Container ship at the port of Singapore (2012).

The South China Sea in the world economy

Mention of the South China Sea finds its way into the news quite regularly, thanks to overlapping national borders and its importance as a trade route. A staggering one third of the world’s shipping is estimated to pass through this sea.

In the past, the US has had military primacy in these waters though this is being challenged by the increased presence of Chinese vessels, bases, aircraft, as well as the growing effectiveness of their missiles. Apart from resources that are there available, the waterway’s importance rests upon its use as one of the world’s most important and most used shipping routes, carrying all manner of goods including manufactured products, resources required for making finished products, and foods.

This maritime body is within the Pacific Ocean, and is bounded by the Malacca Strait and the Strait of Taiwan. To its north sits China. The centre and west are bordered by Vietnam, Thailand, Cambodia, Malaysia, and Singapore. The south holds Indonesia, another section of Malaysia, and Brunei. While the east and northeast are home to the Philippines and Taiwan (the Republic of China).

Map of the South China Sea.
Image: Public Domain license.

The US think tank, Center for Strategic and International Studies has completed an interesting study, and provided some updated economic data. Here are some highlights:

  • 60% of China’s trade (by value) is transported by sea;
  • Over 64% of China’s maritime shipping passes through that waterway (2016);
  • Almost 42% of Japan’s maritime shipping transits via the South China Sea;
  • 14% of the US maritime trade goes through that sea;
  • US$3.3 trillion in exports transited those waters in 2016;
  • Of the total export value, 27.39% belonged to China (including Hong Kong), 6.3% South Korea (the number two spot), 5.97% Singapore, 3.56% Japan, 3.2% Germany.
The Port of Singapore (2007).
The Port of Singapore (2007). / Image: CC BY-SA 3.0 license.

Four out of ten of the world’s largest container shipping ports lie within the South China Sea (by volume, 2016). These are:

  1. Singapore (30.90 million ‘twenty-foot equivalent units or TEU of volume);
  2. Shenzhen, China (23.97 million TEU);
  3. Hong Kong, S.A.R., China (19.81 million TEU); and
  4. Guangzhou Harbor, China (18.85 million TEU).

A further two ports, holding the world’s number one and number four spots for yearly volume sit just outside of the South China Sea, to its north. These are both Chinese: the port of Shanghai (37.13 million TEU), and Ningbo-Zhoushan (21.60 million TEU).

One of the world’s most used waterways.
Image: Public Domain license.

There are multiple points of entry, or choke points into this body of water. They include the Malacca Strait, Sunda Strait, Lombok Strait, and the Strait of Taiwan. The first three of these are to the west and south. The last is in the northeast. The Strait of Malacca is the most important by far. It’s the most used because it’s the fastest and shortest route between the Pacific and Indian Oceans.

The Malacca Strait’s importance is highlighted by the fact that 16% of the world’s volume of crude oil and petroleum products pass through it. It’s not far behind the world’s top choke point for these goods, the Strait of Hormuz (18.5%), that vital seaborne route to the oil rich Persian Gulf countries (source: US Energy Information Agency, World Oil Transit Chokepoints. 2017).

Any sort of sustained military conflict in or around that sea would risk significant harm to the Chinese economy. It would disrupt 64% of China’s seaborne shipping. Therefore, that country has many reasons for maintaining open passage via that route and it would be hard-pressed to militarily restrict access to other country’s without putting its own shipping at risk. Perhaps we may envision short disruptions that would yield large results, but even such a move could lead to great trouble for that country, since it would likely turn other major states against it and further strengthen the US military position there as the guarantor of safe passage. The US, on the other hand, only has 14% of its maritime trade pass via the South China Sea.

The region’s freight options are, however, being impacted by the introduction of new land and sea based customs regimes, railways, and energy pipelines constructed under the broad umbrella of China’s Belt and Road Initiative. Though some of these new routes traverse the land, they also attach to ports outside of the South China Sea and away from the sensitive Malacca Strait, providing what are yet relatively small alternatives. These alternative routes, however, would often require East Asian countries to use Chinese hubs for the transit of goods. The maritime routes, meanwhile, are often dependent on US, Chinese, and Western strong points and financial instruments.

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