Will the U.S. go to war with China in the South China Sea?
south china sea
- China Roils After Joint Military Exercise in South China Sea
- China Warns U.S. Over South China Sea Presence
- What Investors Need to Know About the South China Sea Showdown
- Why Is the South China Sea Important?
- South China Sea Dispute Could Fuel Global Energy War
- The Dangerous Standoff in the South China Sea is About to Boil Over
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Tensions in the South China Sea are ramping up ahead of next week's international tribunal.
The South China Sea is known for its fair share of territorial disputes. But this latest clash between China and the U.S. was hardly expected.
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China warns U.S. officials about an agreement that was just made between North America and the Philippines.
The treaty calls for an increased U.S. military presence in the South China Sea.
The South China Sea showdown took a turn toward even more tension this month, with Donald Trump's campaign rhetoric and Taiwan's missile jitters making a bad situation worse.
Why is the South China Sea important? At first look, the island group seems uninhabitable and worthless - but this observation would be grossly in error.
These islands sit on the edge of the most lucrative fishing area in the South China Sea. They are also on the edge of one of the most oil- and gas-rich areas yet discovered.
And the Spratlys are claimed by no less than six different countries.
"This is definitely a situation you want to watch closely," Money Morning Executive Editor Bill Patalon told readers on Dec. 8. "Any kind of a major 'incident' there will clearly have a big - and negative - impact on the world financial markets."
What's behind the fight is a vast quantity of oil and gas believed to lie beneath the South China Sea.
China and the other nations desperately want the energy resources beneath the South China Sea, and the dispute has caught the attention of global financial markets.
China's biggest offshore oil company, CNOOC Limited (NYSE ADR: CEO), recently updated its projection of energy assets in the South China Sea. It said the area could hold 17 billion tons of oil and 498 trillion cubic feet of natural gas.
All those resources could not be extracted, but enough could be taken out to double China's current reserves of oil and natural gas.
For its part, China's Ministry of Land and Resources says the area contains more than 40 billion tons of oil equivalent. Most of that is believed to be in the form of natural gas.
Another Chinese estimate says 2,000 trillion cubic feet of natural gas lie under the South China Sea. That would be enough gas to meet the country's needs for the next 400 years, based on 2011 consumption levels! No wonder energy-hungry China is so interested in pushing its claims in the region.
Exploration in the South China Sea has been very limited so far because few major international oil companies want to get involved in the territorial dispute. China has already successfully pressured companies like BP plc (NYSE: BP) and Exxon Mobil Corp. (NYSE: XOM) to abandon its deals with neighboring Vietnam.
CNOOC itself caused a diplomatic row with Vietnam in June when it put up for auction nine oil and gas blocks that Vietnam says are in its territory. The blocks had already been auctioned by Vietnam to companies including ExxonMobil and Russia's Gazprom.
CNOOC Taking the Lead in South China SeaCNOOC plans to push ahead in the South China Sea.
Now you see why.
Today, the anniversary of Japan's 1931 occupation of parts of mainland China, an already smoldering territorial dispute between China and Japan is threatening to boil over.
Major Japanese firms have ordered shutdowns of their Mainland China operations, and Japanese expatriates living in that country have been ordered to stay indoors as angry protests sparked by the territory disputes have kicked the anti-Japanese sentiment to its highest level in decades.
We've been telling you for months that this was inevitable.
Last week, Beijing dispatched patrol boats to the five East China Sea islands that are escalating the disagreement between the two Asian heavyweights. Beijing sent the boats to the Senkaku island region as an angry response to Tokyo's plan to buy the mostly barren islands from their private owners.
Over the weekend, well-known Japanese firms such as Honda and Toyota were the focus of demonstrations and violent attacks. And yesterday, a flotilla of around 1,000 Chinese fishing boats was sailing for the islands.
All of this was prompted by Japan's announced plan to purchase the five afore-mentioned islands from their private owners.
Chinese Foreign Ministry spokesman Hong Lei said the government would protect Japanese firms and citizens and called for protesters to obey the law.
"The gravely destructive consequences of Japan's illegal purchase of the ... islands are steadily emerging, and the responsibility for this should be born by Japan," Chinese Foreign Ministry spokesman Hong Lei told reporters at a daily news briefing.
This follows last week's warning by China's Foreign Ministry that "if Japan insists on going its own way, it will bear all the serious consequences that follow."
Although the hottest part of this dispute currently centers upon China and Japan - which generated two-way trade of $345 billion last year - many more Pacific-Region nations are involved.
And, as we'll show you in a minute, there will also be consequences for this country, and for U.S. investors who take the time to understand what's at stake.