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Explained by Graphics: Tension in the South China Sea

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Explained by Graphics: Tension in the South China Sea

Explained by Graphics: Tension in the South China Sea

Claims on the South China Sea, the recent ruling, and why China is ignoring it

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

Tension in the South China Sea reached a potential inflection point this week.

Days ago, an international tribunal ruled in favor of the Philippines, dismissing China’s sweeping territorial claims to the hotly contested waters in the South China Sea.

Since then, it has become clear that China plans to ignore the ruling, while Chinese Vice-Foreign Minister Liu Zhenmin has threatened to declare an air defense identification zone over the waters to help protect the country’s interests.

But how did we get to this point? How was this ruling determined, and what does it mean moving forwards?

Why the South China Sea matters

The South China Sea is home to 250 small islands, shoals, reefs, sandbars, and other tiny landmasses.

The South China Sea is the second most used sea lane in the world, and home to:

  • $5 trillion of annual trade
  • 11 billion barrels of oil
  • 266 trillion cubic ft of natural gas

Six countries claim parts of the South China Sea as their own: China, Taiwan, Philippines, Vietnam, Malaysia, and Brunei.

However, China has the boldest claim, insisting that over 80% of the sea is their territory based on historical maps.

Island or Rock?

The ruling in the Philippines vs. China hearing is based on the provisions of the United Nations Convention on the Law of the Sea (UNCLOS), which came into force in 1994. All countries disputing claims in the South China Sea are signatories.

UNCLOS defines three types of landmasses, and whether something is a “rock” or an “island” has huge implications for territorial claims.

  • Low-tide elevation: A landmass above water only at low tide.
  • Rock: A landmass permanently above water, but unable to sustain human habitation or economic life on its own.
  • Island: A landmass permanently above water that can sustain human habitation and economic life on its own.

Rocks get some territorial benefits, but islands get 200 nautical miles (370 km) of special economic rights around them in each direction.

  • Low-tide elevation: Not entitled to any separate maritime zone.
  • Rock: Entitled to territorial sea and contiguous zone. Each are up to 12 nautical miles (22 km) from base line.
  • Island: Entitled to territorial sea and contiguous zone, but also entitled to an exclusive economic zone of 200 nautical miles (370 km), and continental shelf rights.

The economic zone confers rights for fishing, drilling, energy production, and other economic activities.

The Ruling

The tribunal ruled that Scarborough Shoal, along with areas occupied by China in the Spratly Islands do not count as “islands”, and therefore do not justify 200 nautical mile (370 km) economic zones around them.

China has rejected the ruling calling it “ill-founded”. Taiwan, which has administered Taiping Island since 1956, also rejected the ruling.

China has argued that the tribunal has no legitimate jurisdiction on this issue since it concerns “sovereignty” – which the text of the UNCLOS explicitly prohibits tribunals from addressing.

What are the consequences?

If China continues to ignore the ruling, likely there will be a “hit” to China’s reputation, but that’s it.

Going back in history, there is a long list of situations where superpowers have ignored international rulings. It is also worth noting that China is a permanent member of the U.N. Security Council and has veto power.

Tension will continue to increase in the South China Sea, creating a situation that could boil over at any time.

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Economy

The Bloc Effect: International Trade with Geopolitical Allies on the Rise

Rising geopolitical tensions are shaping the future of international trade, but what is the effect on trading among G7 and BRICS countries?

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Map showing the change in the share of a country’s exports going to their own trading blocs from 2018 to 2023.

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The following content is sponsored by The Hinrich Foundation

The Bloc Effect: International Trade with Allies on the Rise

International trade has become increasingly fragmented over the last five years as countries have shifted to trading more with their geopolitical allies.

This graphic from The Hinrich Foundation, the first in a three-part series covering the future of trade, provides visual context to the growing divide in trade in G7 and pre-expansion BRICS countries, which are used as proxies for geopolitical blocs.  

Trade Shifts in G7 and BRICS Countries

This analysis uses IMF data to examine differences in shares of exports within and between trading blocs from 2018 to 2023. For example, we looked at the percentage of China’s exports with other BRICS members as well as with G7 members to see how these proportions shifted in percentage points (pp) over time.

Countries traded nearly $270 billion more with allies in 2023 compared to 2018. This shift came at the expense of trade with rival blocs, which saw a decline of $314 billion.

CountryChange in Exports Within Bloc (pp)Change in Exports With Other Bloc (pp)
🇮🇳 India0.03.9
🇷🇺 Russia0.7-3.8
🇮🇹 Italy0.8-0.7
🇨🇦 Canada0.9-0.7
🇫🇷 France1.0-1.1
🇪🇺 EU1.1-1.5
🇩🇪 Germany1.4-2.1
🇿🇦 South Africa1.51.5
🇺🇸 U.S.1.6-0.4
🇯🇵 Japan2.0-1.7
🇨🇳 China2.1-5.2
🇧🇷 Brazil3.7-3.3
🇬🇧 UK10.20.5

All shifts reported are in percentage points. For example, the EU saw its share of exports to G7 countries rise from 74.3% in 2018 to 75.4% in 2023, which equates to a 1.1 percentage point increase. 

The UK saw the largest uptick in trading with other countries within the G7 (+10.2 percentage points), namely the EU, as the post-Brexit trade slump to the region recovered. 

Meanwhile, the U.S.-China trade dispute caused China’s share of exports to the G7 to fall by 5.2 percentage points from 2018 to 2023, the largest decline in our sample set. In fact, partly as a result of the conflict, the U.S. has by far the highest number of harmful tariffs in place. 

The Russia-Ukraine War and ensuing sanctions by the West contributed to Russia’s share of exports to the G7 falling by 3.8 percentage points over the same timeframe.  

India, South Africa, and the UK bucked the trend and continued to witness advances in exports with the opposing bloc. 

Average Trade Shifts of G7 and BRICS Blocs

Though results varied significantly on a country-by-country basis, the broader trend towards favoring geopolitical allies in international trade is clear.

BlocChange in Exports Within Bloc (pp)Change in Exports With Other Bloc (pp)
Average2.1-1.1
BRICS1.6-1.4
G7 incl. EU2.4-1.0

Overall, BRICS countries saw a larger shift away from exports with the other bloc, while for G7 countries the shift within their own bloc was more pronounced. This implies that though BRICS countries are trading less with the G7, they are relying more on trade partners outside their bloc to make up for the lost G7 share. 

A Global Shift in International Trade and Geopolitical Proximity

The movement towards strengthening trade relations based on geopolitical proximity is a global trend. 

The United Nations categorizes countries along a scale of geopolitical proximity based on UN voting records.

According to the organization’s analysis, international trade between geopolitically close countries rose from the first quarter of 2022 (when Russia first invaded Ukraine) to the third quarter of 2023 by over 6%. Conversely, trade with geopolitically distant countries declined.  

The second piece in this series will explore China’s gradual move away from using the U.S. dollar in trade settlements.

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Visit the Hinrich Foundation to learn more about the future of geopolitical trade

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