What the United States Wants in the South China Sea

The South China Sea is one of the most valuable trade routes in the world, and nobody - not even the president - is talking about it.

But the events unfolding in the region, which is worth roughly $3 trillion, could have a profound effect on global trade, international security, and your wallet.

The South China Sea has long been a source of territorial disputes between several Asian countries - specifically China, Brunei, Vietnam, the Philippines, Malaysia, and Taiwan.


Each of these nations argue that certain portions of the contested maritime region are their own sovereign property.

Except China.

The Red Dragon asserts that the entire waterway belongs to the Chinese government.

Here's why China is fighting tooth and nail for control over the South China Sea - and how you could play that fight to turn a small stake into $19,690...

China Won't Give Up the South China Sea Anytime Soon

China has been vying for control of the South China Sea for decades.

In the 1940s, Beijing demarcated the South China Sea with what it called the "nine-dash line": a sweeping claim to nearly the entirety of the contested region.

What makes the Red Dragon's broad claim so controversial is the fact that its "nine-dash line" encompasses the Paracel and Spratly Island chains, as well as dozens of rocky outcrops and reefs.

These bits of land provide a point of access to the estimated 11 billion barrels of oil and 190 trillion cubic feet of natural gas located in the South China Sea, according to the U.S. Energy Information Agency in 2016. Much of those resources remain untapped.

The islands are likewise located in the most lucrative fishing zones within the South China Sea, with combined revenue that makes up about 3% of China's GDP and generates up to $279 billion annually, The Diplomat reported in July 2016.

Control over the South China Sea is not just a matter of wealth, but of power as well. Each year, some $3 trillion in traded goods and a third of all maritime traffic worldwide passes through the South China Sea.

And China will do anything to achieve absolute sovereignty over these waters.

In 2013, the Philippines filed a case against China at Sweden's Permanent Court of Arbitration in The Hague. The small island nation sought the right to utilize the waters near the islands and reefs it occupies, even though they fall within the nine-dash line.

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On July 12, 2016, The Hague ruled in Manila's favor, determining that China had no legal basis for its nine-dash line ownership claims. The court added that Beijing had violated the Philippines' sovereign rights under the United Nations Convention on Laws of the Sea (UNCLOS).

But that didn't stop the Red Dragon.

In fact, in the years since The Hague's finding, China has outright defied the court's decree to recognize and relinquish parts of the South China Sea to its rival claimants. It's built man-made islands, militarized disputed features in the waterway, and harassed U.S. naval vessels and aircraft patrolling the region. Beijing has also coerced competing countries to back down from their territorial claims with promises of billions of dollars in investments or with outright threats of military force.

And Beijing's tactics are working.

In recent months, many of the ASEAN countries that had, just a couple years back, opposed China's claims, have ceased fighting - either because of internal struggles or because "Big Brother China" is simply too powerful to contest.

This puts the United States in the spotlight when it comes to countering Beijing's territorial claims...

Why the South China Sea Is Important to Uncle Sam - and You

For the United States, the South China Sea conflict has never been about rocks and shoals so much as it's been about what parties set the geopolitical framework for the region.

The United States wants to maintain freedom of navigation throughout the contested waters. It has been working to promote a rules-based order in the region since World War II and has a vested interest in protecting its allies, such as Vietnam and Taiwan.

And while China hasn't directly threatened or obstructed this freedom of movement yet, it could any day. After all, China has filled the Spratly and Paracel island archipelagos with warship docks, military jet hangars, and even troop bunkers.

If China achieves total military control over the region, it could impose tariffs at will and outright ban shipping vessels from nations with which Beijing has beef.

Editor's Note: Don't miss a single update on the South China Sea as Beijing steps up its aggressive campaign to take over the disputed waters. Get real-time alerts sent to your inbox, completely free, here.

To secure freedom of navigation for all nations in the South China Sea, the United States may be forced to block China's access to the South China Sea.

The South China Sea tensions are part of the reason that the U.S. Pentagon and the Department of Defense have upped America's defense spending 32% since 2012 - the year tensions in the region resurfaced.

Much of the military's increased budget is going to defense contractors. Investors in these contractors are making money hand over fist thanks to increased military spending amid the threat of war with China.

Just look at Northrop Grumman Co. (NYSE: NOC), which is up 37% in the last year, or Boeing Co. (NYSE: BA), up 111% in the same time frame.

But we expect this one tiny company to completely outstrip the competition - and soon...

Secret Weapon Set to Foil China's Master Plan

The South China Sea is about to get violent, and the Chinese have an alarming new superweapon they think gives them the upper hand. Or at least, that's what their war hawks think.

But they couldn't be more wrong.

Thanks to a small $6 U.S. defense contractor with a top-secret technology, the Pentagon has an ingenious new checkmate move designed to stop a Chinese sneak attack dead in its tracks.

Click here to learn more...

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