Beijing just unveiled a new tactic to assert its sovereignty claims in the South China Sea.
Called the "lawfare" - or "legal warfare" - approach, China's new strategy to control the resource- and trade-rich region shifts away from the former (and universally rebuffed) "nine-dash line" (NDL) claim to a more concrete - though no less imperialistic - one.
Specifically, the Red Dragon is now asserting regional sovereignty over the four contested island groups - colloquially called the "Four Shas" - housed within the South China Sea. This shift allows Beijing - at least, in its own mind - to claim ownership of the subterranean continental shelves to which these islands are attached.
And - voilà! - China has a new claim to the same contested area, only based on different terrain this time.
While some might perceive this maneuver as an insignificant move in a one-sided game of semantics, there are greater implications at stake. You see, it's actually advantageous for China to reframe the South China Sea dispute this way. According to Michael Pillsbury, senior fellow at the Hudson Institute and director of the Center for Chinese Strategy, in the Free Beacon on Sept. 21, the "U.S. government lacks both legal warfare and counter legal warfare capabilities" to fight back.
Essentially, Washington doesn't have the international know-how to dispute China's new territorial claims on an international stage - chiefly because "Chinese government seems to be better organized to design and implement clever legal tactics to defy international norms with impunity," Pillsbury said.
America's government? Not so much.
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As a result, the United States hasn't reacted to China's claims at all.
And, according to Money Morning Executive Editor Bill Patalon, who's been watching developments in the South China Sea for years (and in the overall "Asian arms race" for over three decades), "staying mum" is the last thing Uncle Sam wants to be doing right now.
Here's why...
Beijing Doesn't Negotiate Over the South China Sea
Bill says that Beijing is never looking for any "true give-and-take scenarios" - no matter the geopolitical stakes at play.
It never has and never will. While The Diplomat, a D.C.-based Asia-Pacific news site, argued on Tuesday (Oct. 24) that the United States "must ask China for discussions and briefings on the new claim," there's little reason to believe that Beijing would consider such an appeal - especially over its sovereignty claims in the South China Sea.
China has never considered coming to the "negotiating table" before. That's not how the country operates.
And Bill knows that.
Must See: The South China Sea is about to get violent. But thanks to a small $6 U.S. defense firm with a top-secret new technology, China is about to be taken to the woodshed. Read more...
"In the South China Sea," Bill says, "Beijing's idea of cooperation is 'you cave in and agree to let us do whatever we want.'"
Full stop.
And so far, the United States has been playing into that narrative. Although the Pentagon has been conducting regular "freedom of navigation" operations (FONOPs) in the contested region, Washington has not made a peep about China's new claims.
And every moment we drag our heels gives China the impression that its claims will go unchecked.
And the bolder China becomes, the more intense Washington's response will have to be to keep the South China Sea trade routes open and safe.
As tensions in the South China Sea mount, Bill is sure of one thing: Washington will respond.
And when - not if - America barks back, the world will find itself that much closer to actual military conflict.
After all, this current stalemate between the two world powers can't last forever. One day, China may feel the need to save face and lash out at a passing U.S. carrier group in an effort to assert global dominance.
Or perhaps the United States will have to use military force to protect one of its Pacific allies against China's aggression.
Who knows?
Whatever the future may hold, a war in the South China Sea always seems just one overdone bully tactic away.
And that ever-present threat is why Bill recommends investing in the companies that will quite literally shield America from enemy weapons in the years ahead. Indeed, his favorite pick in this space has already racked up 320% gains...
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Your Shelter When Geopolitical Tensions Are High
One such firm is Boeing Co. (NYSE: BA).
Since Bill first recommended Boeing in 2011, its share price has soared a whopping 320%.
His prescient call to buy the jetliner pioneer at that time was based on the fact that he knew airlines worldwide would have to buy $4 trillion worth of commercial jets in the coming decades in order to modernize their own fleets and to keep pace with the growth in international travel.
At the time, Boeing's shares were trading at $61.92 each and were paying a dividend of $1.68 a share.
Today, Boeing is trading at about $257 a share. And it's paying a dividend of $5.68 a share.
When it comes to the ongoing crisis in the South China Sea, Bill points to Boeing's near-omnipotence in various projects as even more proof of the airline-manufacturing company's solid market footing.
You see, Boeing is also the world's largest and most versatile manufacturer of military aircraft.
And thanks to its various defense contracts - including upgrades to its CH-47D Chinook heavy-lift helicopters, as well as its major, ongoing part in building DARPA'S XS-1 military space plan - Boeing raised its full-year earnings and cash flow guidance for the second time in six months this year. That was after beating market expectations with its Q3 earnings report on Oct. 25.
To get more of Bill's perceptive profits plays, we suggest subscribing to his Private Briefing.
In fact, Bill has recently found a $13 billion anomaly he calls the "Halley's Comet of investing." It's quite rare, and fleeting, and Bill sees things lining up perfectly to bring some very sizeable profits to well-positioned investors. Sign up for Private Briefing here...
Up Next
Hostilities in the South China Sea now seem imminent, and the Trump administration could be on the verge of its first major crisis.
But thanks to a small $6 U.S. defense firm with a top-secret new technology, China is about to be taken to the woodshed.
Frankly, you have to see it to believe it...
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Related Articles:
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- Money Morning: South China Sea Tensions Mount as China Monitors U.S. Activities
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