On Jan. 11, the Japanese Ministry of Defense announced that two vessels, a Chinese 4,000-ton Jiangkai-II class frigate and a submarine of unknown origins, were sighted near the territorial waters surrounding the contested Senkaku / Diaoyu Islands, which are claimed by both countries but administered by Japan. The Japanese government later identified the submarine as a Shang-class nuclear attack submarine, after it raised the Chinese flag in international waters. This is the first time China has deployed a submarine to the area. Specifically, the submarine was sighted in the contiguous zone of the islands—the area between 12 and 24 nautical miles from shore.

Japan formally protested China’s actions, with Defense Minister Itsunori Onodera calling it an “act that unilaterally raises tensions.” Japanese officials also reiterated that they are committed to improving relations with China, despite what they consider China’s actions hampering the relationship. Japan’s actions included directly summoning the Chinese ambassador to Japan, Cheng Yonghua, to discuss the issue.

In turn, Chinese officials claimed they had the right to enter the waters around the islands because the islands fall under Chinese ownership. “The relevant actions of the Japanese side will by no means change the established fact that the Diaoyu [Island] belongs to China,” said Chinese foreign ministry spokesman Lu Kang at a daily press conference on Thursday. A pro-China paid editorial in the Washington Post the day after the incident also cited Luas saying that China had been safeguarding its territorial sovereignty.

China and Taiwan both consider the islands part of their sovereign territory, asserting they were claimed under the Ming dynasty (1368-1644), and incorporated into Taiwan’s jurisdiction during the Qing dynasty (1644-1911). Japan holds that the islands were uninhabited and unowned prior to 1895, when it annexed them into its territory. Japan has maintained administrative control of the islands since the end of the Sino-Japanese war later that year, though China believes the islands were in fact taken by force.

The appearance of the Chinese frigate and submarine follows the incursion of four Chinese Coast Guard vessels into the waters surrounding the islands. Since Japan chose to nationalize the islands in 2012, China has increased “routine” patrols of maritime law enforcement ships, as well as scrambling military flights to the surrounding seas. It was not until June 2016, however, that China first deployed a naval vessel to the Senkauku Island’s contiguous zone, in that case a Jiankai-I class frigate. A deployment of a fleet of fishing and coastguard vessels to the region followed soon after. The deployment of a Chinese submarine represents a further escalation from these previous patrols. China’s decision to send a submarine to the area around the islands could therefore represent the same kind of “salami slicing” it has been using in the South China Sea to assert its authority, gradually ramping up its level of interference without taking any steps so far beyond precedent that they would force a response.

China’s actions take place against the backdrop of the two country’s agreement last month to create a new crisis-management hotline to de-escalate conflicts in the region. However, Japan made clear during the negotiations that the hotline would apply only to issues outside its territorial waters, so the Senkaku Islands themselves are excluded. Previous efforts to create this hotline had been frozen after Japan nationalized the islands, and because Japan has continued to insist that the hotline not apply to the islands.

Beyond its maritime movements, China has continued to accelerate its naval development to bolster its power in the South China Sea. The country has launched a new underwater surveillance network to aid its submarines in navigation and targeting. The project was led by the South China Sea Institute of Oceanology, but has recently been handed over to the Navy for military use. The network covers the South China Sea, as well as the western Pacific and Indian oceans. The program may undercut the United States’ “asymmetric advantage” in submarine operations due to its expertise in ocean surveillance.

China also recently began construction of its third aircraft carrier, according to sources close to China’s People’s Liberation Army. When completed, the carrier will provide China with increased power projection due to its catapult launch system and larger size than existing carriers. Sea trials for China’s second aircraft carrier are expected to begin in February as part of its qualification process, but the carrier is not likely to enter service before the end of 2018.

In Other News…

United States

The United States continued its freedom of navigation operations (FONOPS) in the South China Sea this week. In remarks on Jan. 20, Lu announced that the USS Hopper, a U.S. missile destroyer, sailed within 12 nautical miles of the Scarborough Shoal (also known as Huangyan Dao) on Jan. 17. Lu condemned the action, saying “China is strongly dissatisfied with [the incident] and will take necessary measures to firmly safeguard its sovereignty.” He also noted China’s “indisputable sovereignty over the Huangyan Dao.” The disputed reef is claimed by China and the Philippines. Philippines Presidential spokesman Harry Roque Jr. commented that the Philippines did “not wish to be part of a U.S.-China intramural,” and Defense Secretary Delfin Lorenzana downplayed the FONOP as not a concern.

U.S. officials confirmed the patrol, and noted that it was conducted under the regime of “innocent passage” under which warships have the legal right to quickly pass through a country’s 12 nautical mile territorial sea even without the coastal country’s permission. The last U.S. Navy FONOP, near the Paracel Islands, was revealed last October.

Japan-Australia

Australian Prime Minister Malcolm Turnbull visited Japan this week, and met his counterpart Shinzo Abe to discuss a visiting forces agreement. The proposed deal would make it easier to conduct joint military exercises by providing a more certain legal framework for hosting military personnel and equipment. Japan has a similar agreement in place with the United States. The two prime ministers agreed to accelerate the negotiations and complete the agreement "as early as feasible.”

Any defense agreement or increased cooperation is predicted to inflame tensions with China, which is likely to view such action as a provocation aimed at countering its rising influence. Japan and Australia have concluded similar agreements in previous years as the countries’ security strategies have converged around friction in the South China Sea and Korean peninsula.

Vietnam

Vietnam has invited India to increase its investment in the oil and gas sector in the South China Sea. India’s Oil and Natural Gas Corporation has been active since 1988 in developing wells in Vietnam’s maritime claims. Vietnam’s exploration activities often cause diplomatic difficulties because of the region’s overlapping claims. In his Jan. 11 press conference, Lu stated his country’s opposition to the comments and use of bilateral relations as Vietnam’s excuse “to infringe upon China's legitimate rights and interests in the South China Sea and impair regional peace and stability.”

Vietnam’s building program in the South China Sea has also continued throughout 2017 as one counterweight to China’s land reclamation program. Vietnam has also recently held defense talks with its former colonial power France. France sees Vietnam as an important partner in the region due to the countries’ historical ties, and Vietnam believes engagement with France can provide it with more influence on the U.N. Security Council powers.

Analysis and Commentary: Year in Review

Recent commentary has emphasized the relative lack of engagement from Washington on the South China Sea throughout 2017. Writing in the Asia Times, Xuan Loc Doan reviews the Trump administration’s light-touch foreign policy approach to the South China Sea, and how U.S. opposition to China’s building projects has taken a back seat to other issues. The Post’s Emily Rauhala writes that though “Trump has given no clear signs that he plans to make the South China Sea a priority in 2018,” potential Chinese actions may bring the dispute back to the foreground. Looking ahead, Steven Stashwick in The Diplomat highlights several U.S.-China military trends to watch in 2018, including development of hypersonic weapons, focus on submarine capabilities, and new strategies for littoral combat operations.

China’s posture has also changed in the last year. Tom Mitchell and John Reed in the Financial Times chronicle Xi’s effort to seize the “strategic opportunity” created by the U.S. pullback. China has focused on reinforcing existing land reclamation in the South China Sea rather than in developing new reefs, and has expanded investment projects in countries like the Philippines to diffuse tensions over the maritime conflict.

In a recent “Centner for Strategic and International Studies” podcast, Zack Cooper and Bonnie Glaser spoke with Asia Maritime Transparency Initiative Director Gregory Poling on the outlook for the South China Sea in 2018, including China’s strategic goals for the region and how the United States could increase its engagement in the region.

Water Wars is our monthly roundup of the latest news, analysis, and opinions related to ongoing tensions in the South and East China Seas.