Chinese President Xi Jinping smiles after a joint news statement with Serbian President Tomislav Nikolic after their meeting in Belgrade, Serbia June 18, 2016. REUTERS/Marko Djurica China has shown clear disregard for the Permanent Court of Arbitration’s ruling that it had no legal jurisdiction to back up its tendentious 9-dashed-line claim. Such disregard has alarmed the Philippines (who filed the arbitration case), and drawn the ire of the other states in Southeast Asia.

According to China, that ruling – based on the UN Convention on the Law of the Sea (UNCLOS) – is unjust and biased in the west’s favour. China’s ambassador to the UK, Liu Xiaoming, stated that China seeks ‘to resolve relevant disputes through bilateral consultations and negotiations’. But how exactly will these negotiations work, against a backdrop of growing geopolitical friction in those disputed waters?

Vietnam reflects new outlook

The recent agreement between China and Vietnam provides the strongest clue yet as to the nature of China’s ‘diplomacy’. Last Tuesday, China and Vietnam agreed to manage their territorial dispute in the South China Sea in order to safeguard regional stability. But this agreement, according to Forbes’ Ralph Jennings, means that China will now push to build infrastructure in Vietnam.

The relationship between China and Vietnam is a precarious one. Whilst Vietnam is wary of China’s growing influence (and has responded by significantly increasing its defence procurement spending), China is Vietnam’s largest trading partner.

China’s agreement with Vietnam reflects its nuanced outlook to the South China Sea dispute. It is forging key economic arrangements with Southeast Asian states that will afford China greater access to that region over the long term.

Chinese Premier Li Keqiang and Vietnamese Prime Minister Nguyen Xuan Phuc attend a signing ceremony at the Great Hall of the People in Beijing Thomson Reuters

Last January, two Chinese firms were involved in multi-billion-dollar bailouts of 1Malaysia Development Berhad (1MDB), the embattled sovereign investment fund. In Indonesia, Chinese investment jumped fivefold between 2015 and 2016. As previously reported, China has surpassed the US as Indonesia’s chief source of foreign investment in infrastructure. Whether concerning investment, trade or otherwise, there are many other recent examples showing how China has used its politico-economic power to gain regional influence.

Edging out the US

These agreements reflect a shift in China’s foreign policy outlook, as it seeks to gain respect from its neighbours vis-à-vis articulating a distinct, anti-US rhetoric. Effectively, what is being witnessed is a contest between China and America to be perceived as the stabilising power in the region. Each party has attempted to cast doubt over its rival, which has led to escalating tensions and growing mistrust.

With neither American presidential candidate showing interest in ratifying the Trans-Pacific Partnership (TPP) agreement, there are signs that it may fall through. America is not winning the hearts and minds battle, in this respect. This will be particularly true if Donald Trump prevails in November.

China will also be delighted about Duterte’s recent fallout with President Obama, which reflects latent anti-American sentiment in Manila. The US Department of Justice’s investigation into 1MDB can also hardly have helped relations between Putrajaya and Washington.

China is seizing the moment to edge US out and transform the regional status quo, reflecting the bid to reclaim its historical preeminence. At least, it is trying to strong-arm its way into that position. This is a vision infused with a mixture of nationalistic sentiment and strong outrage at state humiliation, thinly veiled as President Xi Jinping’s ‘Chinese Dream’.

Reuters

As far as China is concerned, the US is not (or ought not to be) a relevant partner in these maritime border negotiations. The notion that it must conduct military patrols to ensure the peace of the region is just political pretext that reinforces regional aggression and tension.

The Russia-China joint naval drills that recently concluded in the South China Sea, hint at Moscow’s support for Beijing in light of the Hague ruling. But they equally connote the anti-American solidarity that bonds these two countries.

‘One Belt, One Road’: a classic quid-pro-quo

China has put forward the ‘One Belt, One Road’ (OBOR) project as a contrast to the US-centric TPP – which had sought to exclude China. In essence, OBOR involves sending companies to develop key infrastructure overseas in return for Chinese access – extending Beijing’s global influence. The ‘belt’ will feature key economies across Eurasia, whereas the ‘road’ will occupy Asia and parts of Africa – and crucially the majority of Southeast Asia.

Of course, this is not a cushy arrangement for those states concerned. President Xi likely believes that the particularly dependent states will accept China’s geopolitical domination in return for extensive economic investment. Xi is using his country’s financial influence as a bargaining chip in a quid-pro-quo arrangement that encourages those countries to subdue their reactions to China’s territorial aggression.

Around this time last year Xi made a vow not to militarize the Spratly Islands. But he was far from transparent about his actual intentions in the region. Beijing has possibly been biding its time. Reports even suggest that it will pounce to reclaim the Scarborough Shoal, during the conclusion of the US presidential elections – when America’s back is turned. Whether or not this happens, what has been taking place is a key geopolitical shift in the South China Sea and more broadly Southeast Asia. China is making key arrangements to consolidate its regional bargaining power, for if and when a real ‘crisis’ does eventually materialise.

Conclusion

When Liu Xiaoming met with key political officials on 25 July, at Chatham House, he painted an admirable picture of Chinese diplomacy. ‘[W]hat unite China and the United States is more important than what divides us’, he asserted. But faced with increasingly difficult questions, and pushed for clarification on his country’s aspirations, Liu became increasingly defensive and accused his questioner of a ‘Cold War mentality’.

If this is anything to go by, then tensions are palpable between China and the West regarding this dispute. As the new US president is inaugurated on 8 November, the world will be keen to know how they plan to respond to China and her resurgent quest for Pax Sinica. This first test for the infant government will be a stern one; any miscalculation could result in a sudden escalation of conflict.