Tensions between the U.S. and China ran high this week in the South China Sea after a U.S. naval "incursion" into waters claimed by China. The territory is claimed by rival countries in the region and carries a large portion of international trade.

Recent developments:

China was visibly irate with a U.S. naval "incursion" into what it claimed were its territorial waters in the South China Sea. The Chinese Foreign Ministry called the incursion "illegal" and a "deliberate provocation."

China was responding to a "Freedom of Navigation" patrol by a U.S. Navy Destroyer within a 12-mile strip off a man-made island China built in the Spratly Island Chains. The patrol is intended to send the signal that the U.S. does not recognize China's claims to these islands or the 12-mile strip and 200-mile exclusive economic zone that it claims around them.

The U.S. and China have been engaged in a diplomatic tug of war over the South China Sea for the past few years, which escalated after it was revealed that China was "building islands" in the contested waters. Some of these islands may be used for military purposes, with landing strips and deep sea ports.

Tell me more about the South China Sea…

A maritime dispute in the South China Sea has pitted China, Taiwan, Malaysia, the Philippines, Vietnam, and Brunei against each other. The U.S. is allied with a number of those countries (not China), has a large carrier fleet in the area, and has been trying to "resolve" the conflict. The dispute centers around three main reefs and island chains: the Spratly Islands, the Scarborough Shoals, and the Paracels.

China's claims to the waters are based on a "nine-dash line" that cuts through the South China Sea. Some variant of this claim has been in existence since 1911.

China, which considers this to be its backyard (its own Hawaii) feels that the U.S. should bugger off and everyone should listen to them because "China is a big country, and all other countries are small."

Why is this important?

For starters, $5.3 trillion of trade passes through there (follow the money). It will also be the key foreign relations issue that will determine how a rising China will deal with a still very strong U.S. China's claims in the sea could severely restrict the U.S.'s ability to operate in the South China Sea.

Many of the parties involved in the dispute are key U.S. allies who are looking to the U.S. to protect their claims. The U.S. is interested in a negotiated outcome that respects everyone's claims and allows it to continue operating in the South China Sea. Unilateral acts of island building threaten to disrupt that process.

Finally, there are just a lot of people involved; meaning the probability of someone doing something stupid is high...

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