Militant nationalism rising in China; odds of military conflict rise

Liu Junluo recently warned of a potential regional war in Asia, and both social mood and developing events are increasing the odds of some type of military confrontation.

Every single day, the South China Sea dispute is either headline news or, if not the headline, it's the next top story. It has dominated the airwaves for weeks now, and has equal space with news about China's weakening economy (now dubbed stabilization).

In this article by Minxin Pei, he puts all the dots on the table, but fails to connect the one that leads to conflict.
Beijing plays divide and conquer to win in South China Sea
But after recovering from its greatest diplomatic setback since Tiananmen, the Chinese government seems to have settled on a counter-strategy. Contrary to expectations of a more flexible negotiating approach - embracing a multilateral approach, declaring adherence to the United Nations Convention on the Law of the Sea and signing a code of conduct - Beijing refused to budge.

China has opted for a negotiating position that seems increasingly untenable and counterproductive. A possible reason is that Beijing understands that its much-criticised "nine-dotted line", which essentially claims the entire South China Sea as Chinese maritime territory, cannot be supported by existing international law.

...Beijing is obviously aware that its strategy, in the short term at least, incurs huge diplomatic costs. To offset these costs, China has tried to gain support from some South-East Asian nations so that the other claimants are not able to forge a regional alliance on this issue to isolate China.

...Because China has ample economic resources to achieve this goal, it may have already succeeded to a considerable degree.In last week's Asean summit of foreign ministers in Cambodia, the regional bloc was unable to reach a common position on the South China Sea dispute, a clear victory for Beijing.
China's economic policy cannot be divorced from it's military policy. An economic collapse would be tantamount to a diplomatic collapse for China, which relies on soft power to achieve diplomatic goals. Increased aggression from Beijing may be a result of its weakening economy, with a couple possible of reasons. Since it will need some other way to press its claims if the economy weakens and the military is increasingly nationalist, a stronger military posture is likely. Furthermore, they may be deflecting from the weak economy: when there is internal strife, turn the attention on diplomatic issues. This would be the more benign scenario, but still carry the risk of an accidental escalation.

If China's economy collapses or slows to the point where it hinders their diplomatic position, Beijing may increasingly rely on military power and/or it's rivals may sense the opportunity to press their case. Minxin Pei closes by warning naval skirmishes could result from accidents, given that confrontations with fishing boats and other vessels are occurring more frequently.

Another possibility, one I believe more likely, is that the weaker China's economy becomes, i.e. the more negative social mood becomes, the greater the likelihood of skirmishes, and if China's economy collapses (GDP growth of near 0% or negative), a skirmish would have a not-small probability of escalating into a larger military conflict.

More background is available here: South China Sea issue divides ASEAN

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