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A Risky Forecast for the South China Sea

This report was originally published in April 2016.

A presidential election is looming here in the US—one of the most watched and globally concerning in decades. Who is watching this election so closely? The Chinese central government for one, primarily because once a new commander-in-chief is inaugurated, but not yet settled into the most politically difficult job in the world, the Chinese will want to test his or her mettle. Whoever the next president may be, China will likely be looking for an opportunity to provoke, test, and dominate—all of which sets the tone for the remainder of the administration.

And if you run a business in China, or you do business with the Chinese, they will be testing your mettle at the exact same time.

With increasing volatility and aggressive territorial expansion in the South China Sea, anyone with business interests in China or surrounding markets would do well to educate themselves on dangerously hostile regional geopolitics.

Contested control over the South China Sea—an extremely lucrative commercial waterway that accounts for close to one-third of the world’s maritime traffic and serves as a transit point for trillions of dollars’ worth of goods (much of it bound for the US)—could have grave commercial implications. Many US businesses are inextricably tied to the pulse of the South China Sea, and any conflict scenario includes the possibility of blocked trade, which exposes the waterway’s supply chain to major disruptions. US businesses should consider that consequently they could face any eventuality—from shuttered shipping lanes to restricted movement, interrupted supply chains, hastily erected trade barriers, travel bans, military confrontations, currency fluctuations, materials mark ups and shortages, and the like.

While the US government is left to contemplate how best to counter China’s power play without prompting a significant military conflict, US businesses would be wise to proceed with extraordinary caution, and to implement plans for any variety of diplomatic strife, trade disruptions, or even open conflict. With supply chains exposed to the fallout from any potential US-China showdown—or better yet, China’s “test” for the next US president—LEVICK Business Intelligence understands there is significant for companies with a stake in the region.

For further information about LEVICK Business Intelligence’s political and regulatory risk capabilities—including obtaining a complete copy of this report or others—please visit us online at or contact us directly at [email protected] A complete list of our Political Risk Updates can be found under the Political & Regulatory Risk tab.

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