Rising tensions in the South China Sea cause concern over key global trade route

Concerns are growing over potential disruption to global trade as tensions rise in the South China Sea (SCS) — a crucial trade bottleneck for China, Japan and India, CNBC reported on Friday. The situation in the SCS “remains tense and unchanged,” Filipino President Ferdinand Marcos said in a statement last week. The South China Sea is the “most valuable shipping land in the world in terms of the value of trade that transit through it,” chief global geo-macro strategist at BCA Research Marko Papic told CNBC.

Background: The South China sea, located in the western Pacific Ocean, falls between China, Taiwan, the Philippines, Vietnam, Indonesia, Thailand, Malaysia, and Cambodia. Most of these nations have disputed claims to territory in the waters, yet China in particular, claims most of the area and uses “gray zone” tactics, CNBC writes, which are coercive actions that go beyond normal diplomatic activities but fall short of an armed conflict.

What’s at stake? The CSIS China Power Project estimates that USD 3.4 tn in trade passed through the South China Sea back in 2016, constituting 21% of global trade, CNBC reports.

Tensions have been high: China and the Philippines exchanged accusations of intentionally ramming coast guard vessels in the disputed waters of the South China Sea last month. The Philippines claimed that a China Coast Guard vessel 5205 “directly and intentionally rammed the Philippine vessel” without provocation, while Beijing said that a Philippine ship “deliberately rammed” a Chinese vessel. The collision — which happened near the Sabina Shoal in South China Sea — was the fifth in a month amid a long-running escalating rivalry between both parties.