China’s Evolving Risk Tolerance and Gray-Zone Operations: From the East China Sea to the South Pacific

Backgrounder Defense

China’s Evolving Risk Tolerance and Gray-Zone Operations: From the East China Sea to the South Pacific

September 9, 2024 29 min read Download Report

Authors: Brent Sadler and Elizabeth Lapporte

Summary

China’s recent military operations in the South China Sea echo its activities in the East China Sea more than a decade ago with recent diplomatic efforts foreshadowing a similar focus on the South and Central Pacific. Since 2008, Chinese military gray-zone operations—paramilitary activities designed to avoid direct military confrontation—have followed a familiar pattern of coercion using maritime militia and naval forces. Although its maritime approach is evolving as the Philippines and Japan have blunted its gray-zone coercive tactics, China has intensified its military presence and appears to be more willing to confront neighbors and the U.S. militarily. The U.S. and its allies must understand China’s new, riskier modus operandi and adjust their naval and diplomatic posture accordingly.

Key Takeaways

China’s multifaceted maritime actions follow a familiar trajectory of probing, cooption, coercion, and new status quo–setting behavior.

China’s focus in the Pacific and its interests in the East and South China Seas are driven in part by a desire to gain positional advantage in a war over Taiwan.

Addressing an evolving Chinese strategic modus operandi characterized by increased risk-taking requires a multifaceted U.S. approach to naval statecraft.

Recent developments in China’s military operations necessitate a reevaluation of how the United States and its allies handle Beijing’s increasingly provocative behavior. China conducted its Joint Sword-2024A exercise just days after the inauguration of Taiwan’s new president in May 2024. This drill underscores China’s readiness to execute short-notice major military operations.REF As of this writing, that exercise remains the highest recorded activity of People’s Liberation Army Air Force aircraft near Taiwan this year. Specifically, of 62 detected aircraft, 47 crossed the median line in the Taiwan Strait—a highly provocative move. For historical context, between 1954 and 2020, only four Chinese aircraft had crossed the median line; now it is a routine occurrence. This Joint Sword exercise reflects a broader pattern observed since 2022: increased military activity that has normalized heightened Chinese provocative operations.REF This activity will persist to deadly conclusion if the U.S. and its allies do not respond soon.

Such activities have a purpose: to lull neighbors into apathy toward a military that is ready for rapid mobilization to execute aggression. Taiwan’s absorption into the Chinese mainland is an often-stated Chinese Communist Party (CCP) core national interest. China’s increasing military activities overall should therefore be viewed with Taiwan and a potential showdown with the U.S. in mind.

Any confrontation over Taiwan will necessitate control of adjacent waters by China. This can help to explain why for the past 10 years China has steadily increased its maritime presence in the South China Sea: a concentrated effort to turn that sea into a Chinese lake. Greatly enabling this effort is an archipelago of artificial islands built between 2013 and 2015 that now bolsters a naval and paramilitary coercive presence.REF From these bases, China employs its military and paramilitary maritime militia to intimidate and exert control over neighboring countries’ waters. A recent iteration of this intimidation that played out at Second Thomas Shoal turned violent when Chinese Coast Guard cutters intercepted and assaulted Philippine forces on a resupply mission.REF Then, at another nearby shoal a month later in August, two Chinese Coast Guard cutters intentionally rammed two Philippine patrol boats.REF China’s trajectory of coercion is not new and is certainly evolving, but it is not limited to the South China Sea.

China’s Global Military Operations with Regional Focus

Further emboldened, China has increased its military activities with Russia in new and noteworthy ways. This type of combined provocative military activity first took shape in July 2019 when Russian and Chinese nuclear weapon–capable bombers operated together in the Sea of Japan.REF These operations have since become almost routine and include frequent combined naval flotillas that circumnavigate Japan.REF

In 2024, even more significant activity has occurred. One week before the July North Atlantic Treaty Organization (NATO) summit in Washington, DC, Presidents Xi Jinping and Vladimir Putin met at the Shanghai Cooperation Organization where they discussed coordinated responses to various security challenges.REF Shortly thereafter, China and Russia commenced a joint patrol with seven ships to conduct anchorage defense; reconnaissance; early warning, search, and rescue; and air and missile defense exercises.REF In an unusual move, China has also boosted its ties with Russia’s neighbor Belarus. In a well-planned move coinciding with the July NATO summit, the Chinese People’s Liberation Army (PLA) and Belarusian armies began a joint exercise just three miles from the Polish border.REF China’s engagements with Russia and its allies represent a coalescing of China’s strategic focus and alignment with Russia to challenge the wider West, including NATO. This, at a time that European allies increasingly see China both as a threat economically and as a security threat since 2022 given its persistent support to Russia’s war in Ukraine.

While these operations were occurring, the CCP was holding its Third Plenum, an important policy body focused on economic and social planning. As its top political leaders gathered in Beijing, the PLA was actively engaged in the South China Sea.REF If, in fact, China’s modus operandi of so-called gray-zone operations is changing, committing to a new approach would likely require wider CCP coordination—hence the interesting timing of events in Beijing and the South China Sea. Also, a more aggressive change in long-standing gray-zone tactics would impact China’s economy.

The term “gray-zone operations” first gained popularity in Japan. Japan’s Prime Minister Shinzo Abe used it to describe China’s use of fishing boats to press its claims in the East China Sea and included it in Japan’s 2010 National Defense Program Guidelines (NPDG).REF For several years, China’s use of maritime militia backed by Chinese Coast Guard vessels had provided a degree of official deniability to aggressive activities taken to advance CCP strategic objectives. These acts were devised to avoid eliciting a military response from an adversary, and so far, they have largely worked.

As China moves to a more conventional approach to maritime confrontations in the South China Sea, increasing evidence shows that it is seeking to contest the South and Central Pacific.

Should China’s leaders opt for a more aggressive approach, Xi Jinping, who chairs the plenum, could direct efforts to insulate it from potential repercussions. So far in 2024, China’s leaders seemingly have decided to execute increasingly provocative and geographically far-ranging military operations. Should CCP leaders see this year’s events as successful, it would mean more such challenges ahead as seen at Second Thomas Shoal. Such commitment by senior CCP leaders indicates an increased confidence with a higher threshold of risk-taking and acceptance of a greater probability of a hostile response. Beijing’s penchant for deniability in its maritime coercion may be coming to an end, at least in the South China Sea but likely not in other regions where it is increasingly playing a role.

As China moves to a more conventional approach to maritime confrontations in the South China Sea, increasing evidence shows that it is seeking to contest the South and Central Pacific. Case in point: recent Chinese diplomatic entreaties, such as Foreign Minister Wang Yi’s May 2022 island tour proffering economic and secret security pacts, such as that signed by the Soloman Islands in March 2022.REF Because this could be the vanguard of a new strategic maritime effort just getting underway that could follow the pattern seen in the East and South China Seas, an update of American statecraft is needed. Given China’s multifaceted use of economic inducements, elite capture, debt diplomacy, and outright coercion, a comprehensive U.S. response will be needed to confound China’s designs.

 

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Continuation of Past Decade’s East China Sea Gray Zone

China’s multifaceted maritime actions follow a familiar trajectory of probing, cooption, coercion, and new status quo–setting behavior. East China Sea crises from 2008 to 2013 have led to today’s de facto strategic stasis defined by evenly matched (for now) military presence. The culminating event occurred in 2010, when China’s gray-zone approach in the East China Sea had run its course. China’s focus then shifted south where its gray-zone tactics could continue to be employed against weaker and disorganized neighbors. This decade’s South China Sea incidents, such as the West Capella incident in 2020 or increased aggression toward Philippine sailors in 2024, are reminiscent of the previous decade’s East China Sea incidents.

Probing and Cooption. By early 2008, China and Japan had come to a tentative agreement to co-develop the East China Sea’s energy reserves. An April 2007 agreement had set down the lines for development and mutual understandings in the region for development.REF However, by late 2009, China’s submissions for rights to an extended continental shelf seemingly invalidated this deal.REF In the background of this development had been months of increasing Chinese fishing activity around the disputed Senkaku/Diaoyutai Islands.

Coercion. Events in 2010 exacerbated simmering differences. The watershed event was the Japan Coast Guard’s September 2010 arrest of a Chinese fishing boat captain by the Japan Coast Guard. The arrest followed the repeated intentional ramming of Japan Coast Guard vessels by a Chinese fishing boat, which triggered a months-long diplomatic confrontation that climaxed with China’s embargoing exports of critical rare earth elements to Japan.REF At the time, Japan’s electronics and auto industry relied on China for 90 percent of these materials, and the result was an economic panic with prices of rare earth minerals skyrocketing globally.REF This coincided with the detention of several Japanese nationals in China.REF These events also saw China’s maritime law enforcement begin intrusions closer than ever before into Japan’s contiguous waters (12 to 24 nautical miles from land). The Japanese Coast Guard and Maritime Self Defense Forces paced these developments but almost had to triple the number of scrambles of its air forces to meet Chinese military aircraft.REF

A New Status Quo. In 2010, China began to increase its military presence steadily around the Senkaku/Diaoyutai Islands. In 2012, a crisis unfolded when the Japanese government purchased the islands from a private Japanese owner. China’s response was more muted than in 2010: It merely continued its steady increase in maritime patrols and aircraft around the islands.REF The last significant new Chinese effort in the region was the failed November 2013 unilateral declaration of an air defense identification zone (ADIZ) over the Senkaku/Diaoyutai Islands.REF

A pivotal moment came in April 2014 when U.S. and Japanese national leaders affirmed that the U.S.–Japan defense treaty covers the Senkaku/Diaoyutai Islands.REF This and the failed ADIZ seemingly set a new status quo that has persisted tensely until today—September 2024. While China has strongly condemned the affirmation, the added direct U.S. support to Japan’s pushback against Beijing’s encroachment has been effective: China began to shift its focus southward, where the power dynamics in the South China Sea favored it.

South China Sea as the Decisive Theater

As China and Japan were settling into a statis over disputes in the East China Sea, things were about to heat up in the South. The South China Sea today remains a dynamically contested waterway with five regional powers increasingly willing to stand up to China. For historic and economic reasons, the South China Sea and China’s southern coastline have long been a sensitive region for Beijing. Operationally, control of these waterways would be instrumental in a war over the fate of Taiwan.

For these reasons, the South China Sea is a decisive theater in which naval presence can induce China to change behavior.REF By failing to heed the lessons of the East China Sea, as naval expert Hunter Stires points out in a 2019 essay, the current U.S. approach has fallen short, primarily due to a lack of consistent naval presence and a fundamental misreading of the Chinese threat.REF Stires argues that the U.S. has underestimated the complexity and persistence of China’s challenge, describing it as a maritime insurgency. Therefore, the U.S. must adopt a strategy of naval statecraft that emphasizes a robust and continuous naval presence as an enabler of a comprehensive economic, diplomatic, and military approach that confounds Chinese stratagems and gray-zone operations.REF

An example of effective naval statecraft was seen in the 2020 West Capella incident. The West Capella is a Panamanian-flagged drillship hired by Malaysia’s state-owned Petronas to survey for untapped petroleum reserves in Malaysia’s exclusive economic zone—waters disputed by China. After West Capella had been followed and harassed for weeks by the Chinese Coast Guard and maritime militia, nearby U.S. naval forces eventually took interest. At a critical moment, U.S. littoral combat ship Gabrielle Giffords conducted presence operations nearby that were construed as supporting Malaysia’s economic rights.REF Unknown until declassified in January 2021, the U.S. was pursuing a new strategic framework for a free and open Indo–Pacific that encouraged such support.REF

What the Senkaku/Diaoyutai Islands experience and West Capella crisis make clear is that naval presence matters.

This display of maritime power was not limited to Navy warships and was joined in one instance by Air Force bombers. Military presence culminated in July with dual aircraft carrier operation in the South China Sea. After months of sustained naval presence, a clear message of U.S. resolve and staying power was telegraphed to the region. Beijing blinked, the West Capella completed its surveys, and the region rallied to push back against China’s excessive maritime claims.REF The West Capella incident underscores the importance of a unified military-diplomatic-economic approach defined as naval statecraft. Yet today, overlapping claims have complicated a unified approach to pushing back against China, effectively encouraging increased coercion and escalation.

China’s recent military activities with partners like Russia in Asia have only complicated matters. As the China–Russia strategic partnership—which conducted a joint exercise in the South China Sea in July—continues to evolve, it is clear that China still has options to pursue in this decisive theater.REF China’s pattern of behavior from the East to South China Seas and imminently in the South and Central Pacific indicates a clear strategy of graduated maritime assertiveness. What the Senkaku/Diaoyutai Islands experience and West Capella crisis make clear is that naval presence matters. In both cases, a sustained maritime presence led to a wave of positive regional diplomatic and partner military actions tied to offshore economic interests. The challenge is how to apply these lessons to what could be the next great game for strategic position.

China’s Great Game for the South and Central Pacific

China’s recent activities in the South and Central Pacific are what regional expert Cleo Paskal calls entropic warfare: a strategy of divisiveness aimed at paralyzing target countries’ ability to respond or defend themselves, encapsulating the concept of winning without fighting.REF Entropic warfare has demonstrated its efficacy most notably with the Solomon Islands, which signed a bilateral security cooperation agreement with China in April 2022.REF China makes police support available to the prime minister, and Beijing conceivably could use this to justify the deployment of military forces within the country. In the past, Australian troops have been invited to intervene and restore peace, as was the case in 2000 and 2003 in the Solomon Islands.REF Significantly, this Chinese pact grants permission to “make ship visits to, carry out logistical replacement in, and have stopover and transition in Solomon Islands,” potentially laying the groundwork for a military base.REF The controversial Solomon Islands–China security pact, alongside Chinese Foreign Minister Wang Yi’s subsequent tour of Pacific Island nations, represents a methodical effort to deepen Beijing’s security and economic ties in the region.REF

Amid these developments, the Compacts of Free Association (COFA) with the U.S. and three Pacific Island states were renewed after a months-long process. Given China’s increasing interest in the region, the COFA agreements have become more strategically important. These agreements provide the U.S. with advantages that include exclusive rights to “establish and use military areas and facilities” and authorities over the defense decisions of Palau, the Republic of the Marshall Islands, and the Federated States of Micronesia, known collectively as the Freely Associated States (FAS).REF Under these “strategic denial rights,” U.S. consent is needed for any third-party military presence in the FAS.REF In return, the United States provides economic assistance and access to federal programs pursuant to treaties that last for 20 years. Thus, the COFA agreements help to deter direct Chinese encroachment, though nefarious criminal and unofficial Chinese activity has proceeded apace as recent controversies illustrate. Some notable recent controversies include the arrest of a Chinese couple accused of trying to establish a mini state in the Marshall Islands,REF Chinese intimidation of former Federated States of Micronesia President David Panuelo, and Chinese criminal presence in Tinian and Palau.REF

So far, China’s attempts to thwart or undermine the COFA agreements, as seen in Palau and the Marshall Islands, have failed,REF but recent domestic disputes could weaken the agreements’ effectiveness. For example, Palau’s Senate voted against a resolution that endorses the permanent deployment of Terminal High Altitude Area Defense (THAAD) missile defense systems.REF Additionally, the viability of these island nations’ economies, based largely in fishing and tourism, is easily put at risk, and they might still pivot toward China. In a July 2023 speech, Palau’s then-President Surangel Whipps, Jr., relayed how the Chinese ambassador offered lucrative business inducements such as directing Chinese tourists to the island nation in return for renouncing Taiwan recognition.REF Acceptance of earlier Chinese entreaties, as relayed by the islanders themselves, has been discouraged by a combination of economic, military, and immigration assurances provided by the United States through the COFA agreements. Also frustrating to Beijing is the fact that two COFA states, Palau and the Marshall Islands, recognize Taiwan diplomatically.REF Washington should take account of such facts as it wages the New Cold War with the CCP.REF

China’s pattern of behavior from the East to South China Seas and imminently in the South and Central Pacific indicates a clear strategy of graduated maritime assertiveness.

China’s focus in the Pacific and its interests in the East and South China Seas are driven by much the same rationale: to gain a positional advantage in a war over Taiwan. China knows that for the U.S. to sustain a war in Asia, it will require access to sea and air lanes through the Pacific and that complicating this adds costs to the U.S. and further dissuades American intervention in a war over Taiwan.REF Chinese actions will therefore not be limited to the Soloman Islands or the FAS.

As seen in the previously mentioned regions, the presence of Chinese distant fishing fleets engaging in illegal, unreported, and unregulated (IUU) fishing represents a familiar dimension of China’s strategy.REF The insufficient regulation of IUU has severe economic impacts, depleting island nations’ economic resources (fishing stocks) and in turn weakening local governments’ resistance to Chinese entreaties. In 2019, for example, Kiribati, a Pacific Island country, switched its diplomatic recognition from Taiwan to China after receiving about $114 million from Beijing. This funding included an aircraft and a vessel as well as a loan to help expand Kiribati’s tuna-fishing industry.REF

Kiribati exemplifies how economic leverage can be created and used in pursuit of geopolitical goals. It also illustrates why entropic warfare might better be seen as an update of past methods tailored to Pacific Island nations. The developments in the Solomon Islands, alongside the challenges posed by illegal activities and economic coercion in other parts of the Pacific, underscore the complexities and high stakes involved in maintaining balance and ensuring security across the Indo–Pacific.

Policy Recommendations for the United States

Addressing an evolving Chinese strategic modus operandi characterized by increased risk-taking requires a multifaceted naval statecraft approach. The following recommendations outline a comprehensive strategy to bolster the United States’ engagement and security posture with a focus on the South and Central Pacific.

Specifically, the President and Congress must:

  • Prioritize budgets using budget reconciliation for the South and Central Pacific as a strategic imperative.

Congress should:

  • Amend the proposed fiscal year (FY) 2025 National Defense Authorization Act (NDAA) to prioritize the Indo–Pacific with an increased focus on the South and Central Pacific subregion and ensure that future NDAAs do the same. For example, in May 2024, the Pentagon asked Congress to consider the Indo–Pacific Security Assistance Initiative, a request for $500 million in FY 2025 to arm Indo–Pacific partners.REF The House NDAA did not include this request, but the Senate version did.REF
  • Remain vigilant to ensure that the Pentagon executes initiative funding with greater investment in the South and Central Pacific, a region that is too easily overlooked as demonstrated during prolonged COFA negotiations.REF

The new Administration in January 2025 should:

  • Act quickly, working with Congress, and use budget reconciliation to ensure that Pacific Deterrence Initiatives are fully funded and that resources are provided to begin expansion of U.S. Coast Guard facilities in American Samoa.REF

The next President should:

  • Take the region seriously and visit a Pacific Island nation within 100 days of Inauguration. Across Administrations, there have been too few senior leader engagements with Pacific Island nations. President Joe Biden’s planned May 2023 visit to Papua New Guinea was cancelled at the last minute so that the President could return to the U.S. for domestic budget negotiations.REF Had President Biden stuck to the plan, he would have been the first sitting U.S. President to visit a Pacific Island state. Papua New Guinea had even declared a national holiday for his arrival.REF

    America’s high-profile leaders need to be more present to be taken more seriously by Pacific Island leaders. Likewise, greater regional senior leader engagement with Cabinet-level officials is needed with frequent visits to the region. Many officials from the South and Central Pacific come to and hold meetings in Washington, but travel by U.S. leaders—including the President—to the FAS and South Pacific is past due as China works to erode U.S. influence in the Pacific.

The Department of Defense and Coast Guard should:

  • Expand basing options in the South and Central Pacific. The Department of Defense has stated that military posture is the “fundamental enabler of U.S. defense activities and military operations overseas and is also central to defining and communicating U.S. strategic interests.”REF A good place to start such basing is in American Samoa, an effort championed by Samoa’s Representative in Congress, Aumua Amata Coleman Radewagen (R).REF

    American Samoa was a key staging base during World War II, and its location remains strategic in the South Pacific. The Department of Defense should prioritize upgrading port facilities and expanding airstrip capacities, along with expanded local repair and maintenance options. These enhancements would also improve capacity for tourism and fishing while enabling more robust deployment of U.S. Coast Guard and Navy assets. Attracting more fishing and maritime activity (Naval and Coast Guard) to the island will create more economic opportunities for an economy that is closely tied to the ocean.REF Such an effort could reverse the impact of the 2016 closure of tuna-canning facilities that were the leading employer on the island.REF The example of American Samoa is naval statecraft in action and could be replicated in island nations across the Pacific that are facing similar economic and maritime security challenges.

The U.S. Development Finance Corporation (DFC) should:

  • Make better and more focused use of financial support to the Pacific islands.REF Since 2020, the DFC has funded only two projects in the Pacific Islands, both in Papua New Guinea: a $2.5 million women’s empowerment microbank program and $50 million third-party financing of a telecommunications project.REF If the DFC is to play an effective role in the region, it will need to do more and must focus on investments that foster greater economic activity and enable better maritime security.

The Secretary of State and the Commandant of the Coast Guard should:

  • Establish a maritime dialogue and associated operational exercise with regional partners to learn best practices and build consensus in countering China’s evolving maritime coercive techniques. The U.S. Coast Guard conducts infrequent deployments to Asia, and these deployments represent an opportunity to learn firsthand from regional maritime services that confront China’s paramilitary forces daily. Emblematic of such activities was the 98-day Pacific deployment of the cutter Bertholf in early 2024 that included stops in Singapore and Malaysia.REF For its part, the Department of State has hosted numerous regional forums covering related topics but has not been focused on how best to counter China’s gray-zone tactics.

What is needed in these fora is a focus on exchanging diplomatic, legal, and maritime policing best practices while forming a consensus for collective action. Efforts by the Philippines and Vietnam to rationalize their maritime disputes and formulate a bilateral code of conduct should be embraced and encouraged.REF More broadly, having regional partner nations harmonize their maritime disputes and agree to common codes of conduct will increasingly place China as the outlier. Moreover, U.S. maritime forces stand to benefit from the exchange of lessons learned and best practices from partner nations policing illicit fishing fleets and coercion. Those insights will be important as the U.S. races to confront increasing Chinese activity in the South and Central Pacific.

Conclusion

The dynamics in China’s evolving military operations and burgeoning strategic partnerships underscore an urgent need for a comprehensive strategic approach. China is increasing its risk-taking beyond the Taiwan Strait and South China Sea and is increasingly in league with Russia to confound the interests of the U.S. and its allies. From the East to South China Seas, and soon in the South and Central Pacific, a militarily confident China is on the march. Contesting this Chinese long march requires a naval statecraft that has demonstrated glimmers of success as witnessed during the West Capella incident.

Brent Sadler is Senior Research Fellow for Naval Warfare and Advanced Technology in the Douglas and Sarah Allison Center for National Security at The Heritage Foundation. Elizabeth Lapporte was a member of the summer 2024 Heritage Young Leaders Program.

Authors

Brent Sadler
Brent Sadler

Senior Research Fellow, Allison Center for National Security

Elizabeth Lapporte

Summer 2024 Member of the Young Leaders Program at The Heritage Foundation