While most of the world remains fixated on Syria and Russia, China’s PLA Navy is in the midst of an unprecedented provocation in the South China Sea as a fleet of Chinese warships conducts its 3-day combat war drills in the waters south of Sanya, the southern tip of China’s Hainan Island.
With China’s presence in the waters off its southeastern coast growing increasingly threatening, President Xi Jinping declared on Thursday that the task of building a strong navy “has never been as urgent as present”. His remarks were part of a speech made during the country’s largest fleet review since 1949.
Xi also urged the navy to stay on high alert to safeguard national interests, and said the Navy should strengthen Communist Party leadership.
Meanwhile, China’s latest war drill comes after military jets from the People’s Liberation Army’s Eastern Theater Command conducted exercises over rugged terrain in western China to simulate an invasion of Taiwan earlier this year. Also, China recently celebrated the opening of its first foreign military installation since World War II, in tiny Djibouti, located on the Horn of Africa. The world’s most populous nation has approached the government of tiny Vanuatu – an island nation in the South Pacific – about the prospect of building a military base there. That would place Chinese forces within 1,500 miles from Australia.
Not long ago, a senior US military commander, Admiral Harry Harris, who is set to become the next US ambassador to Australia, warned that the US must prepare for the prospect of a “hot” war with China. Other top military commanders have described China’s strategy of gradually intensifying aggression in the Pacific. China is using its Navy and Airforce to gradually prod and test its neighbors and other powers – including the US – into accepting an expanded Chinese military footprint in the region.
The PLA Navy recently installed radar scramblers on one South China Sea outpost to jam military signals in response to the US’s second “Freedom of Navigation” mission of 2018. These missions typically involve a US destroyer sailing within 12 miles of one of China’s outposts in the South China Sea.
After clarifying earlier today that China hasn’t engaged in trade talks with the US and isn’t planning to offer any concessions, it appears trade tensions between the US and China remain much higher than the market recognizes.
And as investors continue to ignore these trade tensions we wonder: Will equity traders wait until we’re on the precipice of World War III before we see a genuine bear market emerge?
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