South Korea Draws Vietnam Into Its Orbit

FOR CHINA’S NEIGHBOURS, trade and investment relations with each other gain importance as Beijing deepens its involvement in regional trade arrangements. Those between South Korea and Vietnam are a case in point.

South Korea is now a larger foreign investor than China in Vietnam. In raw numbers, more South Korean firms do business there than in China, though they are mainly small and medium-sized enterprises.

For the giant South Korean conglomerates, Vietnam has become an important link in their supply chains. Witness that electronic components such as semiconductors and displays accounted for 89% of Vietnam’s exports to South Korea in 2019 (the latest full-year figures available).

The two have different histories with China and some uneasy mutual history dating back to the Vietnam and Korean wars. Trade did not start to blossom until Hanoi and Seoul established diplomatic relations in 1992. As our chart shows, it bloomed after they signed a bilateral trade agreement in 2015.

Vietnam, with an 8.9% share of the total trade (again on the 2019 data), is South Korea’s third-largest trading partner after China (25.1%) and the United States (13.5%). It ranked third as an export market, again behind China and the United States, worth $48.5 billion, and fifth for imports ($21 billion) after China, the United States, Japan and Saudi Arabia.

It is also South Korea’s fastest-growing trade partner, with trade having expanded by half as much again in the three years to 2019. The two nations are looking for bilateral trade to top $100 billion by the year after next.

On the services side, pre-Covid, Vietnam became a major tourist destination for South Koreans, with visitor numbers rivalling those coming from China.

On the investment side, as mentioned above, South Korea is Vietnam’s largest foreign investor. More than 9,000 projects, worth upwards of some $70 billion, account for 18% of Vietnam’s total foreign direct investment (FDI). Like China, Vietnam offers South Korea’s conglomerates political stability, reasonable geographical proximity, cultural familiarities and cheap, educated labour for manufacturing. Samsung, for example, makes a lot of smartphones there.

The country will remain attractive to South Korean investors despite rising costs and the supply chain headaches now being experienced due to Hanoi’s hapless handling of the Delta variant. Vietnam’s growing popularity with foreign investors, including non-South Korean firms looking for supply chain alternatives to China under what is now being called ‘strategic decoupling’, is putting pressure on the country’s rents, ports and infrastructure. Skilled labour is growing harder to hire and consequently and more expensive.

The tension between China and the United States, which is the backdrop to the growing trade and investment relationship (and defence co-operation) between South Korea and Vietnam, means there is always a risk of blowback against US allies. That is more of a concern for South Korea than Vietnam. South Korean firms well remember the state-inspired consumer boycott against them five years ago to express Beijing’s displeasure at Seoul allowing the installation of a US anti-missile system.

Yongxing And Submarine Protection

CHINA HAS BEEN on Yongxing, known as Woody Island to most of the rest of the world, since Mao’s troops landed on the then unoccupied island in 1956. Woody is part of the Parcels, the closest of the South China Sea archipelagos to the Chinese mainland, and had previously been occupied by French Indochina, Japan and Nationalist China.

As the image above shows, Woody Island today has been extensively built up for a speck of land in the middle of the South China Sea. It has a hospital, library, school and sports fields as well as a military garrison and airport. ICBC and China Telecom both have branches there. The permanent civilian population numbers more than 1,000.

Beijing administers all its claimed land and waters in the region from the Sansha City prefectural government office that was set up on Woody in 2012. The city office is the building with the silvery dome on the right-hand side of the picture.

Vietnam, which calls Woody Island Phi Lam Island, and Taiwan also have territorial claims derived from previous occupants. Reports that the PLA has deployed two HQ-9 surface-to-air missile batteries on the island lend credence to the notion that Beijing is gradually stepping up its militarization of the contested waters of the South China Sea.

Last year, it flew J-11 military jets onto the island, whose airstrip is capable of landing China’s fourth-generation military aircraft. At the same time, it is believed that the newest nuclear submarines that China is building will be based at the PLA-Navy’s Yulin base on Hainan Island only 400 kilometers away and where there are underground pens for some 20 submarines as well as space to dock an aircraft carrier.

Woody could serve as a forward defense base for Yulin should it come to an air attack on the base. Yulin is of increasing strategic important as it offers a quicker route to the deep water passages to the Pacific than the PLA-Navy’s northern Xiaopingdao base. The PLA-N needs that rapid blue-water access if its subs are to be a credible second-strike nuclear deterrent.

The HQ-9 is a medium-to-long-range anti-aircraft missile that can be launched from the back of a heavy-duty military truck on land as well as from a destroyer at sea. An HQ-9 land-based battery would have accompanying power generation and radar trucks, the radar being capable of detecting both low altitude and stealth targets.

The arrays seen in the satellite images taken last weekend that have caused the latest stir are positioned to defend the approaches to Yulin.

The initial reports came from the Taiwanese defense minister, with the commander of the US Pacific Fleet subsequently confirming them to the Reuters news agency, saying it represents “a militarisation of the South China Sea” in ways China’s President Xi Jinping had pledged not to make.

China, for its part, says it has every right to deploy limited defences on its own territory and that that has nothing to do with militarisation of the South China Seas.

HQ-9s, though, are highly mobile weapons systems; they could be taken on or off the island by ferry at any time, or just driven into a storage shed.

Their presence on Woody doesn’t likely have great significance in itself. They are not as provocative there as they would be if rolled out on any of the artificial islands being built in the Spratlys. China vacillates in the South China Sea between asserting its claims and ensuring a belligerent stance does not trip over into live hostilities.

South China Sea Territorial Waters: Ne’re The Twain Shall Meet

IT HAS BEEN a couple of years now since China abandoned its policy of asserting its territorial claims in the South China Sea primarily by way of commercial fishing. Instead it has sent in its oilmen.

State-owned China National Offshore Oil Corp. (CNOOC) started drilling in the disputed waters in May 2011. Later that year it cheekily invited bids from foreign oil companies to join it in the exploration and development of nine blocks off the Vietnamese coast. The current standoff between China and Vietnam over the arrival of CNOOC’s deep-sea oil rig in what Vietnam says is its 200-mile exclusive economic zone and Beijing claims is only 20 miles off the coast of one of its islands, is only the latest development in a series stretching back to then.

Drilling rig HD-981 was China’s first home-developed deep-sea rig, and built to drill in those waters. It has been searching for the 23 billion-30 billion tonnes of oil and 16 trillion cubic meters of natural gas believed to lie beneath the South China Sea — equivalent to one-half of China’s existing onshore oil and gas reserves.

It is first place of operation was some 300 kilometers southeast of Hong Kong between the Paracel Islands, claimed by China as the Xisha Islands and Vietnam as the Hoàng Sa Archipelago, and the Macclesfield Bank, claimed by China as the Zhongsha Islands, and Taiwan. Not too far away lies the Scarborough Shoal (Huangyan Island), scene of repeated maritime stand-offs between China and the Philippines, which calls it the Panatag Shoal. Earlier this week, Philippine authorities detained a Chinese fishing boat and its 11 crew members near the Spratly Islands, which China calls the Nansha Islands.

HD-981 is now deployed some 30 kilometers off one of the specs of rock in the Paracels and some 280 kilometers from the Vietnamese coast, which would put it 100 kilometers inside the exclusive economic zone Vietnam claims. The maritime argy-bargy has been matched by the diplomatic jostling. China has called for Vietnam to stop “disturbing” the operations of Chinese companies; Vietnam, for its part, has accused the PLA-N of intimidating Vietnamese vessels. Japan’s Foreign Minister Fumio Kishida has been told to butt out of it after saying China’s actions in the region were “provocative”.

What is concerning to This Bystander is the large number of Chinese and Vietnamese vessels that have reportedly been involved, 40 on the Chinese side, 20 from Vietnam, with several warships in both flotillas. For Beijing’s part. this appears to be a response to U.S. President Barack Obama’s recent visit to East Asia in which he reaffirmed the U.S.’s commitment to its Asian treaty allies. If Beijing feels those nations have been stiffened by U.S. reassurances, it may feel it needs to demonstrate its own robust response. That could leave these disputed waters more troubled than they been been in recent years.

China’s South China Sea Fishing Fleet: How Far Will It Go?

The picture above shows two of the 30 vessels that comprise the largest fishing fleet dispatched from Hainan to Zhubi Reef, or Subi Reef, in the Spratly Islands (Nansha to China) in the disputed waters of the South China Sea. The 3-story domed building in the background contains a newly installed radar station and a helipad. It towers over the old wharf that China built to establish its claim to the reef. Vietnam, the Philippines and Taiwan all say the reef lies within their territorial waters. The reef surrounds a lagoon and is above water only at low tide, which is why the building appears to be in the middle of the sea. The sharp eyed may detect the band of lighter blue looking water above the reef itself. The fleet is being protected by the Yuzheng 310, one of the most advanced patrol ships of the Chinese fishery administration.

The 20-day fishing mission is the latest display of assertion of sovereignty by Beijing in the South China Sea. It comes in the immediate wake of a meeting in Cambodia of foreign ministers of the Association of Southeast Asian Nations (ASEAN), also attended by U.S. Secretary of State Hilary Clinton, that failed to reach consensus over how to deal with China over its territorial claims in those waters. Beijing successfully divided to conquer ASEAN on the issue, leaving its fishermen free to sail ahead (and its oil drillers to drill), further testing the diplomatic limits of the Philippines and Vietnam in particular.

Footnote: The new city that China is creating to administer its South China Sea specs of rock and reef is preparing to elect a 60-member city council and mayor later this year, according to the Southern Metropolis Daily.

CNOOC Looking For Partners To Drill For Oil In The South China Sea

China’s recently abandoned tactic of asserting its territorial claims to the South China Sea through fishing rather than minerals extraction is well and truly dead. State-owned China National Offshore Oil Corp. (CNOOC) started drilling in the disputed waters in May. Now it is inviting bids from foreign oil companies for the joint exploration and development of nine blocks off the coast of Vietnam that would appear to lie south of the Paracel Islands and cover 160,000 square kilometers where Beijing’s claim to the South China Sea and the 200 mile zone claimed by Hanoi under the UN Law of the Sea overlap. Clash might be a more appropriate word. The diplomatic protests from Vietnam have already started. State-owned PetroVietnam also says CNOOC’s tender blocks overlap its own. This map from CNOOC shows the locations.

Footnote: CNOOC has invited such tenders in the South China Sea before but only in waters incontrovertibly Chinese.

Beijing Creates A City In The South China Sea

Start re-labeling your South China Sea maps. In the latest ratcheting up of diplomatic pressure on territorial claims to the mineral rich waters, Beijing has raised the municipal status of its local government that administers the disputed area. A new prefectural level city, Sansha, replaces the existing county-level administration office for the Pratas, Paracel and Spratly Islands–the Dongsha, Xisha and Nanshas to China. Sansha, which will be part of Hainan province, will be based on Woody, or Yongxing Island (shown at sunset earlier this year in the photo), one of the Paracel (Xisha) Islands, as was the existing county-level administration.

Vietnam also lays claim to the Paracels and Spratlys. Hanoi formally incorporated them into the country by law earlier this week, a move that prompted formal protests from China, including summoning Hanoi’s ambassador in Beijing. Taiwan like China claims sovereignty over all three, while the Spratlys are also claimed by the Philippines, which is involved in a maritime standoff with Beijing off the Scarborough Shoal. Temporarily ended by bad weather, that looks set to be resuming.

The Shipping News

Much has happened this week since Beijing and Manila announced mutual temporary fishing bans that lower the tension in their dispute over territorial claims in the South China Sea that came to a head with a stand-off near the Scarborough Shoal (Huangyan Island to China). In summary:

• Vietnam has repeated its rejection of China’s imposition of the above mentioned seasonal fishing ban in the South China Sea.
• Beijing and Tokyo are holding a first round of talks on their maritime dispute in the East China Sea.
• China is putting 4,000 islands to which it lays claim under real-time 3-D ariel surveillance, including 45 islands described as being “along baseline points of China’s territorial waters”.
• Filipino oil company, Philex Petroleum, says it is seeking rigs to drill for natural gas near the Reed Bank off Palawan, waters disputed with China. China’s CNOOC might supply them.
• North Korea has seized three Chinese trawlers in the Yellow Sea, apparently for ransom.

Stilling Rough Waters In The South China Sea

China and the Philippines have said they will impose simultaneous temporary fishing bans in parts of the South China Sea. It is a way to diffuse their maritime stand-off near the Scarborough Shoal (Huangyan Island to China). While neither side recognizes the legitimacy of the other’s fishing ban in the waters they claim as its own, the arrangement allows both sides to withdraw their coast guard cutters on the grounds that there is no fisheries protection to be done.

Both sides say the fishing bans are for fisheries management reasons and have no connection to the naval stand-off that started more than a month back when a Philippines warship tried to detain a dozen Chinese fishing vessels operating in the disputed waters. While it is true that China has instituted a summer fishing ban every year since 1999–this year’s was first announced in January–the arrangement indicates that neither Beijing nor Manila want the increasingly tense dispute to get out of hand.

That is not to say that it will go away, or that the various parts of the Chinese government won’t stop blowing hot or cold on the issue. For the past three years Vietnamese fishermen have defied the ban, which also covers the fishing grounds near the Spratly Islands over which both China and Vietnam claim sovereignty. That prompted Chinese coast guards to detain the Vietnamese boats. China has again said it will impound the vessels and tackle of violators throughout the waters where it has suspended fishing. That provides China’s coast guard with an excuse to continue its patrols through waters variously claimed by not just by itself, Vietnam and the Philippines but also Brunei, Taiwan, Malaysia and Indonesia.

Updates: Vietnam has rejected China’s imposition of a seasonal fishing ban in the South China Sea. Beijing and Tokyo are holding a first round of talks on their maritime dispute in the East China Sea. China is putting 4,000 islands to which it lays claim under real-time 3-D ariel surveillance, including 45 islands described as being “along baseline points of China’s territorial waters”. Meanwhile, North Korea has seized three Chinese trawlers in the Yellow Sea, apparently for ransom.

China Said Holding 21 Vietnamese Fishermen

China and Vietnam are engaged in a new war of words over disputed territorial waters in the South China Sea. Twenty one Vietnamese fishermen have been detained since March 3 while working off the Paracel Islands (Xisha to the Chinese and Hoang Sa to the Vietnamese) which both countries claim. China says Vietnam’s government should halt the fishing off the Paracels to stop what Foreign Ministry spokesman Hong Lei described as illegal fishing operations by “a large number of Vietnamese fishing ships”. Vietnam insists the fishermen were in Vietnamese waters and should be freed.

Beijing has been beefing up its naval presence in the South China Sea. The Maritime Surveillance Force conducted three times as many missions there last year as in 2008. As well as fishing boats, the vessels were looking for oil and gas drilling, activity off the Spratlys that Beijing also holds to be illegal in what it considers its waters.

As well as China and Vietnam, the Philippines, Malaysia, Brunei and Taiwan all claim sovereignty over often overlapping parts of the South China Sea. China’s claim is the largest, covering a big U-shape over most of the sea’s 1.7 million square kilometers, straddling shipping lanes between East Asia and Europe and the Middle East and below which are believed to be rich oil, gas and mineral deposits.

Diplomonkish Protest

Monks are an inflammatory issue for Beijing right now. Hence Vietnam’s decision to dispatch six of them to take up six-months of residency on the disputed Spratly Islands in the South China Sea–China calls them the Nansha Islands–is a doubly provocative act.

The sextet will take charge of Buddhist shrines on the sparsely inhabited islands that were abandoned in the mid-1970s, but which Vietnam has recently refurbished, the BBC reports. The Philippines, Brunei, Malaysia and Taiwan, as well as China and Vietnam, claim sovereignty to parts of the islands to establish their claims over the resource-rich waters around them. The BBC has a map of the competing maritime boundaries here.

No official response from Beijing yet, but if and when it comes it will surely be to reaffirm its  “indisputable sovereignty” over the islands. Late last month it condemned a plan by Manila to invite foreign investors to explore for oil and natural gas in the area in just such terms.