URSABLOG: Living in Interesting Times

Last week was a bit slow in the market; email traffic, especially from the Far East, was slack. My colleagues asked what was up, and a quick check on Google revealed that the Tomb Sweeping Festival was the cause. It was one of those festivals that are important in China and elsewhere, like Dragon Boat Day, which seem a little idiosyncratic to us in the west but are taken very seriously there. It is one of the big cultural differences between Asia and Europe that keeps popping up; we assume we know how people live everywhere, because they are like us really, but those assumptions can lead to misunderstandings, and worse.

The Tomb Sweeping Festival is the day that families go to the graves of their ancestors and remember them, honour them, and clean up the tombs, all at the same time. How strange then that local governments in China have started to cause unrest and outrage amongst villagers by ordering the destruction of family tombs built on fields around towns and villages in order to preserve and optimise land for agriculture. Tianjin authorities issued an order to remove all tombs from surrounding agricultural land by the end of this month. According to the Financial Times:

The campaign against tombs has “radicalised local sentiment….The public considers that the government’s demolition campaign is grabbing land from the dead.”

It seems a bit extreme: China is a huge country with lots of land. But the peculiar geography of the place – mountainous areas and deserts represent a large proportion of available land – combined with large scale urbanisation and soil pollution means that fertile agricultural land is at a premium. In times when the urban population is growing and food security becomes an issue of increasing importance, tombs are being seen as a – well – bourgeois luxury. Indeed one of the reasons used to demolish the tombs is that “ostentatious” graves and funerals violate anti-corruption and austerity campaigns. The US$ 33 compensation given by authorities in Jingjiang, Jiangsu province to distraught relatives seems pitiful, and insensitive when the rural Chinese, mainly Han Chinese, believe that the peaceful presence of the dead blesses future generations. As Mr Yuan says:

"In Chinese traditional culture, digging other people's graves brings on the most vicious curse.”

Indeed, the existence of a national holiday to clean the very tombs that are being ripped up seems to be a dangerous mixing of messages from the authorities. But they will probably get away with it, as the majority of the population live in the cities, and they are almost always cremated when they die. Their ashes are interred in cemeteries, where a plot (a space for a small box) will cost US$ 14,900.

Scarcity of land - for the living and the dead – and resources is one of the usual starting points for expansionism, and China is no exception. With new wealth and power it is flexing its muscles to a point beyond which others feel comfortable, and indeed start to feel threatened. Countries close to China know how this feels already, and nowhere is this more felt than in the waters off China in the South China Sea. Vietnamese boats regularly fish around the Paracel Islands, as they have done for centuries. However the islands fall within the ‘nine-dash line’ within which the Chinese claim exclusive rights, despite the ruling of a UN tribunal 2016 which said that the Chinese had no legal basis to enforce that claim. This ‘nine-dash line’ seems somewhat arbitrary, but is part of China’s approach to maximise its new found regional power. The Vietnamese fishermen feel the brunt of that by continual harassment by the Chinese Coast Guard.

For those of us in shipping, we have become accustomed to the notion of freedom of navigation, but maybe we should think again. Recent challenges to what has long been held a right bound by UNCLOS (the UN Convention of the Law of the Sea) make freedom of navigation seem a little less written in stone than what it was. Russia’s manoeuvrings in the Black Sea and elsewhere, as well as China’s new found assertiveness are making things interesting. Nowhere is this felt more than in the Western Pacific.

Have a look at the Western Pacific:  

The First Island Chain is basically where the ‘nine-dash line’ is drawn and it reflects China’s desire to have control of all navigation within that line, and access to further trade routes. It is in this area that the island-building and the militarisation, with so-called anti-access and area denial (A2AD) capabilities, of reefs and rocks continues, and as these outposts become increasingly solid, the domination of the area within the ‘nine-dash line’, with the aim of keeping the US military out, becomes a fait accompli.

The US and their allies have noticed. US Navy (and the British Navy too recently) regularly pass through this area asserting their rights under ‘Freedom Of Navigation’ operations. They are confronted by PLA Navy vessels as they pass, but this game of cat and mouse will continue as long as, or until, there is a real conflict, or worse an accident. Apart from Okinawa in the north, where the US has a naval and marine base, there is no real US military presence except these missions, and they continue to assert their freedom, as risks grow.

The Second Island Chain is where things get even more interesting. This stretches from Japan proper in the north down to North Maluku in the south, and it is along this chain that the US military has permanent bases, notably Guam, and has been used to sail in these waters unimpeded. The Second Island Chain however is also the final barrier between the Chinese mainland and the open seas of the Pacific, and the Chinese are pushing back, ensuring that their swiftly growing navy can have access to these waters. By offering investment and diplomatic incentives as well as direct aid to the governments like the Solomon Islands, the Chinese are hoping to extend their reach and military influence to ensure they can get out, and they can control who gets in. In Polynesia, the traditional ties to Australia, New Zealand and their US allies are being weakened by Chinese investment. This is not just ideological colonisation; the Chinese want to take over and manage the Polynesian satellite slots for their own missile system, and their version of GPS, Beidou. The influx of Chinese migrants and workers is also helping to unbalance civil society there. 

It is not just the PLA Navy that is sailing in these waters: Chinese oceanographic research vessels are frequently mobilised to waters around these island states and close to Guam, where the US navy houses submarines that patrol the western Pacific. Apart from relatively benign actions like mapping the seabed, observing marine life and climate patterns, and plant buoys and sensors that record how sound travels under water in different locations, they are up to other stuff as well: 

“The primary driver is seabed mineral exploration, but there are also clear military uses,” says Ryan Martinson, a China expert at the US Naval War College. “The area these vessels’ activity is concentrated in is where possible submarine warfare between the US and China would take place.”  

Chilling stuff.  

Whilst we in shipping will applaud any signature that will be applied to a new US - Chinese trade deal, we blissfully ignore what is happening in some of the busiest waters in the world where our ships sail. The Chinese have been steadily exerting their grip on the supply of the commodities they need by developing their ownership of vessels. All Valemaxes that call directly in China are now under their ultimate ‘beneficial’ ownership. Their fleet of tankers and containerships grow. Leaving aside the role of independent owners, the flags that ships fly may prove to be increasingly important as ships transit seas within the nine-dash line.  

Consider this extract from a recent article in the Financial Times: 

In the Marshall Islands, Cary Yan, a Chinese investor, has leased large tracts of land on Rongelap, one of the atolls worst affected by US nuclear bomb tests. Mr Yan proposes to create a special economic zone which his company says would issue Marshall Islands passports to residents on its own. While he has not built anything yet, he has sold the idea to potential investors in China as a way to gain US residence rights. The project had unexpected political consequences last year when supporters launched a no-confidence vote against president Hilda Heine hoping to replace her with someone more China-friendly. She narrowly survived the vote. 

In Chuuk, one of the FMS states, local politicians who have land dealings with Chinese investors are pushing for independence — a move which could collapse the country’s association with the US and present an opportunity for Chinese military interests.  

In Palau, parliamentary speaker Sabino Anastacio, who is involved in a hotel project with Chinese partners, has become an advocate of switching diplomatic ties from Taiwan to China. 

Leaving aside the irony of a Chinese businessman creating a special economic zone to give US residence rights to Chinese investors, it is the political consequences of toppling a president to replace her with someone “more China-friendly” that we should note. The Marshall Island flag could shift from being a very US friendly one, to one that is in the hands of the Chinese. I’m not saying that the Chinese would start requisitioning ships, but it makes you think. And remember the first flags of convenience, used in the 18th century, were flown not to keep costs down, but to trade with (and sometimes between) openly hostile nations. 

I have no doubt that we are seeing the start of power play between great powers, between the US, China and Russia. Other countries, fearful of the future are starting to reposition, and this means changes to long held views on defence. The shipping industry could face a whole set of hazards from the seizure and impounding of ‘suspicious’ vessels (already started by Russia in the Sea of Azov in an area covered by a freedom of navigation treaty) to the destruction of GPS and other satellite systems, to the severing of undersea cables and pipelines. The defence of a nation’s interests can easily expand until they directly threaten another nation’s power. Thucydides saw this a 2,500 years ago as Sparta feared Athen’s supremacy. War, and the end of the classical era of ancient Greece followed, as Philip, and then Alexander took advantage of the city states’ weakened position, let’s call it the existing liberal rules-based order of the time.  

A country whose government has a public holiday for cleaning the tombs that it then destroys in the name of protecting the interests of the state will have no problem in stamping on the rights of other states. Other governments wanting to preserve, or worse, make themselves great again, could find themselves asserting their rights just as aggressively. Smaller nations will have to pick their way through this mess and choose carefully. Shipowners may look at the flags they have used for convenience in a different way, and considerations other than tax and transparency may influence their choices of jurisdiction. Freedom of navigation as we have known it for 75 years is ending, and a right we have taken for granted will be significantly diminished. However it plays out shipping and trade will be greatly affected, and we should begin paying attention right now.

Simon Ward

www.ursashipbrokers.com