The South China Sea is one of the world’s most disputed regions; however, recent developments indicate that the conflict is evolving from military confrontation to economic interdependency. For decades, countries located in the South China Sea conducted military exercises to control trade routes and resources. Later, Beijing shifted its policy towards trade, investment, and economic interdependence, rather than military confrontation. In modern geopolitics, trade dependence can control states more than gunboats and military expansion. The web of trade binds countries to compromise and mediate without military confrontation. By leveraging trade and economic factors, China gradually turned the South China Sea into a strategic zone of dependence, compelling states to soften their claims to secure economic benefits.
China initiated its economic strategy by signing the ASEAN-China Free Trade Agreement (ACFTA) in 2000, enforcing it in 2010. China became the largest trading partner of ASEAN countries and maintained its place over the decade. On the one hand, economic integration promotes economic prosperity, while on the other hand, China has gained the power to influence other countries. As a result, countries moderated their claims over the South China Sea to maintain good relations with China and gain economic benefits. Furthermore, the Belt and Road Initiative (BRI) was introduced by President Xi in 2013, which benefited Southeast Asian countries alongside China. It can be foreseen that economic dependency on China will increase as the BRI project ties economies and technologies together, making it difficult for countries to confront China over the dispute of the South China Sea.
Over time, China increased bilateral trade relations with each country in the region to deepen economic influence. The total trade between China and ASEAN countries increased to USD 694 billion in 2025 from USD 507 billion in 2019. The primary claimant countries in the South China Sea are Malaysia, Indonesia, Vietnam, Brunei, and the Philippines. China manages its interests through economic interdependence, except in the case of the Philippines.
Historically, Malaysia had a conflict with China over the Spratly Islands. The waters surrounding the islands were considered to be part of the Exclusive Economic Zone, as defined by international maritime law. Currently, Malaysia has not abandoned its claim but prefers diplomacy and economic integration over confrontation. Both countries focus on trade, which has increased their interdependency. The total trade between the two countries was US$131.16 billion in 2020, which reached US$190.24 billion in 2023. Moreover, China has been Malaysia’s largest trading partner for over 15 years. Computers and their components are the main products exported to Malaysia by China, making it technologically dependent. An analyst stated in the South China Morning Post that an aggressive stance by Malaysia could hurt its economy and escalate the conflict in the South China Sea.
Moving to Indonesia, China plays a significant role in its foreign economic trade. China increased its trade gradually, reaching US$135.15 billion in 2024, compared with US$73.87 billion in 2020. In 2013, President Xi visited Indonesia and proposed a comprehensive strategic partnership to improve relations between the two countries. Furthermore, after being elected as President of Indonesia, Prabowo Subianto visited China in 2024. During his visit, the two leaders emphasized diplomatic engagement and agreed to build a community with a shared future. Various agreements were also signed to improve maritime cooperation. An analyst, Basundoro, argued that Indonesia did not publicly recognize China’s control in the South China Sea, but it acknowledged Chinese claims of the 9-dash line by signing the agreement.
Likewise, China expanded its economic engagement with Vietnam while encouraging free trade. It promotes investment and development in Vietnam and initiates projects such as railways, wind energy, and local transportation. Apart from that, China serves as an important market for Vietnam’s agricultural exports, mainly fruits. Additionally, Vietnam’s labour market is highly dependent on China for raw materials and equipment, which can influence Vietnam’s ability to confront China in the South China Sea. This will also cause economic consequences, including sanctions from China. In 2023, the Foreign Minister of China, Wang Yi, met the Foreign Minister of Vietnam, Bui Thanh Son, in Jakarta and discussed economic cooperation between the two countries, also addressing maritime issues to resolve the conflict.
Meanwhile, Brunei has a weak economy that is dependent on natural resources, which account for 99% of its exports. It is also the only country in the South China Sea that does not claim sovereignty over any area and has no military presence. China used the strategy of “Charm Offensive” to benefit its own interests against Brunei’s weak economy. China’s development projects in Brunei make it dependent. According to Espena and Anne, by investing $6 billion in the development project of Brunei, China bought silence in the dispute over the South China Sea.
Moving on, the Philippines is a major claimant in the South China Sea, backed by the support of the USA and Japan. It became a part of the BRI project but withdrew in 2023 and secured economic benefits and defence support from the US. Through these actions, the Philippines managed to reject China’s economic influence over the country and is trying hard to control its claimed areas in the South China Sea.
In conclusion, economic integration has made the world globalized and interdependent, and China is using it to sway claimant countries in the South China Sea. Traditionally, great powers annexed territories of interest through military invasion; however, China is using economic tools to make a legal claim to the South China Sea.
By Sakina Final-year student of International Relations at BUITEMS University and a former Intern at Balochistan Think Tank Network.
