In a recent post Kai He insightfully examined the recent transit by the USS Lassen close to China’s new man-made islands in the South China Sea. His post raised several issues, three of which might be worth further discussion.

Firstly, Kai makes use of prospect theory in examining Chinese decision-making however the Lassen transit may also be considered from another perspective. In this regard, the transit was not a surprise or a crisis but rather a well-choreographed event. China was informed months before, allowing a PLAN warship to be pre-positioned to closely shadow the Lassen for some ten days before it neared the islands of concern. There was adequate time for both sides to think about the issues involved and fully consider their respective responses. Both sides appeared to be acting strategically. America seemed to be purposefully responding to Chinese actions that directly related to the particular strategy China has chosen. Thomas Schelling’s work seems apposite: such strategic interactions “are essentially bargaining situations…in which the ability of one participant to gain his ends is dependent…on the choices or decisions the other participant will make.”

In prospect theory, decision-making outcomes depend on how information is presented in terms of method or order, and how the expected outcomes compare to a pre-determined reference point, most often the status quo position. Policymakers favour policies that avoid losses rather than make gains; they willingly take risks to minimize losses but are reluctant to in search of gains. In the Lassen case prospect theory might suggest Chinese decision-makers might take risks to keep their revisionist ‘status-quo’ intact – that is prevent anyone infringing their newly-made territorial waters. In reality though, it is hard to see Chinese policymakers took any risks. Instead unfazed, they remained intent on patiently implementing their strategy, perceived no crisis and saw no urgent need to change course or take precipitate actions.

If not prospect theory then what? In formulating strategies, policymakers have often drawn on historical analogies. Indeed some observe that China’s decision to be more assertive reflects the lessons ‘learned’ from the so-termed century of humiliation. These lessons highlight that the correct response when other nations impinge is to push back, stand up and strongly defend what is China’s by right – certainly never again to be bullied into trading territory for peace. In Chinese policymakers’ minds, historical lessons rather than the summing of losses or gains may loom larger when they craft and implement deliberate, well-considered strategies. In carefully responding to China’s South Sea’s strategy, understanding the historical perspectives of Chinese policymakers may be more useful than prospect theory.

Secondly, the US actions appear unlikely to have any significant negative impact on China’s South China Sea strategy. Instead, the reverse might be true. It is possible to read the US acting alone as an indication that regional nations either have no real interests involved or instead side with China. Kai’s argument that China might lose ‘face’ if other nations joined the US actions implies that with the reverse – no nations joining – China may perceive it gains ‘face’. Other nations adopting a Kai’s recommended “keeping-my-distance” stance may come at the cost of unintentionally encouraging greater Chinese assertiveness.

On the other hand however, the Lassen’s transit now sets the stage for this to be a regular event. The US now plans to undertake eight such freedom-of-naval-navigation exercises every year. The regular presence of the USN in the area may be reassuring for America’s regional friends and allies, and appealingly at no cost to them.

Thirdly, after the Lassen’s transit a solution to the South China Sea imbroglio seems as distant as ever. Kai’s suggestions to resolve the matter through legal means, international conferences or negotiated agreements are most sensible but Chinese policymakers seem to be studiously ignoring such options.

In this Kai’s noting of the Chinese response to the Lassen by rallying nationalist fervour was particularly worrying in making finding a solution more difficult. This and the bellicose statements by some officials suggests it may be unwise to assume Chinese actions in a real crisis situation will conform to rational actor theory. Chinese actions then may be more influenced by the emotions of the moment than a clear-eyed assessment of the situation.

On the plus side however, the protocols that the US and China have agreed to, the so-called Conduct for Unplanned Encounters at Sea (CUES), are working well. Both the USN and the PLAN acted professionally and displayed a high level of competence. The likelihood of accidental conflict seems to have markedly reduced since 2001 when an aggressively flown Chinese air defence fighter collided with a USN EP-3 surveillance aircraft.

Overall, it should be expected that Chinese assertiveness in the SCS will intensify in 2016, continuing the trend line set in the last decade. The main fault lines next year seem to be the Philippines with its case before the Permanent Court of Arbitration in the Hague and Vietnam, the nation seemingly most impacted by the Chinese claim to some 90% of the South China Sea. If strategy is a bargaining process where the players negotiate an outcome, the Lassen transit does not seem likely to dissuade China from seeking a zero-sum result.

Article by Griffith Asia Institute Visiting Fellow, Dr Peter Layton.