China Tells America To Stay Away From South China Sea

China has told America to stay away from its “own” South China Sea again.

This time around, the message came from Hainan-based National Institute of South China Sea Studies.

The Beijing-backed think tank reports that the American navy and air forces carried out more than 700 surveillance patrols in the South China Sea region during 2015. Officials at the institute warned that Beijing is prepared to set up an Air Defense Identification Zone in the South China Sea if Washington continues its military presence in the region.

Tensions between Beijing and Washington over the South China Sea have been adding to investor anxiety over the fate of Asian markets following the sharp rise in US long term interest rates.

Fund	1-Month Performance	3-Month Performance
ishares MSCI China (NYSE:FXI)	-1.33%	+0.43%
iShares MSCI Philippines (NYSE:EPHE)	-9.06	-16.22
iShares MSCI Emerging Markets (NYSE:EEM)	-5.75	-4.11
Market Vectors Vietnam ETF (NYSE:VNM)	-6.67	-11.70

Disputes in the South China Sea started as a regional tug of war between China and several neighbors, but they quickly flared into a showdown of economic and military muscle between Beijing and Washington, with each side eager to write its own navigation rules for the world’s biggest trade sea route.

Two years ago, Beijing raised tensions with the construction of artificial islands in the sea. Washington countered in two ways – by escalating its naval presence around those islands, making the statement that those are international waters; and by advancing its missile capabilities in South Korea.

Then came an international arbitration ruling last July, which found that China has no historic title over the waters of the South China Sea.

That was a big victory for both the US and Philippines, its close ally, which had filed the arbitration case.

Nonetheless, Philippines’ President Rodrigo Duterte decided to side with China on the dispute, and seek a “divorce” from the US – thinking, apparently, that his country is better off appeasing rather than confronting China.

That was certainly a big diplomatic victory for Beijing. And it has ‘upped the game’ for China, increasing the chances of an “accident” that could destabilize the world’s fastest growing economic region.

Investors should keep a wary eye.

(Source : forbes.com)

Newer Post Older Post