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You are here: News The South China Sea Dispute: An Unbalanced Bargaining Game

The South China Sea Dispute: An Unbalanced Bargaining Game

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Du Tran
09 Feb 2009

The territorial dispute over the South China Sea, also sometimes referred to as the Spratly Islands dispute, was in the late 1980s and during the 1990s often described as a major regional security flashpoint. Although the core issues remain unresolved, economic integration and globalisation has since the beginning of this decade, temporarily deflected relationships between South China Sea claimants away from direct confrontation.


While the conflict appears to be in the de-escalation phase, almost all claimants have been coming up with and relying on non-military means to enforce claims and to consolidate their stance. Some organise field trips for tourists to the disputed areas and atolls. Others send scientists for wildlife research while yet other powers with more coercive capital construct permanent structures on the disputed reefs and rocks.

From a game-theory perspective, the dispute in South China Sea is in its most naked form, a bargaining game. Each country is a player who possesses certain strategies and who has to decide which strategy to utilise against a portfolio of strategies likely to be played by others.

Like any other bargaining game, the one who has the most bargaining power will leave the game with the biggest reward. Those who have no bargaining power will leave empty-handed. For that to happen, the most powerful player will contest aggressively and use his superior strength to intimidate weaker foes for various concessions.

And that is exactly what is happening in the dispute over South China Sea. China, the most powerful player in this dispute, has been exercising a relatively aggressive policy towards the other claimants.

Since 1947, China released a now famous map featuring nine undefined dotted lines and claims sovereignty over all territory within (which accounts for more than seventy five percent of the South China Sea area). In 1992, the National People’s Congress promulgated these baselines, which, by the words of the U.S. Institute of Peace, defy conventional international legal interpretations. To enforce its claims, China has resorted in military confrontation (against Vietnam in 1974 and 1988, and against Philippines in 1996 and 1997).

Even during the de-escalation phase, China has been very active in enforcing its claims via non-military means. Specifically, China periodically employed deadly force against civilian fishermen from neighbouring countries when they travelled through the disputed waters. China also pressured international oil companies such as BP and Exxon Mobil to back out from joint-venture exploration projects with Vietnam. In addition, China has been building numerous permanent structures on disputed atolls and rocks for “scientific and humanitarian” purposes. Underwriting all these measures is a sophisticated strategy China plays to divide the South East Asian claimants through economic and diplomatic means in addition to a worldwide propaganda campaign to publicise China’s “unequivocal stance”.

China’s recent successes in the South China Sea are tangible. In late 2007, China announced a formation of a new “city” in the dispute area. This is in spite of the fact that the area referred to barely has a population to speak of and consists mostly of water and desolate islands. In a second incident on Nov 24, 2008, China announced the country would invest more than $29 billion into oil exploration projects around the disputed waters. Both these announcements met with surprisingly little opposition from the other claimants. International media largely neglected the first one. The second one made headline news around the globe, except that most reports forgot to mention the territorial dispute in the South China Sea.

As in a typical bargaining game, China’s coercive yet understated diplomatic posturing and success is understandable. What is harder to comprehend is the lack of action and perceived impotence of China’s rivals. If Vietnam, Philippines, Malaysia and Brunei confront China separately, their failure is certain because they are severely disadvantaged, both economically and militarily.

If these countries could form a coalition and confront China as one, the coalition may be strong enough to withstand Chinese designs. After all, history has proved that China will concede when it faces an adversary with an equally strong suite. In a recent territorial dispute over East China Sea, China and Japan finally achieved an agreement on June 18, 2008, to agree on mutual exploration and exploitation. According to this agreement, all the joint-venture projects are located on the border between the two countries, as originally asserted by Japan, not China.  In other words, the borderline previously drawn by China was of no value. Japan’s territorial assertions regarding the East China Sea were upheld.

Nonetheless, forming a coalition over the South China Sea dispute will not be easy for Vietnam, Philippines, Malaysia and Brunei. For a coalition mechanism to work, these countries must first learn to trust each other. In 2003 and 2004, for example, China easily persuaded the Philippines to sign a bilateral agreement that tossed Vietnamese concerns aside. The lack of trust will make all four countries vulnerable to Chinese manipulation.

These ASEAN countries should put aside conflicting claims over the islands, reefs and rocks in the Spratlys and work collaboratively on a fair division of the disputed area. This envisaged coalition must also be more proactive in disseminating information about their stance and the legality of their claims on the international stage. Because without worldwide support, even a durable coalition of some ASEAN members may not be strong enough to counter China over the South China Sea dispute.