US-China military drills triple in South China Sea, raising collision risk
The frequency of simultaneous large-scale military exercises by the US and China in the South China Sea has tripled over the past three years, with close encounters between vessels and aircraft on site exceeding 300 incidents annually. The "structural conditions" for military escalation are falling into place, and the risk of an accidental collision escalating into a geopolitical crisis is higher than ever.
── Understand in 3 points ─────────
- • The US Navy announced plans to deploy the USS Ronald Reagan Carrier Strike Group to the South China Sea in March 2026 and conduct the largest-ever "Balikatan" joint exercise with the Philippine military.
- • The Chinese People's Liberation Army (PLA) notified that its Southern Theater Command would conduct live-fire drills across the entire South China Sea during the same period. The exercise areas partially overlap with the US-Philippines joint exercise zone.
- • According to the US Department of Defense, 312 "dangerous close encounters" between US and Chinese vessels and aircraft were recorded in the South China Sea in 2025, an increase of approximately 3.2 times from 98 incidents in 2022.
── NOW PATTERN ─────────
The "spiral of conflict" in which the US and China mutually escalate their military presence in the South China Sea, combined with the absence of crisis management mechanisms ("failure of coordination"), is structurally creating the risk of accidental collisions escalating into unplanned conflicts.
── Probability and Response ──────
🟡 Basic 55% — US-China military hotline response rate, scale and duration of Balikatan exercise, location and scope of China's live-fire drills, progress of COC negotiations at ASEAN Foreign Ministers' Meeting
🟢 Optimistic 20% — Wording of joint statement during Trump's visit to China, resumption of military dialogue at defense secretary level, initiation of working-level talks on expanding CUES applicability
🔴 Pessimistic 25% — Success or failure of resupply mission to Second Thomas Shoal, use of new water cannons/acoustic weapons by China Coast Guard, frequency of Chinese fighter jet intercepts of US reconnaissance aircraft, trends in South China Sea maritime insurance rates
📡 THE SIGNAL — What Happened
Why it matters: The frequency of simultaneous large-scale military exercises by the US and China in the South China Sea has tripled over the past three years, with close encounters between vessels and aircraft on site exceeding 300 incidents annually. The "structural conditions" for military escalation are falling into place, and the risk of an accidental collision escalating into a geopolitical crisis is higher than ever.
- Military Deployment — The US Navy announced plans to deploy the USS Ronald Reagan Carrier Strike Group to the South China Sea in March 2026 and conduct the largest-ever "Balikatan" joint exercise with the Philippine military.
- Military Deployment — The Chinese People's Liberation Army (PLA) notified that its Southern Theater Command would conduct live-fire drills across the entire South China Sea during the same period. The exercise areas partially overlap with the US-Philippines joint exercise zone.
- Close Encounters — According to the US Department of Defense, 312 "dangerous close encounters" between US and Chinese vessels and aircraft were recorded in the South China Sea in 2025, an increase of approximately 3.2 times from 98 incidents in 2022.
- Military Infrastructure — China has completed the deployment of runways, radar, and anti-aircraft missile systems on seven artificial islands in the Spratly Islands, establishing a chain of "unsinkable aircraft carriers" covering the entire South China Sea.
- Diplomacy — The US-China military hotline was reopened after the November 2023 San Francisco summit, but its effective operational rate has declined since the Taiwan Strait crisis in late 2025.
- Alliances — In 2024, the Philippines added four new Enhanced Defense Cooperation Agreement (EDCA) sites under the US-Philippines Mutual Defense Treaty, now hosting rotational deployments of US forces at a total of nine sites.
- Economy — Annual trade passing through the South China Sea is approximately $5.3 trillion, accounting for about one-third of global maritime trade. Navigation restrictions due to accidental collisions would immediately impact the global economy.
- Legal Basis — China continues to assert historical rights based on its "nine-dash line," but the 2016 South China Sea arbitration ruling rejected this. China has dismissed this ruling as "a piece of paper."
- Technology — In 2025, the Chinese Navy deployed AI-powered Unmanned Surface Vessels (USVs) for the first time in an exercise in the South China Sea, commencing autonomous patrol and surveillance activities.
- Regional Security — Four ASEAN member states (Philippines, Vietnam, Malaysia, Brunei) claim sovereignty in the South China Sea, and negotiations with China on a "Code of Conduct (COC)" have been stalled for over 20 years.
- Military Buildup — The total number of Chinese naval vessels exceeds 370, outnumbering the US Navy (approx. 290 vessels), and is projected to reach over 400 by 2030. While the US holds a qualitative advantage, China has a local numerical advantage in the South China Sea.
- Domestic Politics — 2026 is a US midterm election year, and the Trump administration has a political incentive to strengthen its presence in the South China Sea to avoid criticism of being "soft on China."
The military tension in the South China Sea did not emerge suddenly today. To understand the structural reasons why this area has become known as "the world's most dangerous sea," one must look back at least 30 years of history.
**Post-Cold War Vacuum and China's Rise (1990s)**
After the collapse of the Soviet Union in 1991, US forces withdrew from Subic Naval Base and Clark Air Base in the Philippines. China quickly filled this "power vacuum." In 1995, China occupied Mischief Reef, which the Philippines claimed. This was a turning point where territorial disputes in the South China Sea shifted from "exchanges of words" to "physical occupation." At the time, the US was enjoying the "peace dividend" of the post-Cold War era and had no serious intention of intervening in disputes over small rocks in Asia.
**"Gray Zone Strategy" of Artificial Island Construction (2013-2016)**
Following the inauguration of the Xi Jinping administration, China initiated unprecedented large-scale projects in the South China Sea. Seven reefs in the Spratly Islands were dredged and reclaimed, and runways, radar facilities, anti-aircraft missiles, and anti-ship missiles were deployed. Crucially, **China described this not as "militarization" but as "development of civilian facilities."** Lighthouses, meteorological stations, maritime rescue facilities—by emphasizing these "civilian uses," China skillfully kept its actions below the threshold for military response from the international community. The 2016 Hague arbitration ruling completely rejected China's historical rights based on the "nine-dash line," but China ignored the ruling. **A precedent was set where an international legal judgment was nullified by physical force.**
**Escalation of "Freedom of Navigation" Operations (2017-Present)**
The US intensified its "Freedom of Navigation Operations (FONOPs)" from the late Obama administration, and their frequency increased from 6-8 times per year to over 15 times during the first Trump term and the Biden era. **However, there is a structural dilemma here.** FONOPs are symbolic actions intended to "demonstrate navigational rights under international law," but China views them as "invasions" of its territorial waters. Since both sides believe their positions are legitimate, close encounters occur during each FONOP, creating a risk of escalation every time.
**Philippines' "Strategic Shift" (2022-Present)**
The inauguration of President Marcos Jr. significantly altered the dynamics in the South China Sea. While his predecessor Duterte adopted a pro-China stance, Marcos re-strengthened the alliance with the US, increasing EDCA (Enhanced Defense Cooperation Agreement) sites from five to nine. The Philippine military increased patrols in disputed waters, and clashes with the China Coast Guard became routine. Resupply missions to the grounded old warship Sierra Madre on Second Thomas Shoal have become sites of military confrontation each time.
**The "Perfect Storm" of 2026**
At this point, all structural factors are acting simultaneously. China's military infrastructure is nearing completion, the US-Philippines alliance is the strongest it has been in 30 years, AI-powered unmanned systems are appearing on the battlefield, and most dangerously, **leaders on both sides are in a position where they "cannot back down" due to domestic political reasons.** The Trump administration, facing midterm elections, cannot soften its hardline stance against China, and Xi Jinping cannot afford to retreat on "core interests" to solidify his third term in power. During the Cold War, the US and Soviet Union had sophisticated crisis management mechanisms to avoid nuclear war—hotlines, arms control treaties, the "red phone." The US and China **lack** comparable mechanisms. This is the core reason why the South China Sea in 2026 is structurally dangerous.
The delta: The frequency of "simultaneous" large-scale military exercises by the US and China in the South China Sea has surged, and the number of close encounters has exceeded a structural threshold. The risk of accidental collision, once a "matter of possibility," has transformed into a "matter of time." The most dangerous aspect is that the domestic politics of both sides are structured to prevent them from "backing down."
🔍 BETWEEN THE LINES — What the News Isn't Saying
The "simultaneous conduct of military exercises" emphasized by reports is merely a superficial phenomenon. What is fundamentally underway is that **China has entered the final stage of "internalizing" the South China Sea.** With the completion of military infrastructure on seven artificial islands, the constant presence of the China Coast Guard, and the deployment of AI unmanned systems, China is quietly passing the "point of no return" in solidifying its effective control over the South China Sea. The US's intensified exercises are a last-ditch effort to prevent this "internalization," but it is likely structurally too late. Another overlooked point is that the Philippine Marcos administration is adopting a "tail-wagging-the-dog" strategy, voluntarily placing itself on the "front line of a proxy war between the US and China" to attract US military aid. The Philippines' provocative resupply activities are based on a calculation to induce an overreaction from China and then appeal to international opinion, thereby enhancing the value of its alliance.
NOW PATTERN
Spiral of Conflict × Overextension of Power × Failure of Coordination
The "spiral of conflict" in which the US and China mutually escalate their military presence in the South China Sea, combined with the absence of crisis management mechanisms ("failure of coordination"), is structurally creating the risk of accidental collisions escalating into unplanned conflicts.
Intersection of Dynamics
These three dynamics—"spiral of conflict," "overextension of power," and "failure of coordination"—do not operate in isolation but rather form a **positive feedback loop that mutually reinforces them.** This intersection is the structure that makes the South China Sea crisis uniquely dangerous.
The specific mechanism is as follows: The "spiral of conflict" drives the mutual strengthening of military presence → This accelerates the "overextension of power," causing both countries to excessively concentrate resources and attention on the South China Sea → The costs and political pressure of "overextension" exacerbate the "failure of coordination" (compromise is interpreted as "weakness," making the establishment of crisis management mechanisms domestically politically difficult) → The lack of crisis management capability due to "failure of coordination" makes the "spiral of conflict" even more dangerous.
The most unsettling characteristic of this self-reinforcing loop is that **fixing any single element does not resolve the overall crisis structure.** Even if the hotline were to function perfectly (a partial resolution of "failure of coordination"), as long as the "spiral of conflict" continues to increase the frequency of close encounters, a crisis exceeding the hotline's capacity will eventually occur. Conversely, even if the scale of military exercises is reduced (mitigation of the "spiral of conflict"), the existence of already constructed military infrastructure will continue to maintain the structure of "overextension of power."
History shows that such intersections of complex dynamics "explode in unpredictable ways." In Europe in 1914, the rigidity of alliances × military escalation × breakdown of diplomatic channels combined to trigger a world war that no one desired. The structure of the South China Sea is precisely reproducing this pattern.
📚 PATTERN HISTORY
1914: Europe on the Eve of World War I — A Chain of Alliance Obligations and Mobilization Plans
Multiple great powers maintained overlapping security commitments and military confrontations, and with insufficient crisis management mechanisms, an accidental incident (the Sarajevo assassination) triggered a chain of escalation.
Structural Similarities to Today: No leader desired "total war," but alliance obligations, military mobilization schedules, and domestic public pressure created a structure where they "could not back down." The US-China confrontation in the South China Sea has a similar structure of mutual defense treaties, constantly deployed military forces, and nationalist pressure.
1988: Johnson South Reef Skirmish in the South China Sea — China-Vietnam Naval Clash
The Chinese Navy and Vietnamese Navy clashed in disputed waters of the South China Sea, resulting in 64 Vietnamese deaths. After this battle, China occupied six reefs in the Spratly Islands.
Structural Similarities to Today: In the South China Sea, "small-scale clashes" directly lead to territorial status quo changes. If a clash occurs, "fait accompli" advances amidst the chaos. This is the same pattern as China's current artificial island construction.
2001: Hainan Island Incident (EP-3 Incident) — US-China Mid-air Collision
A Chinese J-8II fighter jet and a US Navy EP-3 reconnaissance aircraft collided in mid-air over the South China Sea. The Chinese pilot died, and the US aircraft made an emergency landing on Hainan Island. US-China relations temporarily plunged into a serious crisis.
Structural Similarities to Today: A classic example of an accidental military collision escalating into a diplomatic crisis. At the time, both sides had the political will to "stop the escalation" (China was in WTO accession negotiations), but such "brakes" are weaker in current US-China relations.
1972: Signing of the US-Soviet Agreement on the Prevention of Incidents at Sea (INCSEA)
Frequent close encounters between US and Soviet navies during the Cold War increased the risk of accidental collisions, leading both countries to sign an agreement establishing rules of conduct at sea. This became the foundation for crisis management.
Structural Similarities to Today: Crisis management mechanisms tend to be built "after a crisis." There is no South China Sea version of INCSEA between the US and China, and CUES is non-binding. It is highly likely that a full-fledged crisis management mechanism will not be built until a major incident occurs.
2012-2016: Scarborough Shoal Crisis to the Hague Arbitration Ruling
In 2012, China effectively seized Scarborough Shoal from the Philippines. The Philippines sought international arbitration and won a complete victory in 2016, but China ignored the ruling. Legal victory did not change the dynamics on the ground.
Structural Similarities to Today: International law cannot be enforced without physical military power. In the South China Sea, "the rule of law" and "the logic of power" coexist, and the latter has become entrenched as overwhelming the former.
Patterns Revealed by History
Historical patterns reveal three unsettling lessons. **First, the situation where "no one wants war" does not guarantee safety.** European leaders in 1914, and US and Chinese leaders in 2001, did not desire military conflict. However, structural conditions—alliance obligations, mutual reinforcement of military presence, and domestic public pressure—created a situation where they "could not back down," and accidental incidents triggered escalation. The current structure of the South China Sea increasingly fulfills the conditions for this "unwanted conflict" to occur.
**Second, crisis management mechanisms are tragically built only "after a crisis."** The US-Soviet INCSEA was established after the Cuban Missile Crisis, and the hotline was also set up after the Cuban Missile Crisis. It is likely that a full-fledged South China Sea crisis management mechanism between the US and China will only be established "after" the first serious accidental collision occurs. The question is, what will be the scale of that "first collision"?
**Third, international law does not function without physical force.** As the 2016 Hague ruling showed, a legal victory does not change the military balance on the ground. The order in the South China Sea will ultimately be determined not by law but by the balance of power. And that balance is a delicate and unstable equilibrium between China's geographical advantage (proximity to the mainland) and the US's technological advantage (qualitatively superior).
🔮 NEXT SCENARIOS
**"Managed Tension" Continues — A State of Near-Collision but Pulling Back at the Last Moment** The most likely scenario is that the current "managed tension" will continue throughout the latter half of 2026. Both the US and China will conduct large-scale military exercises in parallel in the South China Sea, and the number of close encounters will remain above 300 incidents annually, but field commanders on both sides will avoid crossing the final line. This scenario has three prerequisites. First, backchannels (informal diplomatic channels) must continue to function between the Trump and Xi Jinping administrations. Second, the Philippines must exercise restraint from provocations that could lead to direct military conflict with China. Third, AI-powered unmanned systems must not cause accidental contact incidents. **However, the biggest vulnerability of this scenario is that it represents "apparent stability" rather than "actual stability."** As long as the number of close encounters continues to increase, an accident will eventually occur probabilistically. It could be tomorrow or six months from now, but if over 300 close encounters continue annually, the probability of "no accidents ever occurring" decreases year by year. The basic scenario is not "no conflict occurs," but merely "conflict does not occur immediately."
Implications for Investment/Action: US-China military hotline response rate, scale and duration of Balikatan exercise, location and scope of China's live-fire drills, progress of COC negotiations at ASEAN Foreign Ministers' Meeting
**Establishment of a "New Crisis Management Framework" — Birth of a South China Sea INCSEA** In the optimistic scenario, President Trump's visit to China (March 31 - April 2) becomes a turning point. The US and Chinese leaders agree to begin negotiations on a "South China Sea Military Code of Conduct," and a framework including the following elements begins to take shape within the year: (1) development of standard communication protocols for close encounters, (2) a prior notification mechanism for large-scale exercises, (3) expansion of CUES to include the China Coast Guard and maritime militia, and (4) interim rules for the operation of AI-powered unmanned systems. The conditions for this scenario to materialize are limited. The Trump administration must be able to domestically politically justify a "deal" with China (selling it as an achievement of "bringing China to the negotiating table"), and Xi Jinping must be able to manage domestic nationalist sentiment (an agreement that can be explained as "not abandoning sovereignty in the South China Sea"). Historically, the US-Soviet INCSEA was also established after the "terror experience" of the Cuban Missile Crisis. If a serious close encounter (no fatalities, but clear physical contact occurs) of "just the right scale" happens in the South China Sea, it could paradoxically provide the political impetus for building a crisis management mechanism. However, even if this scenario materializes, the underlying territorial disputes and strategic competition will not be resolved. Crisis management mechanisms are intended to "reduce the risk of accidental collisions," not to "end competition."
Implications for Investment/Action: Wording of joint statement during Trump's visit to China, resumption of military dialogue at defense secretary level, initiation of working-level talks on expanding CUES applicability
**Escalation from Accidental Collision — The Hainan Island Incident 2.0** In the pessimistic scenario, an accidental military collision occurs during a period of overlapping large-scale US-China exercises. The most probable scenarios are one of the following: (1) A China Coast Guard patrol vessel collides with a Philippine Navy vessel during a resupply mission to Second Thomas Shoal, resulting in casualties among Philippine military personnel. The activation of the US-Philippines Mutual Defense Treaty is discussed. (2) A US Navy reconnaissance aircraft and a Chinese military fighter jet have a mid-air close encounter similar to the EP-3 incident, resulting in aircraft damage or crew casualties. (3) A Chinese AI-powered unmanned surface vessel collides with a US Navy vessel, and the absence of operating rules for unmanned systems complicates the crisis. **The most dangerous aspect of this scenario is the unclear "stopping point" for escalation.** In the 2001 EP-3 incident, the "economic anchor" of China's WTO accession negotiations provided both sides with an incentive to avoid escalation. In 2026, such "anchors" are weak. The US-China trade war is ongoing, and tensions over the Taiwan issue are high. If an accidental collision occurs, domestic public opinion on both sides will demand "retaliation," narrowing the political space for leaders to choose "de-escalation." The economic impact would immediately ripple globally. If navigation in the South China Sea is even partially restricted, one-third of global maritime trade would be affected. A surge in insurance rates, supply chain disruptions, and soaring energy prices—an impact far exceeding the 2021 Suez Canal blockage—is anticipated.
Implications for Investment/Action: Success or failure of resupply mission to Second Thomas Shoal, use of new water cannons/acoustic weapons by China Coast Guard, frequency of Chinese fighter jet intercepts of US reconnaissance aircraft, trends in South China Sea maritime insurance rates
Key Triggers to Watch
- President Trump's Visit to China (March 31 - April 2) — Focus on whether the South China Sea issue is discussed and if the joint statement mentions crisis management mechanisms: March 31, 2026
- Start of US-Philippines Joint Exercise "Balikatan 2026" — Key is whether the largest-ever exercise induces a retaliatory exercise from China: April 2026 (typically early to mid-April)
- Next Resupply Mission to Second Thomas Shoal (Ayungin Shoal) — The most likely point for physical confrontation with the China Coast Guard: March - April 2026 (approx. twice a month)
- Full-scale Operation of China's AI-powered Unmanned Surface Vessels (USVs) — Close encounters involving unmanned systems cannot be handled by existing crisis management protocols: First half of 2026
- Progress/Stagnation of COC (Code of Conduct) Negotiations at ASEAN Foreign Ministers' Meeting — Success or failure of multilateral framework affects regional stability: July 2026 (annual Foreign Ministers' Meeting)
🔄 TRACKING LOOP
Next Trigger: President Trump's Visit to China on March 31, 2026 — The presence or absence of a crisis management mechanism agreement for the South China Sea is the most critical event determining the escalation trajectory for the next six months.
Continuation of this Pattern: Tracking Theme: South China Sea Accidental Collision Risk Series — The next milestone is the scale and location of China's countermeasures during the "Balikatan 2026" exercise (April).
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