The South China Sea Ruling Against China: What’s Really at Stake

This week’s ruling by the Permanent Court of Arbitration endorsing the Philippines’ claim that China’s interpretations of South China Sea maritime boundaries violate the UN Convention on the Law of the Sea (UNCLOS) is being hailed in Washington as a salutary exercise in rules-based international governance—and as validation for resolute U.S. policy. But conversations with Chinese academics, analysts, and officials suggest that the outcome may trigger backlash in Beijing against Western-backed international institutions, with potentially profound implications for multilateral management of some of the world’s biggest challenges, from forging cooperative regional security architecture in Asia to climate change.

China’s rise challenges the rest of the world—especially the United States, as the world’s leading power—to engage Beijing in devising new approaches to regional and global governance.  From the Chinese vantage point, existing institutions do not, for the most part, meaningfully bind Washington—because the United States either does not subscribe to them (as with UNCLOS) or ignores them (as with multiple U.S. military interventions lacking UN Security Council authorization). But, in Beijing’s view, America is still able to use these institutions—as with the Obama administration’s encouragement of Filipino claims in the South China Sea case—to threaten what China sees as some of its core interests.

Certainly, Beijing will disregard this week’s ruling. In the near term, Washington pundits are focused on physical steps China might also take in “retaliation” for the ruling—e.g., island building at Scarborough Shoal, blockading Filipino marines at Second Thomas Shoal, deploying air assets to Chinese airstrips around the Spratlys. Yet, as concern about U.S.-backed institutions deepens in Beijing, China may respond in three other ways with prospectively deeper ramifications for regional and global governance.

First, China may reconsider its participation in institutions that, in Chinese policymakers’ judgment, no longer serve Chinese interests—starting with UNCLOS. China is unlikely to act precipitously before hosting the G-20 summit in September. But withdrawal is an option receiving serious attention in Beijing—an option that, if exercised, would hurt both U.S. interests and those of America’s Asian partners. Most immediately, it would leave Beijing largely free to press, under customary international law, Chinese positions on Asian maritime boundaries without UNCLOS’ added substantive and procedural constraints (which go beyond Manila’s resort to the tribunal). Longer term, exiting from UNCLOS would set a precedent for leaving other frameworks—and would marginally but inevitably begin devaluing China’s membership in these frameworks for at least some Chinese elites.

Another option that Beijing may pursue is to intensify its promotion of alternative multilateral frameworks for various issue areas—frameworks in which, among other things, the United States is either not involved or not uniquely dominant. China has played a key role in cultivating the Shanghai Cooperation Organization (SCO) as a regional security mechanism—partly to limit and roll back America’s post-9/11 military deployments in Central Asia. More recently, China has championed new financial institutions—e.g., the Asian Infrastructure Investment Bank, the BRICS New Development Bank, the SCO’s Development Bank. Beijing led in creating these institutions as America declined, until December 2015, to expand China’s voting power in the International Monetary Fund (IMF)—even though Washington committed to do this in 2008 pursuant to what the IMF’s own (largely U.S.-drafted) rules said was appropriate given Beijing’s contributions to IMF recapitalization during the global financial crisis and formally agreed on terms for such expansion in 2010.

Following this week’s ruling, Beijing may broaden its efforts to encourage a more genuinely multipolar international order by cultivating multilateral frameworks effectively operating outside Washington’s influence. In Asia, China is, in line with its established policy, already offering economic inducements for new Filipino President Rodrigo Duterte to “set aside” the arbitration results, indefinitely “shelve” boundary issues, and pursue “joint development” of disputed areas. If Duterte—seen as warmer toward Beijing and cooler toward Washington than his predecessor—goes along, this would effectively blunt U.S. efforts to use UNCLOS and the tribunal process to press China over regional security. It would also lend momentum to China’s incremental quest to build a de facto alternative security architecture for Asia, resting on regional states’ expanding economic relations with China rather than (as in the U.S. model) projection of hard military power.

Third, China may deepen bilateral relationships with other powers sharing its concern about U.S.-backed multilateral mechanisms—most importantly, Russia. Since the Cold War’s end, Western commentators have, on the whole, dismissed prospects for lasting, strategically consequential collaboration between China and Russia. In the prevailing view, Beijing and Moscow might cooperate tactically, for finite periods on particular issues (“marriage of convenience” is an often-deployed shorthand). But genuinely strategic relations are not in the cards; historical baggage from Sino-Soviet disputes, structurally incompatible interests, and each side’s overriding need for basic comity with Washington allegedly preclude such ties. As Sino-Russian relations have drawn ever closer over the last decade—evidenced most recently at last month’s summit between Presidents Xi Jinping and Vladimir Putin—this view has become progressively detached from strategic reality.

Starting over a decade ago, successful demarcation of the Sino-Russian border and creation of regional security frameworks like the SCO set the stage for today’s Sino-Russian partnership. On the Chinese side, what many elites see as renewed U.S. efforts to “contain” China have, over the last decade, increased interest in closer ties to Moscow, while Beijing has become relatively less concerned about traditionally negative aspects of Sino-Russian relations—e.g., border issues and Russia’s long-term security role in Asia. What many in Moscow see as a more assertive U.S. posture vis-à-vis core Russian interests has similarly made closer cooperation with China more compelling, while downsides—e.g., potentially conflicting Chinese and Russian interests in Central Asia—have come to seem relatively more manageable. Additionally, the strategic failures of America’s post-9/11 military interventions in the Middle East and the 2008 financial crisis have heightened concern in both Beijing and Moscow about the long-term viability of international order still characterized by substantial U.S. dominance.

In these circumstances, China and Russia are intensifying their economic, political, and military collaboration with a goal of boosting their ability to hedge against, if not block, what they see as ongoing U.S. assertion of essentially hegemonic prerogatives. Burgeoning Sino-Russian energy links, for example, help Beijing hedge against Washington using residual U.S. military capabilities to leverage Persian Gulf hydrocarbons against China. These links also reinforce renminbi internationalization as a way of diversifying denomination and settlement of cross-border transactions—thereby buttressing Beijing and Moscow’s escalating efforts to hedge against overreliance on U.S.-dominated financial systems. If Beijing grows more disaffected from U.S.-backed multilateral frameworks, this will almost certainly be matched by deeper and more extensive cooperation with Moscow.

America and its partners do not have an option of “containing” China at anything approaching an acceptable cost. Thus, a wise response to China’s rise starts by reviving and broadening the original Nixon-Kissinger “grand bargain” with Beijing and by reaffirming positive U.S. disposition toward China’s economic advancement—which necessarily entails more today than in the 1970s, when China was hardly a commercial presence in Asia, much less a global economic heavyweight. A wise response also means engaging China as an unavoidable partner in addressing vital global challenges, like climate change, in non-zero-sum terms, and in forging a genuinely cooperative and truly regional framework for Asian security.

For an established power to share authority with a rising power over critical aspects of global governance is essentially unprecedented in the history of great power relations. But how well Washington does this with a rising China will go a long way toward determining what sort of world we live in through much of the 21st century.

Flynt Leverett is professor of international affairs at Penn State, a visiting scholar at Peking University’s Institute for International and Strategic Studies, and senior fellow at the Chongyang Institute of Financial Studies, Renmin University of China.