In continuation of its “free and open Indo-Pacific” strategy, U.S. 30 July pledged $113mn to increase technology exports to region, support energy industries and establish network to promote infrastructure development; at ASEAN meeting in Singapore 4 Aug pledged $300mn in security assistance. China FM Wang Yi publicly mocked scale of assistance and traded barbs with his U.S. counterpart over militarisation of South China Sea (SCS). U.S. Congress 1 Aug passed defence spending bill which calls on Department of Defence (DoD) to increase public reporting on Chinese activities in SCS, and conditions future Chinese participation in Rim of Pacific naval exercises on Beijing halting its island-building activities and removing weapons from features it controls. DoD report 16 Aug said China seeks to establish regional pre-eminence and is developing land, sea and air nuclear capabilities. China’s People’s Liberation Army 10 Aug issued six alerts to overflying U.S. reconnaissance plane to stay away from Chinese-controlled features in disputed Spratly archipelago. Chinese media 14 Aug reported three satellites scheduled to launch 2019, part of constellation that will enable China to track ships across entire SCS. Vietnam’s state-owned PetroVietnam and two Japanese companies 31 July signed agreement to extract and sell gas in Sao Vang-Dai Nguyet project, likely within China’s nine-dash line claim. China 29 July donated four patrol boats to Philippine Navy as gesture to improve relations. In unusually stern statement, Philippine President Duterte 14 Aug said China had no right to repel aircraft and vessels passing artificial islands, calling waters international sea; China 16 Aug replied it had right to respond to aircraft and ships encroaching into its waters. ASEAN and Chinese officials 2 Aug formally announced agreement on single draft text that will serve as basis for code of conduct negotiations, which Chinese FM Wang 4 Aug said would be long and complex. Japanese helicopter carrier conducted rare SCS bilateral exercises with U.S. aircraft carrier strike group (CSG) 31 Aug.

Biennial U.S.-led Rim of the Pacific (RIMPAC) naval exercises continued, scheduled to end 2 Aug, including some 25,000 personnel and 52 ships from 26 countries; China sent surveillance ship to monitor exercises. Vietnam’s participation for first time seen as significant sign of closer military relations with U.S. Department of Ocean and Fishery. China’s Hainan province 4 July released notice encouraging Chinese development of uninhabited islands in SCS; policy would particularly affect islands in Paracel archipelago, also claimed by Taiwan and Vietnam. Reports emerged that Philippines govt is proposing new constitution that would make more explicit assertions of sovereignty over areas in SCS, which Manila calls West Philippine Sea. ASEAN and Chinese officials late June discussed proposed code of conduct (CoC) in meeting on implementation of 2002 Declaration of Conduct of Parties in the SCS, agreeing on a single draft CoC negotiating text and to move ahead with consultations to produce a unified draft document. Australia and UK 20 July discussed plans to send British aircraft carrier to Pacific and undertake joint naval operations to reassert international “norms and conventions”.

Addressing Shangri-La Dialogue Asia security summit in Singapore 2 June, U.S. Sec Defense Mattis outlined U.S. “Free and Open Indo-Pacific Strategy”, consisting of expanded maritime security support for U.S. partners; helping regional navies become more interoperable with U.S. Navy; strengthening governance through defence engagements; and private sector-led development. Mattis said U.S. wants to work with regional multilateral institutions, particularly ASEAN; that new U.S. national security and defence strategies emphasise Indo-Pacific; said cooperation with China is “welcome wherever possible”. Mattis criticised China’s militarisation of features in disputed Spratly archipelago. Also addressing Shangri-La Dialogue, China for first time publicly acknowledged that it was basing weapons and military personnel on disputed features it controls in Paracel and Spratly Islands, which it said are Chinese territory. Chinese military representative said Mattis’s comments were “irresponsible” and that U.S. was the one militarising, citing U.S. air and naval passages within twelve nautical miles of Chinese-controlled territory. U.S. 5 June flew two B-52 bombers over disputed Scarborough Shoal near Philippines; China sent ships and aircraft, said U.S. “stirring up trouble”. Reuters 3 June reported U.S. considering stepping up its naval operations near disputed features. U.S. held annual Malabar naval exercise with India and Japan 7-16 June off coast of Guam and in Philippine Sea. Biennial U.S. Rim of the Pacific (RIMPAC) naval exercises began 27 June without China after U.S. late May rescinded China’s invitation to participate. Citing satellite imagery dated 8 June, ImageSat International reported that China had redeployed surface-to-air missile systems to Woody (Yongxing) Island in Paracels. PLA navy 15 June carried out missile drills in South China Sea (SCS). UK and French defence ministers 3 June said they would send more naval ships through SCS to assert right to freedom of navigation. Meeting with Sec Defense Mattis in Beijing 27 June, President Xi Jinping reasserted that China would not give up any of its territorial claims in SCS; also called for deepening military-to-military ties.

Chinese steps to enhance military capabilities in air force and navy continued to stoke regional anxiety in South China Sea (SCS). People’s Liberation Army (PLA) Air Force 9 May announced that its Chengdu J-20 stealth fighter had conducted drills over SCS in “actual war conditions” to “further upgrade the air force’s combat capabilities”. China’s first home-built aircraft carrier departed Dalian port for sea trial 13 May; based on same design as Liaoning, new carrier is likely to enter service by 2020 in fully operational role. CNBC 2 May cited U.S. govt source reporting that China in April deployed anti-ship cruise missiles and surface-to-air missiles on Fiery Cross Reef, Subi Reef and Mischief Reef in Spratly Islands; if confirmed, would mark China’s first missile deployments in Spratlys. China did not deny allegations, said such moves strictly defensive; U.S. warned China would face “consequences” for military build-up in contested waters. China 17 May called for halt to offshore oil drilling by Russia’s Rosneft in area of sea claimed by both China and Vietnam; Rosneft responded that area was in Vietnam’s territorial waters. China 18 May said it had landed bombers on SCS feature for first time, with drills consisting of simulated strikes against sea targets; video showing H-6K bomber landing and taking off from base on Woody (Yongxing) island, largest of disputed Paracel Islands, reportedly confirmed claim. CCTV footage published 15 May showed Chinese ship-borne helicopters conducting live-fire drills in SCS. U.S. subsequently on 23 May retracted invitation for China to take part in RIMPAC joint naval drill, saying recent moves were inconsistent with principles of exercise. Two U.S. warships sailed within twelve nautical miles of Paracel Islands 27 May, prompting Chinese condemnation; Chinese warships reportedly confronted U.S. ships and warned them to leave. U.S. and Philippines conducted 34th annual military exercises 7-18 May, largest since 2016. Japan and Philippines 8 May conducted joint maritime patrol in Palawan near West Philippine Sea. Philippines FM 28 May said country “prepared to go to war” over resources in SCS.

China’s People’s Liberation Army (PLA) held multiple major live-fire drills and manoeuvres in South China Sea (SCS), Taiwan Strait and Western Pacific Ocean east of strategic Bashi Channel between 24 March - 26 April. PLA 12 April conducted naval parade off Hainan island, China’s largest-ever modern naval display featuring 48 warships (over half commissioned after 2012), 76 aircrafts, more than 10,000 troops. Reviewing display, President Xi pledged to further accelerate navy’s modernisation and development. China’s National People’s Congress 21 March transferred administrative control of coastguard from civilian to military authority, enhancing Communist Party and military control of China’s maritime operations. Philippine foreign minister claimed 12 April Manila and Beijing are “quite near” start of joint oil and gas exploration project, contingent on agreeing legal framework and technical details; said China had pledged not to build new installations on Scarborough Shoal, which is claimed by both countries. U.S. early April said China has deployed military jamming equipment capable of disrupting communications and radar systems on two features it controls in Spratly archipelago. Philippines newspaper 18 April published photos of two Chinese military transport aircraft on archipelago’s Mischief Reef. In 17 April testimony to U.S. Senate Armed Services Committee, Admiral Philip S. Davidson, nominee to head U.S. Pacific Command, stated that “China is now capable of controlling the South China Sea in all scenarios short of war with the United States”. Canadian Senate 24 April passed non-binding resolution criticising China’s “hostile behaviour” in SCS; China called move “irresponsible”. Russia and Vietnam 4 April signed roadmap on increased military cooperation for 2018-2020. Australian media reported China’s PLA Navy 15 April “challenged” two Australian frigates transiting SCS en route to Vietnam; Beijing said its ships behaved professionally during “encounter”.

Media 23 March reported that Vietnam, pressured by China, stopped oil exploration project in block of South China Sea (SCS) licensed to Spanish energy company Repsol. China’s People’s Liberation Army (PLA) navy conducted large drill week of 26 March involving aircraft carrier Liaoning and at least 40 ships and submarines off Hainan island in SCS. China’s Foreign Minister Wang Yi 8 March called U.S. naval activities greatest disturbance to peace and stability in SCS. U.S. aircraft carrier USS Carl Vinson 5 March made historic five-day visit to Vietnamese port Da Nang, before conducting joint anti-submarine drills with Japanese Maritime Self-defence Force in South China Sea 11 March. U.S navy destroyer conducted “freedom of navigation” operation near Mischief Reef in Spratly islands 23 March. U.S. 29 March said it had delivered $20mn of coastguard patrol boats and equipment to Vietnam. Philippines 2 March said it is considering joint development with China of two offshore oil and gas blocks inside its exclusive economic zone, one involving plan to explore block of disputed Reed (Recto) Bank, which is potentially inconsistent with Philippines’ legal position and 2016 decision of Law of the Sea Tribunal. Philippines Supreme Court justice Antonio Carpio ruled that such a deal would be illegal unless China acknowledges relevant Philippine sovereignty. Media 14 March reported that Philippines had received unmanned aerial system from U.S. for deployment on Palawan, near disputed Spratly archipelago, which would improve military’s maritime domain awareness capabilities. Vice president of China’s Academy of Military Sciences, Lt Gen He Lei 8 March told journalists that China should build defensive structures on SCS features it controls to underline its sovereignty. China 5 March announced at opening of its National Peoples’ Congress (NPC) that its defence budget will grow by 8.1% this year, and its spending on diplomacy by 15.6%.

China’s continued militarisation of South China Sea (SCS) features drew further international concern. Official Chinese newspaper 2 Feb announced China’s South China Sea Fleet had signed deals with Chinese firms to upgrade communications systems in Paracel (Xisha) and Spratly (Nansha) archipelagos. Philippine newspaper 5 Feb published detailed photographs of Chinese-built structures in Spratly Islands and said China will soon have seven “military bastions” from which it can project power. China 7 Feb announced it had deployed advanced Su-35 fighter jets to SCS for first time. UK 13 Feb said Royal Navy frigate will conduct freedom of navigation operation in SCS in March. Philippine President Duterte 8 Feb banned all scientific research off country’s Pacific Coast, despite earlier allowing Chinese oceanographers access. In second planned series of bilateral consultations, Chinese and Philippine diplomats 13 Feb met in Philippine capital Manila to discuss marine environmental protection, fisheries, marine scientific research, and oil and gas; Philippines afterwards said China and ASEAN nations could hold next round of talks on Code of Conduct as early as March. Trump administration 9 Feb announced it was nominating Head of U.S. Pacific Command Admiral Harry Harris as its ambassador to Australia; Harris 24 Jan warned China is “further militarising” its man-made SCS bases in attempt to “assert de facto sovereignty over disputed maritime features”.

U.S. 9 Jan said it intended to conduct more Freedom of Navigation Operations (FONOPs) in South China Sea (SCS) in light of China’s continuing “provocative militarisation”. U.S. Navy 17 Jan conducted first FONOP of 2018, sailing within twelve nautical miles of Scarborough Shoal (Huangyan Dao) near Philippines; despite making no prior claim to area around shoal, China 20 Jan condemned manoeuvre as violation of its sovereignty and security interests; incident downplayed by Philippines, which claims reef. U.S. 20 Jan announced its 2018 National Defense Strategy, which characterises China as strategic competitor reinforcing likelihood of continued tensions and potential for unintended clashes, particularly in SCS and East China Sea; and described focus on modernisation and readiness to defeat a single major power. China 20 Jan responded negatively, saying it seeks “global partnership, not global dominance”. South China Morning Post 31 Dec reported China’s launch of underwater surveillance network to support navigation and targeting for submarines along its “Maritime Silk Road” trade route, which passes through SCS; 22 Jan reported that China has deployed acoustic seabed sensors near U.S. military base at Guam since 2016; also reported that China has started construction on third aircraft carrier. Philippines 8 Jan said it would lodge diplomatic protest with China after Chinese state television 30 Dec broadcast rare aerial footage of disputed Fiery Cross Reef showing its transformation into airbase; said structures on reef include hospital, radar and airport; reported hundreds of soldiers stationed there. Cooperation efforts continued, with Philippines 15 Jan announcing that research institutes financed by Manila and Beijing will conduct joint project at Benham Rise.

U.S. 18 Dec announced new “America First” National Security Strategy that said Russia and China “challenge American power, influence and interests”, and identified China’s militarisation in South China Sea (SCS) as behaviour of “revisionist power” that challenges regional status quo. Strategy also highlighted problematic “gray zone” activities such as China’s use of coast guard vessels to assert influence and maintain presence, and reiterated importance of quadrilateral cooperation with Australia, India and Japan, as well as alliances and partnerships with ASEAN member states. Follows Australian foreign policy white paper 21 Nov calling for stronger alliance in Indo-Pacific to defend U.S. regional dominance and balance against China, particularly in SCS, and criticised China’s island-building activities as “major fault line in the regional order”. U.S. navy 19 Dec announced plans to increase its presence in SCS; China said “U.S. ought to adapt to and accept China’s development”. China 2 Dec said its domestically-built Y-9 transport aircraft had completed first long-distance exercise over SCS, including simulated airdrop; 15 Dec announced new satellite remote sensing plan, including ten additional satellites to be launched by 2021; 24 Dec tested world’s largest amphibious aircraft. Washington-based Asia Maritime Transparency Initiative’s 14 Dec report on China’s SCS development activities counted 29 hectares of new infrastructure in 2017, mostly in Spratlys and Paracels, including several radar facilities, missile shelters and hangars, as well as aircraft deployments; in response, Philippines FM Alan Peter Cayetano 15 Dec said Vietnam, Malaysia and Philippines have also been building their SCS presence.

During Asia-Pacific Economic Cooperation leaders’ meeting in Vietnam, U.S. President Trump 10 Nov called China’s actions in South China Sea (SCS) “provocative”; tone contrasted to Trump’s remarks during state visit to China 8-9 Nov. Ahead of Trump’s China visit, Beijing said SCS not an issue between China and U.S., latter should not cause problems. Trump 12 Nov met Vietnamese President Quang in Hanoi and offered to mediate SCS disputes; offer received lukewarm response. Following meeting, U.S. and Vietnam announced $12bn in business deals and conclusion of three-year defence cooperation pact, which includes increased bilateral naval cooperation. Following 12 Nov state visit to Vietnam by President Xi, China and Vietnam jointly said they had “unanimously agreed” to play down tensions, maintain stability and implement the 2002 Declaration of Conduct of Parties in the South China Sea; also signed twelve cooperation pacts. Philippines 7 Nov announced it was upgrading military facilities on disputed Thitu (Pag-asa) Island, but halted construction 9 Nov after reported standoff between Philippine and Chinese vessels. After meeting Chinese President Xi at APEC summit, Philippine President Duterte 12 Nov struck conciliatory tone and said two countries must remain “friends”, despite taking harder line on SCS militarisation early Nov. At East Asia Summit in Philippine capital Manila, Chinese Premier Li and ASEAN leaders 13 Nov agreed to begin negotiating text of Code of Conduct (CoC) in SCS, based on framework agreed in Aug; U.S. joint statement with Vietnam 13 Nov called for CoC to be legally binding. China 4 Nov launched Asia’s largest dredging vessel in SCS, raising concerns among claimant states. China 23 Nov said it had flown several planes over SCS during drills, and over two channels north-east and south of Taiwan.