CNBC.com | June 1, 2014
By Ansuya Harjani
Territorial spats between China and its neighbors over competing claims in the East and South China Seas have precipitated a groundswell of nationalism in Asia, which if unmanaged, threatens to destabilize the region, say experts.
"Nationalism is on the rise in Asia, which is a serious issue because it shifts the rationality of actors from cost-benefit calculations from an economic and military sense towards a cost-benefit calculation ideologically," Ruediger Frank, department head and professor of East Asian economy and society at the University of Vienna told CNBC.
Growing nationalism may force politicians to act in a much sharper way than they may have done previously to respond to public sentiment, he said, increasing the risk of conflict.
The perils of nationalist fervor are apparent in the escalating row between China and Vietnam over territory in the South China Sea. China claims the resource-rich South China Sea nearly in its entirety, rejecting rival claims from Vietnam, the Philippines, Taiwan, Malaysia, and Brunei.
"In both China and Vietnam, leadership has promoted aggressive nationalism as a means to unify the country, consolidate domestic support, and underpin foreign policy decision-making," said U.S.-based security intelligence firm The Soufan Group.
"As a result, flare-ups between the neighboring countries over tiny but strategic slices of territory in the South China Sea have escalated tensions between the two, threatening to invite full-out conflict," it said.
The stand-off intensified last week when Vietnam accused China of sinking one of its fishing boats near a Chinese oil rig that was placed in the contested waters around the Paracel Islands in the South China Sea in early May.
The deployment of an oil rig triggered deadly anti-China protests in Vietnam that led to the evacuation of over 3,000 Chinese nationals.
"We need to look at the involvement of our citizenry - moving along in foreign policy gets more complicated with citizens get involved," said Laura del Rosario, Undersecretary for International Economic Relations at the Department of Foreign Affairs of the Philippines.
Economic ramifications of conflict
If a conflict were to break out in the South China Sea, it would endanger global trade,potentially derailing the global economic recovery, Vietnam's Prime Minister Nguyen Tan Dung warned at the World Economic Forum on East Asia last month.
The South China Sea is as a major international shipping route, a blockage of which is unchartered territory in terms of the potential scale of disruption, according to Parag Khanna, senior fellow at public policy institute New America Foundation.
"Whenever you have a supply chain disruption in individual countries - whether its Thai floods, riots in Vietnam, typhoon in the Philippines or a tsunami in Japan - you have significant global supply chain disruptions. Those are individual events, and none of those are acts of war," he said.
"If you do have conflict in the Paracel Islands, where there's obviously a tremendous amount of shipping, it's going to create a lot of bottlenecks and uncertainty," he added.
Espen Barth Eide, managing director at the World Economic Forum agreed that conflict would have significant global implications: "Asia is the powerhouse of the global economy, so bad news for Asia is bad news for the rest of the world," he said.
Assessing the likelihood of conflict
Political analysts currently assign a low probability to risk of conflict breaking out, noting that China would not want to jeopardize its public image.
"China wants to establish itself as a world leader; I think this will limit its willingness to go too far," said Frank of University of Vienna.
"They want to be seen as a responsible paternal leader. Of course, they don't want to be on an equal footing, they want to be respected as an 'elder brother'," he said. "In the Confucian sense, it's usually a two-way street, you expect this kind of respect and obedience, but on the other hand you're supposed to provide security and stability."
Khanna agrees that risk of regional conflict is low, but adds that this should not make policymakers complacent.
"We've had dozens and dozens of flash points in the last couple of years alone. While none of them have yet escalated into a regional conflict, any of those incidents could escalate because you don't have significant diplomatic institutional constraints in the region," he said.