China May Use Offshore Banking to Secure South China Seas

China considers killing two birds with one stone, turning Yongxing Island (Woody Island) into an offshore financial center. Aside from the economic benefits, it would secure China's political claim on the South China Sea.

21st CBH: 南海岛礁能成为百慕大式离岸注册地吗?
Two of the country this year, the South China Sea once again become the focus of the parties. NPC press conference, spokesman Fu Ying was asked three times to the South China Sea. There are also proposals for motions involving the South China Sea. Two of the most notable of the CPPCC National Committee, deputy director of the Foreign Affairs Committee, submitted Han Fangming "Yongxing Island will build a Bermuda registered offshore" proposal.

Registered offshore, through low-tax policy or tax-free, loose financial regulation and open management program, set up to attract foreign companies registered offshore companies. Proposal suggested that the central and Hainan through policy and legal support, allowing the Xisha Yongxing Island, the development of offshore financial services, and thus promote the development of the South China Sea and the central economic zone in the South China Sea strategic layout.

I believe that, and regardless of the specific content of proposals, one on its own logic - the economic development of the island as a means of distribution of the South China Sea should be able to provide new ideas for breaking the increasing complexity of the South China Sea game.

In fact, economic development has become the main means to safeguard the sovereignty of the South China Sea. From the initial joint development of South China Sea oil and fishery resources initiatives, to the exploration of deepwater oil and gas fields, economic instruments are to highlight its significance. The difference is that the role of fisheries and oil and gas development is mainly reflected in the sovereign sea waters especially controversial declaration, and the development of offshore financial sector would help to strengthen the management of the actual controlled islands.

Although China has already realized over the Paracel Islands and administrative development, its economic function has often been watered down. A real problem is that China's legitimate military and civilian deployment in these reefs, likely to cause unnecessary tension in neighboring countries, and become some of the United States, Japan and other countries outside the South China Sea issue of multilateral excuse. In this context, clearly some of the reefs controlled economic development function, can also be regarded as reducing misjudgment, an effective means of reducing external intervention.
I doubt outside parties will be mollified by China securing its interests, but it undoubtedly strengthens China's claims.

There are drawbacks though. Foreign investors will be wary of China's claim on the islands and China's legal system is unable to deal with offshore banking at this time:
Security Capital is also an important factor. The vast majority of offshore centers away from geopolitical disputes, and maintaining political stability through effective government. In contrast, the South China Sea tensions in the South China Sea islands and reefs will hinder the development of the financial industry has brought. This is why a lot of people are not optimistic about Yongxing Island Offshore Financial reasons development. Of course, this view underestimates the Chinese South China Sea as a "real master" determination to maintain peace and stability on the South China Sea. However, for Yongxing Island as an international financial capital registration, we also need to make some effort to highlight Yongxing Island demilitarization of use and so on.

In addition, the legal system, now known global offshore centers use the Law Department. This system was considered for a higher degree of financial innovation tolerance, and ease of integration with Western multinationals legal system. And China, as in civil law countries, the ability to "compatible" an offshore centers?

In short, the Yongxing Island, the reality limited by a variety of conditions, even if the island's offshore area can be entered substantive stage of development, it is difficult to attract transnational capital in the short term. However, we could have based on their own business, and then through a series of innovative laws, the financial system, reducing barriers on legal convergence.

Of course, both can develop from the Yongxing Island offshore financial business, the South China Sea policies are ultimately in order to safeguard China's sovereignty and territorial integrity. Under this theme, we might open my mind, bold innovation, and explore more effective path of development and rehabilitation of the South China Sea.

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