SHANGHAI—Armed only with a set of revolving teeth, the Tian Jing Hao, Asia’s largest dredger, has pulled off a stunning naval upset.

Under the noses of the U.S. Seventh Fleet, this Chinese vessel led a civilian armada that built almost 3,000 acres of land atop submerged reefs in the Spratly Islands, altering a strategic balance that has held since the great naval battles of World War II established U.S. primacy in the western Pacific.

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