Thayer Consultancy

ABN # 65 648 097 123

Background Briefing: South China Sea: Chinas North Sea Fleet Makes Its Appearance Carlyle A. Thayer February 13, 2013

[client name deleted] We would like your assessment of the following:: 1. Recently, China has stepped up its activity in the South China Sea. On February 3rd warships from the North China Sea Fleet (NCSF) entered the South China Sea to exercise. Up until now the NCSF has focused on the Yellow Sea near Russia and the Korean peninsula. The NCSF is also Chinas key nuclear force. Are the current exercises unusual? What is your assessment? ANSWER: China regularly conducts naval exercises in the Western Pacific including the South China Sea, usually in waters to the north of the Philippines. In the past elements of the North Sea Fleet joined with elements of the other fleets. In April 2010, for example, an exercise was held involving the longrange deployment of sixteen warships from the Peoples Liberation Army Navy (PLAN) drawn from the North Sea, East Sea and South Sea Fleets. The PLAN flotilla conducted live-firing exercises north of the Philippines before steaming toward the Malacca Straits. Up until this exercise Chinas South Sea Fleet was the only fleet to operate in the South China Sea. In July 2010, China also conducted the largest naval exercise of its kind to that date. This exercise included twelve of Chinas most modern warships from each of its fleets. The current naval exercise is notable because it involves only the North Sea Fleet. The primary purpose of such exercises is to demonstrate that Chinese naval forces can operate beyond the so-called first island chain. Exercises of this nature have several purposes. They serve as part of the routine training cycle. They are also intended to send a message to the U.S., Japan and other regional states that Chinas naval power and reach are growing. And China conducts exercises to off-set the naval exercises conducted by the United States and its allies. China sends a message to regional states that they must take Chinas interests into account. 2. Are these naval exercises designed to emphasize that China can bring more naval power to bear to influence the South China Sea territorial disputes? ANSWER: Yes, the recent exercise by the North Sea Fleet can be viewed as a demonstration that the PLAN can operate far from its base and exert naval power in the South China Sea. Beyond this, it is more important to view the modernisation of

2 Chinas South Sea Fleet for its impact on the South China Sea. The development of a major naval base in Yalong Bay near Sanya on Hainan Island is the main indicator that China intends to bring strong naval power to bear on the South China Sea in future years. 3. In addition, China has announced it will conduct daily fishery administrative patrols in the South China Sea in 2014 to better safeguard the legitimate interests of domestic fishermen, a fishery official said 7th February. See: (http://www.chinadaily.com.cn/cndy/2013-02/08/content_16213996.htm). Last year, Chinese police in Hainan were authorized to board and search ships that illegally entered the province's waters starting from January 1, 2013. But China did not define clearly the area where this regulation would be applied. Are the exercises of the North China Sea Fleet and the actions by Hainan authorities linked? What is your assessment of Chinas objectives? ANSWER: It has been clear from at least 2009 that China was embarked on a major expansion of its civilian enforcement fleet, including the China Marine Surveillance force and the Fishery Law Enforcement Command. China is building more ships; they are larger in tonnage and capability. They can embark helicopters. These civilian ships provide protection to Chinese fishermen and prevent littoral states from exercising sovereign jurisdiction in waters claimed by Chinas nine-dash line ushaped map. Chinese central authorities have clarified that Hainan provinces new regulations apply only to cases where China has promulgated baselines. It is my assessment that the new regulations only apply to the territorial sea and Exclusive Economic Zone surrounding Hainan Island. If these regulations are enforced in these waters they are legal under international law. All littoral states have the right to take action, including boarding and seizing ships that conduct illegal activities in their territorial sea and EEZs. There are also restrictions in international law. If Chinese authorities attempt to board and search foreign vessels elsewhere in the South China Sea, in disputed waters without proper demarcation, this would be a serious breach ofinternational law. For the moment is it best to wait and see what China does. 4. In early February a US report said that the undersea reserves of oil and natural gas in disputed areas are far higher than previously estimated. (http://www.taipeitimes.com/News/front/archives/2013/02/09/2003554582). Will this report raise tensions in the South China Sea in the near future? ANSWER: China has always provided estimates of oil and gas reserves that are seven or more times greater than estimates provided by the US Energy Information Administration. The new U.S. estimates are higher than previously estimated but far lower than current Chinese estimates. To some extent this new report will confirm in Chinese minds the South China Sea contains vast reserves of oil and gas and that foreign oil companies will want to develop these resources at Chinas expense. In sum, this new report will spur China to take action against contracts between foreign oil companies and the littoral states to prevent the exploitation of these resources.

3 Suggested citation: Carlyle A. Thayer, South China Sea: Chinas North Sea Fleet Makes Its Appearance, Thayer Consultancy Background Brief, February 13, 2013.