TWO-thirds of Australia's exports and almost half of its imports, about $273 billion worth of goods, are carried through the South China Sea, a stretch of water that has become the freight freeway between the world and its new centre of global economic gravity, east Asia.
The traffic shipped through the sea is three times that through the Suez Canal, and five times that of the Panama Canal.
Plumb in the centre of this freeway, China last Tuesday established its newest city, Sansha, with mayor Xiao Jie and communist party secretary, Fu Zhuang.
This city in the sea stands on an island of just over 2sq km, located 350km off Hainan island, the closest point in China.
Its population of 1000 comprises a few fishermen, but mainly soldiers, police and government officials. It contains a post office, bank, supermarket and hospital, and a grandiose city hall.
The job of the inhabitants is to "administer", chiefly, to police, a Chinese prefecture covering an ocean area of 2 million sq km, which is rich in oil, gas, and fish. China has described it as "a second Persian Sea," containing more oil than Kuwait. China's sovereignty stretches, it claims, to James Shoal, 80km north of Malaysian Sarawak and 1800 km from the Chinese mainland.
Despite the Chinese orientation of its English name, parts of the South China Sea are claimed by The Philippines, which now calls it the West Philippine Sea, by Vietnam, which calls it the East Sea, and by Indonesia, Malaysia, Singapore, Brunei and Taiwan. Southeast Asians used to call it the Sea of Cham, after the ancient Champa kingdom that prospered in the region until 500 years ago.
The row over access to the sea -- chiefly between China and the countries of southeast Asia -- has torn apart the 10-member Association of South East Asian Nations, has driven several ASEAN members towards closer military co-operation with the US, has provoked considerable antipathy in the region against China, and has provided the transitionary Chinese leadership with a rallying cause that provokes strong nationalist fervour.
The sea, which stretches from the Malacca Strait to the Taiwan Strait, contains more than 250 tiny islands and shoals, none with traditional inhabitants and many of which are submerged at high tide. They include the strongly disputed Spratly, Paracel and Pratas islands, the Macclesfield Bank and the Scarborough Shoal.
Whatever people call the sea, it is boiling with bitter antipathies. It is becoming over-fished as a result of increased numbers of fishing vessels being deployed there to assert sovereignty, as alternatives to open military excursions.
A fleet of 30 Chinese fishing vessels, including a 3000-tonne craft, has been fishing for the past few days at what China calls the Zhubi Reef in the Spratly Islands. The reef is also claimed by Taiwan, The Philippines and Vietnam. Chinese news agency Xinhua says the size of the fleet is "a rarity".
The Lowy Institute for International Policy's executive director, Michael Wesley, believes that the South China Sea is Australia's single point of greatest strategic vulnerability. "Canberra is not a party to the dispute nor a great power, and therefore is well placed to play a significant role in proposing and brokering a solution," he wrote in a paper released by the Lowy last week.
Meanwhile, a 42-page report on the sea released by the Brussels-based International Crisis Group last Tuesday concluded: "All the trends are in the wrong direction and the prospects of resolution are diminishing All claimants are expanding their military and law enforcement capabilities."
Australian politicians are reduced to wringing their hands and arguing between themselves at the outer margins.
The uncertain plight of Australia's defence strategy, and the inability to deploy the submarine fleet, affords little opportunity to do otherwise.
Tony Abbott said in his speech in Beijing last Tuesday: "Under a Coalition government, Australia will do what it can to ensure territorial disputes in the South China Sea are managed peacefully and in accordance with international law."
Foreign Minister Bob Carr responded by saying that this comprised "a big and very significant shift," interpreting it to mean Australia would become involved in the imbroglio under an Abbott administration.
Carr strongly rejected Wesley's suggestion that Australia should try to resolve the issue: "I don't think it is remotely in Australia's interest to take on for itself a brokering role in territorial disputes" in the sea.
"Up until now we have said we want this resolved peacefully," Carr said. "We don't take a side on the various claims.
"But we do . . . call on governments to clarify and pursue those claims, and accompanying maritime rights, in accordance with international law."
Naturally, none of the contesting countries admits to defying the Law of the Sea, articulated most clearly in the UN convention. But this route has not been pursued seriously by any of the parties. China stands by its claims, delineated in a "nine dotted line" that encompasses almost the entire sea, based on historic involvements dating back to the 15th century, and boundary claims made by its predecessor Kuomintang (Nationalist) government in 1947.
It wishes to settle disagreements, if it is required to do so, through bilateral negotiations.
In comparison, the ASEAN countries that claim areas of the sea wish to face China together on the issue. They have long been discussing a joint code of conduct to govern nations' behaviour in the South China Sea. If they can agree a common approach, this would amplify massively the pressure on China and other non-ASEAN players in the region such as Taiwan to sign up too.
Indonesia's highly regarded Foreign Minister Marty Natalegawa -- Indonesia has chaired ASEAN this year -- expended considerable personal and national prestige and effort to promote the code of conduct, flying from capital to capital in advance of the ministerial summit held three weeks ago in Phnom Penh.
But Cambodia's Foreign Minister Hor Namhong, who chaired the meeting, held at the Peace Palace, which was built with Chinese funds, refused to countenance the four paragraphs diplomatically drafted to be part of the joint communique to be issued at the end of the meeting.
Carl Thayer, emeritus professor at the Australian Defence Force Academy, cites a participant at the summit as saying that Cambodia twice rejected attempts by other ASEAN members to include a reference to recent disturbing developments in the South China Sea.
Thayer says Malaysia told the summit: "We must talk with a single voice. ASEAN must show a united voice. Or our credibility will be undermined."
But Cambodia, increasingly perceived as a virtual client state of China, would not back down. China has become a major foreign investor in Cambodia, last year announcing plans to invest $1.2bn, almost 10 times the value of American pledged investments.
So for the first time in ASEAN's 45-year history, a ministerial meeting concluded without releasing a joint statement.
Indonesian former ambassador to Australia Sabam Siagian commented: "In the past, ASEAN spoke with one voice. From now on, all hell can break loose. Good luck ASEAN."
The Philippines Foreign Minister Albert del Rosario lamented at the meeting that "if left unchecked, the increasing tensions . . . being generated in the process could further escalate into physical hostilities, which no one wants".
"This puts in greater jeopardy the remarkable economic dynamism of our region, which was made possible by the relative peace and stability that prevailed in the past years."
Bonnie Glaser, a senior fellow of the Washington think tank the Centre for Strategic and International Studies, wrote for the Pacific Forum that for more than a decade, China relied heavily on "economic carrots" to build good relations, especially with southeast Asian countries.
"In the past few years, however," she said, "China has directly used economic relations to compel target countries to alter their policies."
She gave as examples, China's blocking of Philippines agricultural exports and of Chinese tourism to The Philippines, as punishment "for encroaching on Chinese sovereignty" over access to the Scarborough Shoal, the halting of rare earths exports to Japan following its detention of a Chinese trawler skipper in an incident near jointly claimed islands, named Senkaku in Japanese and Diaoyu in Chinese, and the freezing of free trade agreement talks and hurdles for salmon exports from Norway following the award of the 2010 Nobel Peace Prize to jailed writer Liu Xiaobo.
The rivalry over the Japanese-controlled, uninhabited Senkaku/Diaoyu Islands, 150km northeast of Taiwan, parallels the broader antipathies over the South China Sea. Japan's Defence Minister Satoshi Morimoto warned last Friday that troops might be deployed there, while China's Global Times editorialised this month that Beijing should consider challenging Japan's sovereignty further up the island chain, including sovereignty of Okinawa.
The strong grassroots feelings provoked have linked China and Taiwan in an unusual common cause, which is pushing them towards mutual positions on their South China Sea claims too.
Taiping Island, for instance, the largest of the Spratly islands, 1.4km by 0.4km, including an airstrip, and the only island there with fresh water, is occupied by Taiwan, which is also planning to deploy anti-aircraft and mortar batteries there.
Qiu Yi, a Kuomintang MP and executive at state-owned oil and gas company CPC, says: "The seabed around Taiping Island has abundant reserves of oil and natural gas. It would be great if a cross-strait [China and Taiwan] joint development project is done."
A China-Taiwan academic conference on Hainan island a fortnight ago produced further proposals for joint resource exploration in the South China Sea.
It was two years ago that southeast Asian countries started to voice frankly their concerns about China's more forceful stance over the South China Sea and other issues, which also intensified the competition for regional influence between China and the US, which insists that it has both a capacity and a duty to keep major shipping routes, the vital arteries of trade, free and open for all.
Seizing on this changed diplomatic climate at the ASEAN Regional Forum meeting in Hanoi in 2010, US Secretary of State Hillary Clinton said that freedom of navigation was an American "national interest".
She said: "We oppose the use or threat of force by any claimant."
China's Foreign Minister Yang Jiechi responded that asserting its right to the large area of the sea that it claims, is a "core national interest," and added, while looking at Singapore's Foreign Minister George Yeo, that "China is a big country and other countries are small countries, and that is just a fact."
Since then The Philippines has sought to intensify its defence alliance with the US, while Vietnam has invited the US to broaden military co-operation between them, shrugging off the former American occupation.
Last December, US President Barack Obama spelled out during his Australian visit, America's "pivot" from its former Middle East and Afghan preoccupations: "The US is a Pacific power, and we are here to stay," he said.
Clinton went on to support strongly the failed attempt to introduce an ASEAN code of conduct for the South China Sea.
There are, however, limits as to how far China's Asian neighbours, and Australia, too, to judge by Carr's comments, would wish the US to pursue the issue, since none wishes to support a full-on confrontation with China, and all are still digesting ASEAN's recent failure in Phnom Penh.
Shao Feng, international strategy division director at the Institute of World Economics and Politics' Chinese Academy of Social Sciences, wrote that while "cooperation is the main policy driver for China's relations with neighbouring countries, it isn't the bottom line," which is instead comprised of sovereignty and national interest.
"Confrontation should play a larger role in maritime security strategy. Co-operation must be in good faith, competition must be strong and confrontation must be resolute."
Beijing will not want to see such confrontation degenerate into hot conflict while it is undergoing its process of changing leadership, through the five-yearly Communist Party congress taking place in October.
But it will want that message about being resolute to be understood clearly by its neighbours as their prime grouping, ASEAN, fractures, and as Americans vote for a new president. by: Rowan Callick, Asia-Pacific editor From: The Australian and Joyo News