U.S.-China Military Tensions in the South China
In early 2026, US and Chinese military exercises in the South China Sea are overlapping in time and space, raising the risk of accidental clashes to post-Cold War highs. This tension is not merely a bilateral issue but a structural risk that threatens the foundations of global supply chains, energy transportation, and alliance systems.
── Understand in 3 points ─────────
- • From January to March 2026, the US Navy conducted "Freedom of Navigation Operations" in the South China Sea at a frequency 40% higher than the same period last year, maintaining two carrier strike groups permanently deployed in the Western Pacific.
- • In February 2026, the Chinese People's Liberation Army Navy conducted its largest-ever live-fire exercise around Scarborough Shoal, with over 40 participating vessels.
- • The United States announced plans to conduct the four-nation joint exercise "Balikatan Plus" with the Philippines, Japan, and Australia in the South China Sea in April 2026.
── NOW PATTERN ─────────
In the South China Sea, a "spiral of conflict" is the dominant dynamic, with both the US and China incrementally escalating military activities under the pretext of "countering the other's actions." The transformation of alliance systems and the overextension of power by both nations are further accelerating this spiral.
── Probability and Response ──────
• Base case 55% — Progress in negotiations for resuming the US-China military hotline, continued containment of Philippines-China clashes to water cannon levels, success or failure of adopting a joint statement at the ASEAN Foreign Ministers' Meeting, worsening trend in China's economic indicators.
• Bull case 20% — Decision to hold a US-China summit or foreign ministers' meeting, decrease in the frequency of China Coast Guard activities around Second Thomas Shoal, substantial progress in ASEAN-led COC negotiations, signals of softening external posture due to China's worsening economy.
• Bear case 25% — Occurrence of a collision incident between unmanned weapons, casualties during Philippine resupply activities, unilateral establishment of an Air Defense Identification Zone (ADIZ) by China in the South China Sea, commencement of deliberation by the US Congress on a South China Sea Security Act analogous to the Taiwan Relations Act.
📡 The Signal — What Happened
Why it matters: In early 2026, US and Chinese military exercises in the South China Sea are overlapping in time and space, raising the risk of accidental clashes to post-Cold War highs. This tension is not merely a bilateral issue but a structural risk that threatens the foundations of global supply chains, energy transportation, and alliance systems.
- Military Trends — From January to March 2026, the US Navy conducted "Freedom of Navigation Operations" in the South China Sea at a frequency 40% higher than the same period last year, maintaining two carrier strike groups permanently deployed in the Western Pacific.
- Military Trends — In February 2026, the Chinese People's Liberation Army Navy conducted its largest-ever live-fire exercise around Scarborough Shoal, with over 40 participating vessels.
- Alliance Relations — The United States announced plans to conduct the four-nation joint exercise "Balikatan Plus" with the Philippines, Japan, and Australia in the South China Sea in April 2026.
- Territorial Claims — In January 2026, China completed new runway extension work on three artificial islands in the Spratly Islands and began permanent deployment of J-16 fighter jets.
- Diplomacy — The US-China military hotline operation, agreed upon at the APEC San Francisco summit in November 2025, is effectively non-functional as of February 2026 due to delays in China's response.
- Economic Impact — The annual trade volume passing through the South China Sea reaches approximately $5.3 trillion, with about 30% of global trade dependent on this waterway.
- International Law — China continues to reject the 2016 Permanent Court of Arbitration ruling on the South China Sea as "a piece of waste paper" and is strengthening its unique "nine-dash line" claim.
- Technology — The US military began full-scale unmanned surface vessel (USV) patrols in the South China Sea in 2026, with an average of over six close encounters with the Chinese Navy reported monthly.
- Energy — Estimated natural gas reserves in the South China Sea are approximately 190 trillion cubic feet, intensifying the resource development competition among China, Vietnam, and the Philippines.
- Domestic Politics — Ahead of the 2026 US midterm elections, the current administration, succeeding the Biden administration, has made a tough stance on China a pillar of its election strategy.
- Regional Trends — The Marcos Jr. administration in the Philippines has regularized resupply activities to Second Thomas Shoal as an "exercise of sovereignty," leading to 12 physical clashes with the China Coast Guard in 2025 alone.
- Military Technology — China has deployed mobile launchers for DF-21D anti-ship ballistic missiles in the South China Sea, significantly enhancing its A2/AD (anti-access/area denial) capabilities.
To understand the current escalation of US-China tensions in the South China Sea, at least four historical contexts must be considered simultaneously.
First, there is China's long-term national narrative of recovery from the "Century of Humiliation." Since the Opium War in 1839, China's territory and sovereignty have been encroached upon by Western powers and Japan. In the "Great Rejuvenation of the Chinese Nation" championed by the Xi Jinping administration, the recovery of sovereignty over the South China Sea is not merely a geopolitical interest but an issue of national identity. The claim to the nine-dash line dates back to the Republic of China era in 1947, and the People's Republic of China inherited this as a "historical right." This assertion of historical legitimacy dictates China's actions, transcending international legal judgments (the 2016 arbitration ruling).
Second, there is the evolution of the US "Freedom of Navigation" policy and Indo-Pacific strategy after the Cold War. The US has conducted "Freedom of Navigation Operations" worldwide since 1979, but the South China Sea became a focal point after the 2010s. Through the Obama administration's "Pivot to Asia" policy, the Trump administration's first "Free and Open Indo-Pacific" concept, the Biden administration's strengthening of the QUAD, and the creation of AUKUS (US-UK-Australia security cooperation), the US has incrementally strengthened its military presence in the South China Sea. In this process, the US strategy has effectively shifted from "ensuring freedom of navigation" to "countering China's expansionism," forming the structural basis for military escalation.
Third, there is the division of ASEAN countries and the hollowing out of regional order. The South China Sea issue has remained a litmus test for ASEAN unity, but the presence of countries with strong Chinese economic influence, such as Cambodia and Laos, has prevented ASEAN from adopting a consistent stance toward China. The failure to adopt a joint statement at the ASEAN Foreign Ministers' Meeting in 2012 for the first time in history symbolizes this structural division. As of 2026, while the Philippines and Vietnam are taking a hard line against China, Malaysia and Indonesia are seeking to secure bilateral interests, and there is no unified regional deterrent. This "legitimacy vacuum" encourages unilateral actions by both the US and China.
Fourth, there is the qualitative change in escalation risks brought about by the evolution of military technology. Previously, maritime collision risks were limited to incidents at "human-judgable speeds," such as physical contact between vessels or abnormal approaches by aircraft. However, as of 2026, unmanned surface vessels (USVs), unmanned underwater vehicles (UUVs), anti-ship ballistic missiles, hypersonic weapons, and AI-assisted decision-making systems are being deployed in the South China Sea, structurally increasing the possibility of accidental clashes escalating without human intervention. In particular, the operational deployment of China's DF-21D "carrier killer" missile has increased the vulnerability of US carrier strike groups and transformed US military operational plans themselves.
The reason these four contexts are simultaneously intensifying in early 2026 lies in the intersection of multiple timelines. In the US, political pressure ahead of the midterm elections is accelerating a hardline stance against China, while in China, pressure to demonstrate military power is increasing ahead of the 100th anniversary of the founding of the People's Liberation Army in 2027. In the Philippines, clashes with the China Coast Guard since 2025 have hardened domestic public opinion, pushing the Marcos administration into an irreversible position. And technologically, both countries' unmanned weapon systems have entered the operational deployment phase, accelerating the cycle of monitoring and countering each other's actions.
Thus, the current crisis in the South China Sea is the result of four long-term trends—historical nationalism, the structure of great power competition, the hollowing out of regional order, and the evolution of military technology—converging at a single point, making it a structural problem fundamentally different from temporary diplomatic tensions.
The delta: As a result of both the US and China simultaneously expanding military activities in the South China Sea, the risk of accidental clashes has structurally increased. In particular, the combination of the operational deployment of unmanned weapons and the dysfunction of military hotlines means that escalation management mechanisms are being lost. This is not a temporary tension but signifies a transition to a structural crisis phase where the domestic political calendars and military technological advancements of both countries are synchronized.
🔍 Between the Lines — What the News Isn't Saying
Although not stated in official announcements, the true purpose of China's increased military activity in the South China Sea is not the South China Sea itself, but rather a rehearsal for a Taiwan contingency scenario and the collection of US military response patterns. The People's Liberation Army is meticulously analyzing the speed of US military deployment, communication patterns, and coordination procedures with allies in the South China Sea, which is directly fed back into operational plans for the Taiwan Strait from 2027 onwards. Similarly, the US views the South China Sea as a "rehearsal ground" for a Taiwan contingency, where joint exercises with allies, ostensibly for stability in the South China Sea, are in fact a validation of integrated operational capabilities for Taiwan's defense. This structure, where "the South China Sea is becoming a proxy battlefield for Taiwan," is the fundamental reason why neither side can compromise, and why a superficial resolution of territorial disputes cannot alleviate tensions.
NOW PATTERN
Spiral of Conflict × Alliance Strain × Overextension of Power
In the South China Sea, a "spiral of conflict" is the dominant dynamic, with both the US and China incrementally escalating military activities under the pretext of "countering the other's actions." The transformation of alliance systems and the overextension of power by both nations are further accelerating this spiral.
Intersection of Dynamics
The three dynamics observed in the South China Sea—the spiral of conflict, alliance strain, and overextension of power—do not operate independently but function as a complex system that mutually reinforces itself. This intersection is the structural factor that makes the current situation particularly dangerous.
The spiral of conflict incrementally escalates military activities by both the US and China, but this escalation places asymmetric pressure on both countries' alliance relationships. Each time the US strengthens its military presence in the South China Sea, allies are asked for deeper commitments, but their willingness and capacity to bear risk differ from country to country. This asymmetry creates "alliance strain," and the existence of this strain provides China with opportunities for "divide and rule," inducing further assertive actions—thereby accelerating the spiral of conflict.
Simultaneously, escalation due to the spiral of conflict demands additional military resource allocation from both countries, exacerbating the "overextension of power." The pressure of overextension, in the short term, increases the irreversibility of military commitments (rising withdrawal costs), and in the long term, entrenches unsustainable resource allocation. Furthermore, domestic political pressures associated with overextension (budget constraints, polarization of domestic public opinion) narrow the room for diplomatic compromise, making it even more difficult to exit the spiral of conflict.
Even more serious is that these three dynamics form an "escalation trap." Because each dynamic reinforces the other two, a self-reinforcing loop is established where the entire system tends to move in only one direction (intensifying tensions). In such a system, small accidental events (such as collisions between unmanned vehicles, or clashes between fishing boats and the Coast Guard) can lead to unexpectedly large outcomes through a chain reaction of each dynamic. The structural characteristic of the South China Sea in early 2026 is that it is approaching a "critical state" in terms of complex systems theory.
📚 Pattern History
1914: From the Sarajevo Incident to World War I
Spiral of Conflict, Chain of Alliances
Structural similarities to the present: A chain of alliance obligations and a spiral of arms race escalated a single accidental incident into a world war. In the current South China Sea, the conditions for invoking the US-Philippines Mutual Defense Treaty and the expanded application of the US-Japan Alliance contain the risk of escalating a localized clash into a regional conflict.
1962: Cuban Missile Crisis
Spiral of Conflict, Accidental Escalation
Structural similarities to the present: Both the US and the Soviet Union acted on the premise that "the other side would back down first," leading them to the brink of nuclear war. Ultimately, a secret diplomatic channel (the Robert Kennedy-Dobrynin channel) functioned to avert escalation, but a critical difference in the South China Sea is the absence of a comparable backchannel.
1988: Sino-Vietnamese Spratly Islands Clash (Johnson South Reef Skirmish)
Militarization of Territorial Disputes
Structural similarities to the present: The Chinese Navy engaged in armed conflict with the Vietnamese military in the Spratly Islands, resulting in the deaths of 64 Vietnamese soldiers. This clash marked a turning point in China's expansion of effective control over the Spratly Islands. The pattern of "small-scale clashes facilitating the establishment of facts on the ground" underpins China's current actions.
2001: Hainan Island Incident (EP-3 Incident)
Escalation Management of Accidental Clashes
Structural similarities to the present: The mid-air collision between a US Navy EP-3 reconnaissance aircraft and a Chinese J-8II fighter jet escalated into an 11-day diplomatic crisis due to inadequate communication channels between the two countries and domestic public pressure. While it ultimately led to a diplomatic resolution, US-China relations today are far more confrontational than in 2001, and a similar incident may not resolve in the same way.
2012-2016: From Scarborough Shoal Standoff to China's Establishment of Effective Control
Establishment of Facts on the Ground through Gray Zone Tactics
Structural similarities to the present: The process by which China established effective control over Scarborough Shoal following the 2012 standoff with the Philippines demonstrated the effectiveness of "gray zone tactics" using the Coast Guard and maritime militia rather than military force. This success story forms the basis of China's current pattern of behavior, and the same tactics are being applied to Second Thomas Shoal and other disputed areas.
Patterns Revealed by History
Three crucial lessons can be drawn from historical patterns. First, a spiral of conflict based on security dilemmas can lead to uncontrollable escalation despite (or precisely because of) rational decision-making by participants. Leaders in 1914 did not desire war, but a chain of alliance obligations and military logic triggered a world war. Second, accidental clashes are not "accidental" but probabilistic events that inevitably occur when structural conditions are ripe. The EP-3 incident and the Scarborough Shoal standoff were "predictable contingencies" that arose from the spatial overlap of military activities by both countries. Third, the success or failure of escalation management depends on the quality of pre-established communication channels. Secret channels functioned during the Cuban Missile Crisis, but initial communication failures prolonged the crisis during the 2001 Hainan Island Incident. The current situation in the South China Sea, where military hotlines are effectively non-functional in 2026, is extremely dangerous when viewed through historical patterns. These lessons reveal the stark reality that, on the current trajectory, an accidental clash is not a question of "if" but "when," and whether that clash can be contained depends critically on the existence of prior mechanisms.
🔮 Next Scenarios
Tensions in the South China Sea will remain high throughout 2026 but will not escalate to actual military clashes (firing or missile launches). Both the US and China will continue to maintain and strengthen their military presence for domestic political reasons, but in the event of accidental contact, on-site restraint and escalation control through diplomatic channels will function. In this scenario, physical clashes (use of water cannons, ramming, etc.) between the Philippines and China over Second Thomas Shoal will continue and intensify, but these will remain within the "gray zone" and will not meet the conditions for invoking Article 4 of the US-Philippines Mutual Defense Treaty (armed attack). China will continue its tactic of projecting pressure by fronting its Coast Guard and maritime militia, thereby avoiding direct clashes between regular forces. The US will proceed with the four-nation joint exercise in April 2026 as planned, but will adjust the exercise area to maintain a certain distance from waters claimed by China, in consideration of China's strong reaction. China will conduct counter-exercises but will avoid direct confrontation with US forces. In the latter half of the year, informal diplomatic contacts may resume, driven by changes in political pressure after the US midterm elections and China's worsening economic situation. However, structural factors of tension will not be resolved, and risks will continue to accumulate towards 2027.
Implications for Investment/Action: Progress in negotiations for resuming the US-China military hotline, continued containment of Philippines-China clashes to water cannon levels, success or failure of adopting a joint statement at the ASEAN Foreign Ministers' Meeting, worsening trend in China's economic indicators.
A concrete agreement for de-escalation in the South China Sea is reached between the US and China, temporarily halting the spiral of military escalation. The realization of this scenario requires the political will of both leaderships to pursue de-escalation, even at domestic political cost. The most likely trigger is an accidental "near-miss" incident that shocks both countries, accelerating the establishment of crisis management mechanisms. Just as the US-China Military Maritime Consultative Agreement (MMCA) was strengthened after the 2001 EP-3 incident, a crisis can paradoxically become an opportunity for risk management. Specifically, agreements would include the full operationalization of the US-China military hotline, a framework agreement for a "Code of Conduct" (COC) in the South China Sea, and the introduction of a prior notification system for military exercises in specific areas. This would significantly reduce the risk of accidental clashes in the short term and maintain regional economic stability. However, even in this scenario, structural conflicts (territorial disputes, hegemonic competition) are not resolved, and the agreement represents a transition to "managed competition," not "reconciliation." The sustainability of the bull case scenario depends on whether the domestic politics of both sides continue to tolerate this "management."
Implications for Investment/Action: Decision to hold a US-China summit or foreign ministers' meeting, decrease in the frequency of China Coast Guard activities around Second Thomas Shoal, substantial progress in ASEAN-led COC negotiations, signals of softening external posture due to China's worsening economy.
A military clash actually occurs between the US and China (or between China and the Philippines with US intervention) in the South China Sea. In this scenario, an accidental incident—for example, a collision between unmanned vehicles, casualties resulting from a clash between a Coast Guard vessel and a Philippine Navy vessel, or warning shots fired by the Chinese military at a US naval vessel—escalates due to a failure of escalation management. The most likely direct trigger for a clash is an incident during Philippine resupply activities at Second Thomas Shoal. If the China Coast Guard uses force against a Philippine resupply vessel, resulting in casualties among Philippine military personnel, the Marcos administration would be compelled to consider invoking the US-Philippines Mutual Defense Treaty. If the US responds to this request, the situation would rapidly escalate. The impact of a military clash would be immense. Partial disruption of South China Sea sea lanes would immediately cause global trade chaos. Crude oil prices would rise by $20-40 per barrel, and global supply chains would suffer severe damage. Financial markets would see an acceleration of risk-off sentiment, and Asian currencies would depreciate significantly. Tensions in the Taiwan Strait would also surge in tandem, raising concerns about impacts on semiconductor supply chains. While the probability of a full-scale war is low, even a limited military clash would irreversibly alter the regional order. China would portray the clash as "US aggression" domestically and internationally, mobilizing nationalism. The US would be forced to undertake additional military deployments to maintain the credibility of its alliance commitments, further increasing the risk of overextension.
Implications for Investment/Action: Occurrence of a collision incident between unmanned weapons, casualties during Philippine resupply activities, unilateral establishment of an Air Defense Identification Zone (ADIZ) by China in the South China Sea, commencement of deliberation by the US Congress on a South China Sea Security Act analogous to the Taiwan Relations Act.
Key Triggers to Watch
- Conduct of the US-Japan-Australia-Philippines four-nation joint exercise "Balikatan Plus" and China's response: April 2026
- Occurrence of a serious incident during Philippine resupply activities at Second Thomas Shoal: March-June 2026 (constant risk due to regularization of resupply activities)
- Potential establishment of a South China Sea Air Defense Identification Zone (ADIZ) by China: Latter half of 2026 (as a show of force ahead of the PLA's 100th anniversary)
- Results of the 2026 US midterm elections and their impact on China policy: November 2026
- Progress of Code of Conduct (COC) negotiations in the South China Sea at the ASEAN Summit: October 2026 (under Malaysia's chairmanship)
🔄 Tracking Loop
Next Trigger: April 2026 Balikatan Plus Joint Exercise — The scale and exercise area of the four-nation exercise and the extent of China's military countermeasures are the most critical events determining the escalation trajectory in the latter half of 2026.
Continuation of this Pattern: Tracking: South China Sea - US-China Military Escalation — The next milestones are the scale of the four-nation joint exercise in April 2026 and China's counter-exercises. Subsequently, track COC negotiations at the ASEAN Summit in October 2026 and shifts in China policy after the US midterm elections in November 2026.
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