The Sino-Japanese Antagonism in East China Sea: Evaluating Emerging Risks
In the past decade the competition between China and Japan has sharply risen to a new level of confrontation. The unparalleled advancement of Beijing in the economic and military sectors and its updated revisionist behavior can easily provoke further instability and insecurity to investors and, of course, its neighbors. Specifically in the East China Sea, the maritime dispute over the Senkaku/Diaoyu islands carries great significance with larger potential implications in the region and abroad.
Overview of the dispute
The ongoing dispute over the Senkaku/Diaoyu islands, an island chain southwest of Tokyo including 5 uninhabited islands and 3 barren rocks, is an issue of interest for three main actors: the People’s Republic of China (PRC), the Republic of China (Taiwan) and Japan (Cornelis et al, 2015). The key confrontation, and thus the focus of this analysis, has been between China and Japan concerning issues of sovereignty and overlapping claims over the area. From a historical perspective, Japan has been claiming jurisdiction over the area since the end of the Sino-Japanese War and the Treaty of Shimonoseki in 1895. After a short period of Japanese dominance in the early 20th century, the islands were occupied by the US during the Second World War. Their occupation held until 1972 when they were handed over to Japan under the Okinawa Reversion Treaty (Cornelis et al., 2015). It was that period of time when China begun to officially claim sovereignty over the island chain, following reports of potential natural resources fields (gas/oil) at the seabed around it.
The area under question is important enough in economic and geostrategic terms. First, both China and Japan are heavily relied on energy imports to meet their domestic needs. For instance, China has become over the years the second largest oil consumer importing around 54% of its oil, while Japan is covering its demands by LNG imports at a rate of 95% (Cornelis et al., 2015). Second, the location of the Senkaku/Diaoyu has its geostrategic importance. By controlling them, China can better monitor the activities of its adversaries, namely Japan and the US, and add them to its “first-island chain” security periphery. For similar reasons, Japan can better respond and monitor China’s assertiveness and protect its vital Sea Lanes of Communications (SLOCs).
The situation today
In the last couple of years the Chinese aggression has been advanced. According to the official data provided by the Japanese Coast Guard, the number of Chinese vessels violating the territorial waters of the islands (up to 12 nautical miles of the baseline/shore of the island) or being spotted in their contiguous zone (the maritime area after the territorial waters for another 12 miles-in total 24 from the baseline) has increased significantly in 2019 and 2020. In total, in 2019, 1223 vessels spotted intruding the above maritime areas with 126 violating its territorial waters, i.e. its sovereignty. In 2020, the total number of vessels intruded was slightly lower (1167) with 76 vessels spotted in territorial waters. Comparing these figures to previous years the growth of Chinese intrusions is an all-time high one. For instance, in 2018 the total number was 685 while in the beginning of the last decade, in 2010, it was only 36 (see figure 1).
Implications for Businesses
In economic terms, the current dispute could generate significant consequences and losses of revenue. In case of a large/small conflict situation, the highly energy dependent countries as well as the maritime industry will be affected. In the short term, the transportations costs could increase substantially combined with delays in ports because of the high mobility of vessels in the area. China has advanced its presence sending maritime law enforcement vessels, fishing and surveillance vessels in order to showcase sovereignty and demonstrate administrative control (Burke et al., 2018). There is also the risk of a tremendous augmentation of costs in the long term in case of continuous low-scale conflict situations. In this case the current shipping routes would need to be altered abandoning the shorter, and cheaper, ones which cross the maritime area into question, leading to the South China Sea and the Middle East.
Additionally, advanced patrols and tensions could also cause severe incidents and accidents with commercial shipping due to miscalculations. A good example good be the accident between USS Fitzgerald, patrolling around South China Sea in order to deter Chinese vessels, with a container ship back in 2017 (Kinsey, n.d.). In the long term, disruption of SLOCs in a sensitive maritime area as the above, can damage the economy of China and Japan as well as its partners. It is also worth mentioning that the above countries are important players of the area’s production network. China is considered to be the largest assembly plant while sophisticated components are being provided by Japan. The impact on the region’s growth could therefore be significant.
Nonetheless, besides the emerging risks, it must be taken into account that a large escalation is in no one’s interest. For instance, the bilateral trade between China and Japan accounted for more than 340 billion US dollars between the years 2000-2012, while the former is Japan’s major export market (Huang, 2012). Lastly, despite the overall augmentation of Chinese aggression, in the vast majority of cases all Chinese assets were extremely careful not to provoke conflict. The last major one reported was back in 2010 between a Chinese fishery and a Japanese Coast Guard vessel (Burke et al., 2018). Hence, the risks deriving from the confrontation exist and are of a significant magnitude. However, it is unlikely that a deliberate escalation would take place and as a result, the current situation tends to remain stable but potentially dangerous.
References
Burke, E., Heath, T., Hornung, J., Ma, L., Morris, L. and Chase, M. (2018). China’s Military Activities in The East China Sea. Santa Monica: RAND Corporation, pp.1-45. Available at: https://www.rand.org/content/dam/rand/pubs/research_reports/RR2500/RR2574/RAND_RR2574.pdf [Accessed 17 Jan. 2021].
Cornelis-Atanassova, E., Pardo, P., R. and Pejsova, E. (2015). Pride and Prejudice: Maritime Disputes in Northeast Asia. European Institute for Security Studies, 23, pp. 3-55.
Huang, Y. (2012). The Economics Behind the China-Japan Dispute. Financial Times, [online]. Available at: https://carnegieendowment.org/2012/09/24/economics-behind-china-japan-dispute-pub-49454 [Accessed 17 Jan. 2021].
Kinsey, A. (n.d.) Shipping security – political risk threat continues to evolve. Allianz website, [online]. Available at: https://www.agcs.allianz.com/news-and-insights/expert-risk-articles/shipping-security-political-risk-threat-continues-to-evolve.html [Accessed 17 Jan. 2021].
Ministry of Foreign Affairs of Japan. (2021). Trends in Chinese Government and Other Vessels in the Waters Surrounding the Senkaku Islands, and Japan’s Response. Available at: https://www.mofa.go.jp/region/page23e_000021.html [Accessed 17 Jan. 2021].
