Welcome to conflict tourism: how Chinese state firms are using the South China Sea

by Xue Gong / 19 September, 2016 / South China Morning Post

Analysts have tried to interpret China’s rejection of the UN arbitration on the South China Sea dispute from Beijing’s strategic and regional security policy perspectives. What is missing in all such analyses is the increasing role of Chinese state-owned enterprises (SOEs), some of which may even be complicating China’s position in the dispute.

But in addition to the defence industries, there are other less well known but active SOEs reaping benefits from the South China Sea disputes.

It is easy to understand that the Chinese defence industry has significantly benefited from the South China Sea disputes. The stock market offers a glimpse of its latest gains. In the weeks leading to the tribunal ruling, a few notable Chinese stocks experienced significant hikes in prices and trading volumes. For example, the shares of Beifang Daohang Technological Corporation, affiliated to China North Industries Group, rose by 8.8 per cent; China RACO, which specialises in satellite communication, rose by 6.6 per cent; and State China Shipping Corporation jumped 19.6 per cent between 24 June and 12 July.

Although the tourism industry may seem to be the unlikeliest candidate to experience growth in times of regional conflict and uncertainty, it is not the case for Chinese companies that offer tour services to the South China Sea.

On the day after the release of the arbitration ruling, two aircraft, chartered by China Southern Airlines and Hainan Airlines, both state-owned, departed from Haikou ( 海口 ) and landed on Mischief Reef and Subi Reef respectively. Pundits in China suggested their government may eventually come up with a plan in the future to utilise the tourism resources on the newly constructed artificial islands occupied by China in the South China Sea.

Chinese tourist companies had already started business in the Paracels. Coconut Fragrance Princess Cruise was introduced in 2012 by Hainan Strait Shipping, a local SOE, to promote tourism in the Paracel Islands, especially to All Wealth Island and Male Duck Island.

Initially, Princess Cruise made losses and was subsidised by the government. But its operational performance improved after Sanya ( 三亞 ) became the departing port in September 2014 and Yinyu or Observation Bank was added as a destination.

Such tourism operations are inevitably linked to nationalism. Tour activities include flag-raising and oath-taking ceremonies. It is believed that promoting travel resources bolsters China’s sovereignty and rights in the South China Sea. More than 10,000 Chinese tourists, touted as patriots, have visited the Paracel Islands. Such tours continue to be supported and welcomed by the general Chinese public, especially after the arbitration. Read more…

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