. The countries claiming this area are clamoring for the ownership of the surrounding resources. The UN Convention on the Law of the Sea states that the countries do have special access to marine resources including oil, gas and fisheries only in the exclusive economic zones which makes up 200n nautical miles from the respective countries shores. Malaysia, Vietnam, the Philippines and China have ratified the treaty. China made an assertion of having the right to monitor all the troops and foreign Navy activities within its exclusive economic zones, but the US vehemently rejects China’s interpretation claiming that any country has the freedom to navigate the airspace and seas around a country’s region.

China and other countries took steps in the area

To expand their claims to the territory, a good number of countries have artificially expanded or constructed islands into the sea and also to expand their exclusive economic zones. For instance, the Philippines, China, Malaysia, and Taiwan have constructed airstrips capable of holding surveillance, fighter jets or cargo into the sea. Since 2014, China’s activities in the sea have been the most controversial and expansive, outpacing all the other nations by building/ expanding around seven artificial islands in the sea. Beijing has control over Mischief Reef, the largest piece of reclaimed land in the South China Sea, which is about 60 million square feet of China building a third runway last September on Mischief Reef. China has also installed on Paracel Island surface-to-air-missiles and also high-frequency radar systems on the Spratly islands.

Although the US bears no claims on the island, it has political and economic interests in the region since around 1.2 trillion of the US-traded good pass through the sea yearly. The Philippines also signed a mutual defense treaty hence the US has the commitment to help provide the defense to the nation. Historically, the region has had disputes over the South China Sea, and the US has greatly criticized the way China deals with territorial disputes reminding them of the region’s political stability.

The South China Sea is the second busiest international lane in the world having more than half of the world’s supertanker traffic and 30% of all the global maritime trade pass through the waters. Compared to Suez Canal traffic, the tanker traffic through Strait of Malacca through the South China Sea is more than three times greater. All shipping going through Sunda and Malacca Straits must virtually pass near the Spratly. Due to the enormous shipping volumes in this sea, it experiences numerous merchant shipping attacks, and it is the most piracy-prone region in the world. Tonnage shipping in the South China Sea is highly dominated by raw materials to the East Asian countries. Liquid bulk such as Liquefied natural gas and crude oil dominates the Tonnage through the Spratly Islands and Malacca while dry bulk including iron ore and coal comes in second. The shipments of liquefied Natural Gas(LNG) through the sea make up to two-thirds of the world’s overall Liquefied Natural Gas trade. Almost half of the volume of the tonnage passing through Strait of Malacca is the Persian Gulf crude oil. In the next two years, this would increase due to the rising oil demand in the Asian countries.

The Spratly’s Have Commodities that Could be Exported

It’s also important to note that the Spratly’s are also gas and oil-rich which is located at such a strategic position with some of the largest energy-consuming countries in the world such as India, Japan, and China nearby. This sea is quite significant since more than half of the world’s merchant fleet by tonnage sails through this region yearly.

China holds the matters of international trade close to the heart, and since the South China Sea is one of the most important trade routes in the world, it does almost the impossible to keep it. Most often than not the steps China takes comes out as greedy, obsessive and controversial hence need for a more operational and effective way to settle the regional disputes regarding the sea. The US has been instrumental in mitigating uncertainties and on improving the communication and coordination among the involved parties. The US- China international trade is greatly dependent on stability in the area hence should be handled with a great sense of importance.

Related Posts
chinese crowd
Friend or Foe?
financial support
China’s Financial Support Landscape: Slow Growth or Recession?
managing others
Managing Others: The Importance of Human Capital

Leave Your Comment

Your Comment*

Your Name*

This site uses Akismet to reduce spam. Learn how your comment data is processed.