CHINESE CONDUCT IN SOUTH CHINA SEA WILL AFFECT COUNTRY RISK IN REGION

The Chinese Navy attempted, eight times, to warn off a US Navy surveillance aircraft that was operating in the South China Sea this week, monitoring the construction of military airfields on land reclaimed by China in the contested Spratley Islands chain. This Chinese assertiveness could not only eventually impact Country Risk for Vietnam and the Philippines, but also the freedom of navigation for all those consumer products from Japan and Korea that must transit the sea lanes there, en route to markets in Europe, the Middle East & Africa. Japanese and Korean companies, unable to reach their usual markets, could fail, and their countries' economies be severely damaged.

Compliance officers who are charged with periodically updating Country Risk should be looking at South China Sea events on a regular basis, lest they be surprised by rapidly unfolding developments that impact China's neighbors in a negative way.