Perspectives have to be revisited to understand the decision of the Permanent Court of Arbitration (PCA) in The Hague on the South China Sea issues raised by the Philippines.
The size of China’s Gross Domestic Product enables it to spend for hard and soft power projection globally.
It must now be viewed by its leaders differently, to grapple with the current century’s opportunities, the better for peace, harmony, and stability in this part of the world.
These include the following:
- Grow with 21st century capitalism in the spirit of Marx
Uber profitably provides online transport service without owning any vehicle; Airbnb, vacation home arrangements without buying hotels. China can provide many things to the world without owning islands in the South China Sea.
Of course, this is just one of many perspectives needed for contenders to understand the chaotic situation in this millennium. The issue of sovereignty over the rocks and islands has been confused by some with the maritime claims under UNCLOS which was the subject of the ruling, when in fact these are two separate issues.
UNCLOS was precisely presented to the world as an opportunity to establish “with due regard for the sovereignty of all States (underscoring mine), a legal order … which will facilitate international communication…, and promote the peaceful uses of the seas and oceans, the equitable and efficient utilization of their resources, the conservation of their living resources, and the study, protection and preservation of the marine environment” (fourth paragraph, Preamble, UNCLOS).
Of course, the verdict of The Hague tribunal is that “China’s claims to historic rights, or other sovereign rights or jurisdiction, with respect to the maritime areas of the South China Sea encompassed by the relevant part of the ’nine-dash line’ are contrary to the Convention and without lawful effect to the extent that they exceed the geographic and substantive limits of China’s maritime entitlements under the Convention….” (paragraph 278). It continues to stress that UNCLOS “superseded any historic rights or other sovereign rights or jurisdiction in excess of the limits imposed therein” (paragraph 278).
China can do away with the sense of physical ownership of real/property assets; it can focus on the services attached to production factors they need not have title to, and thereby rise to be a world power peacefully in the 21st century.
- Insist that global value chains require peace
One thoughtful strategist reminds us that rather than WW III, the apt version for our times is the tug-of-war, a noncontract sport in which “almost no one has ever died … an apt metaphor for our times.”
This is best illustrated by the perceived decline in war among states “while the war over supply chains is rising … fought not over territory but over flows-of money, goods, resources, technology, knowledge, and talent” (Parag Khanna, Connectography : Mapping the Future of Global Civilization, Random House, 2016, p. 137-8).
In fact, China and many countries in Southeast Asia thrive in an interconnected world of global value chains. The statistics on China’s “trade in value added data” that shows this interconnectedness indicates heavy dependence on the rest of the world for its economy to thrive. Its domestic value added in exports of final products as share of gross exports were slightly above world averages in 1995 and 2000 (low 30 percent), but started to slow down thereafter, showing even greater interdependence with the world by 2005 and 2010.
The later rebalancing of China’s economy to more domestic consumption rather than international trade and investment may have slightly altered its global economic linkages.
Like all large economies today, however, China still needs to import many goods and services; these include raw materials, and parts and components, even as local economies are being re-structured to meet domestic requirements.
- Reinvent nation- and civilizational-states
The fear of a non-cooperative China should be tempered by helping its leaders and people comprehend this century without the baggage of nation-states pitted against each other.
After all, China is proud it was a civilization before it became a nation.
The civilizational-state rather than the nation-state image should dignify a new way of asserting leadership in the new millennium in whatever sphere of influence one finds itself. China can show the world it understands capitalism in a new light. During the Tang Dynasty (613-907 AD) , three centuries of China’s civilization blossomed in the light of new ideas applied to the real world – great inventions such as the compass, papermaking, printing, gunpowder, glazed ceramics, gas cylinders, clockwork escapement mechanism, air conditioning, studies on diabetes and goiter, and even a kind of wine server, etc.
Many entrepreneurial Chinese citizens have shown such adaptation to the 21st century. Consider the successful disruptors as Alibaba, TenCents, Xiaomi, etc. To what extent public administrators will allow their success will measure the strides the Communist Party are taking in transforming the new China.
- Let China fast track its own internal reform
But then, there are some who think that China cannot rise to lead in this century unless it reforms internally—to attract its own people to invest and find fortune in their own country, to trust their own citizens to be secure in the thinking that the ruling Communist Party’s pro-people policies can stand the test of dissent, to lead morally within and outside the country under a rule of law, etc. (Regina M. Abrami, William C. Kirby, and F. Warren McFarlan, Can China Lead? Reaching the Limits of Power and Growth, Harvard Business School Publishing Corporation, 2014).
The G-20, business associations, and overseas Chinese communities can nudge reforms in this regard.
Two win-win solutions to the possible impasse in implementing The Hague PCA rulings and providing the environment in which they will have to thrive are suggested here.
(1) New bilateral, multilateral or plurilateral dialogues that seek to re-invent nation-states in the 21st century (e.g., various forms of economic integration which multinationals and state-owned corporations may implement with small and medium enterprises), and (2) more collaborative people-to-people activities to understand the rapid and chaotic structural changes in the new millennium.
Each of these proposals hopefully hastens the deep discernment of the need for tugs-of-war.
One Tang emperor Xuanzong demonstrated this on a truly massive scale—half-a-thousand warriors on each side of a rope 150 meters long. The longer it is played, Khanna notes, the more everyone wins.
Many pray that this is the game all contenders in the South China Sea/West Philippine Sea will play.
(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is a member of the MAP Asean Economic Community Committee and a Professor at the Asian Institute of Management. Feedback at map@map.org.ph and fmmacaranas@gmail.com. For previous articles, please visit map.org.ph.)