Bi-Weekly Geopolitical Report – The Philippines, China & Escalation in the South China Sea (June 3, 2024)

by Daniel Ortwerth, CFA | PDF

On the short list of seemingly constant topics in the news today is the rising tension between the United States and the People’s Republic of China.  Across the spectrum of issues, disagreement between these two great powers seems increasingly unavoidable.  Geopolitical developments in every corner of the globe often find a way to become another point of US-Chinese friction.  When conditions become stormy like this, the question arises as to whether this tension will escalate into greater conflict, possibly even outright war.  If it does, what will be the flashpoint?  Where will the spark occur?

A storm is currently brewing in the South China Sea (SCS) that might make this body of water the area of greatest risk.  Like so many conflicts in history, this one does not involve a direct conflict between the opposing great powers, but rather a local dispute involving a small but significant country, the Philippines, and China.  This dispute holds the potential to stir up a storm that engulfs the region or that even spills into the world beyond it.

This report explains how the current Philippine-Chinese dispute developed and how it could further escalate.  After providing a recent history of key developments in the SCS, we explain in detail the dispute at hand.  Next, we show the strands that connect the tiny outcropping of land at the heart of the dispute to the broader world.  As usual, we conclude with a review of implications for investors.

Read the full report

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