China's Escalating Military Pressure on Taiwan and the South China Sea and Regional Deterrence Trends: Structuring a Two-Track Coercive Diplomacy and Reorganizing the Asian Security Order

Executive Summary

China is institutionalizing military coercion in Taiwan and the South China Sea through actions such as SLBM test launches and expanded coast guard patrols, crossing a strategic threshold towards completing its nuclear triad. This is intertwined with domestic drivers like nationalism amidst economic slowdown and a real estate crisis, creating structural tensions unlikely to ease in the short term. The United States is maintaining a strategic ambiguity, seeking to reset relations post-Trump-Xi summit while simultaneously strengthening its alliance network. China is expected to counter this with a two-track coercive diplomacy, blending diplomatic flexibility with a hardline military stance. Asian nations are navigating the vortex of US-China competition by seeking strategic balance, enhancing deterrence capabilities, and maintaining multilateral diplomatic channels to protect their sovereignty and economic interests. The resolution of the Code of Conduct (COC) in the South China Sea and the deepening of trilateral cooperation among the US, Japan, and the Philippines are emerging as key variables for regional stability. Korean companies must promptly establish contingency plans for supply chain risks traversing the Taiwan Strait and the South China Sea, tailored to various scenarios.

I. Issue Situation Analysis

China's Escalating Military Pressure on Taiwan and the South China Sea and Regional Deterrence Trends

Issue Situation Analysis

1. Background and Developments of the Issue

China's military activities in the Indo-Pacific have consistently maintained a strategic direction and gradually intensified since the launch of the Xi Jinping administration. At its core is the Anti-Access/Area Denial (A2/AD) strategy, which defines the South China Sea and the Taiwan Strait as areas of China's 'core interests' and aims to block the US-led alliance network's access to these spaces. China officially asserted its claims in the South China Sea by submitting a note verbale marking the 'nine-dash line' to the UN in 2009, and has since engaged in a phased alteration of the status quo, termed the 'salami-slicing strategy' by the Center for Strategic and International Studies (CSIS) in Washington [5]. Despite the Permanent Court of Arbitration's ruling in 2016 that China's nine-dash line claims violated the UN Convention on the Law of the Sea (UNCLOS), China outright rejected it and instead responded by expanding its military presence.

China's strategic leap is also evident in its nuclear capabilities. Following the People's Liberation Army Rocket Force's launch of an Intercontinental Ballistic Missile (ICBM) in the Pacific high seas for the first time in decades in 2024, a test launch of a Submarine-Launched Ballistic Missile (SLBM) from a nuclear-powered submarine towards the South Pacific on July 6, 2025, signifies crossing a strategic threshold towards completing its nuclear triad encompassing land, sea, and air [2]. This SLBM test, deliberately timed to coincide with the Australian Prime Minister's security treaty with Pacific island nations, serves a dual function beyond a mere military technology demonstration: it is a geopolitical signal and a domestic political message aimed at fostering nationalistic unity amidst mounting internal pressure from economic slowdown and the real estate crisis [2].

Regarding the Taiwan issue, a structural trend has emerged where support for unification within Taiwan has sharply cooled following the forceful enactment of the Hong Kong National Security Law (2020), leading to an increased preference for unification by force among Chinese authorities. President Xi Jinping reaffirmed at the 20th Party Congress in 2022 that while China would strive for peaceful unification, it would not renounce the use of force, indicating that the military tensions surrounding Taiwan are a structural and long-term conflict, not a short-term issue [8]. Japan, through its revision of three key security documents in 2022, historically decided to possess counter-strike capabilities and increase its defense spending to 2% of GDP, a move that has become a key variable stimulating China's strategic vigilance [15].

2. Current Situation

As of mid-2025, regional military tensions are escalating simultaneously on multiple fronts. In June, China dispatched coast guard vessels to the Pacific waters east of Taiwan for patrol activities, and weeks later, conducted an SLBM test launch in the South China Sea. Both actions are noteworthy to experts as they appear to be responses to specific security activities by US allies, while simultaneously testing new long-term deterrence measures [1].

In the South China Sea, physical clashes between the Philippines and China are recurring. An incident occurred near the Second Thomas Shoal where the Chinese Coast Guard struck a Philippine naval personnel with a baton [12], and in June 2024, Chinese Coast Guard personnel forcibly boarded a Philippine vessel armed with knives and axes [3]. Amidst these escalating tensions, the Philippines conducted the 17th Multilateral Maritime Cooperative Activity (MMCA) in the South China Sea from July 21 to 26, 2025, with the United States and Japan. The exercise involved warships, coast guard vessels, surveillance aircraft, and fighter jets, conducting advanced maritime interoperability training [4]. In response, the Southern Theater Command of China's People's Liberation Army strongly criticized the Philippines for disturbing regional peace and stability by engaging in so-called joint patrols with external countries, announcing that its naval and air force units conducted routine patrols in the South China Sea on July 26 [7].

Meanwhile, Philippine President Marcos expressed his willingness to reset relations with China at the time of the ASEAN Foreign Ministers' Meeting held in Manila. President Marcos met with the Chinese Ambassador at Malacañang Palace on July 21, demonstrating the Philippines' dual approach of maintaining diplomatic channels despite continuous clashes in the South China Sea [14]. At the ASEAN level, the foreign ministers' meeting assessed that "significant progress" had been made in the negotiations for the Code of Conduct (COC) in the South China Sea and stated their goal of concluding it within the year, but clashes near the Second Thomas Shoal and Scarborough Shoal overshadowed the meeting's atmosphere [10].

Tensions are also escalating simultaneously in the East China Sea. China strongly protested the passage of a Japan Maritime Self-Defense Force destroyer through the Taiwan Strait, and instances of the Chinese Coast Guard attempting to exercise jurisdiction within Japan's Exclusive Economic Zone (EEZ) have been reported. The official warning issued by China's PLA Daily regarding Japan's drone force buildup is not merely a media commentary but is interpreted as China's structural response to the shift in the East Asian security paradigm triggered by the revision of Japan's three key security documents [15].

3. Key Actors and Their Positions/Interests

Chinacharacterizes all current military activities as 'routine and lawful exercises,' emphasizing their defensive nature. However, an offensive logic of consistently implementing its A2/AD strategy is effectively at play. The pursuit of completing its nuclear triad is understood in the context of seeking strategic balance against US nuclear superiority. The use of gray-zone tactics, fronted by the coast guard and maritime militia, is a calculated choice to expand effective control while avoiding direct confrontation resulting from clashes between regular forces [2][5]. Domestically, political motives to channel social discontent arising from economic slowdown and the real estate crisis into nationalistic solidarity are also at play. Simultaneously, China is building a diplomatic narrative that frames the intervention of external powers (US and Japan) as 'disturbing regional peace' while maintaining its leadership in dialogue with ASEAN through the COC negotiations [7][10].

United Statesmaintains its existing policy of containing China's expansion of influence through Freedom of Navigation Operations (FONOPs) and strengthening its alliance network. However, following the Trump-Xi summit, a certain flexibility in its hardline stance towards China is perceived, with Defense Secretary Hagerty describing US-China relations as being in "the best state in years" [9]. This reflects the Trump administration's transactional approach, simultaneously pursuing trade war de-escalation and the restoration of military communication channels, which amplifies uncertainty among allies regarding the credibility of US extended deterrence. The US's core interest in the South China Sea lies not in the territorial disputes themselves, but in maintaining its hegemony in the Western Pacific through freedom of navigation and overflight, and it actively supports multilateral exercises with the Philippines and Japan to achieve this goal [4][5].

Philippineshas shifted its foreign policy under the Marcos administration from the pro-China stance of the Duterte era towards strengthening security cooperation with the US and Japan. However, due to the realistic constraints of economic interdependence with China and geographical proximity, it faces a structural dilemma where adopting a complete confrontational stance is difficult. President Marcos's remarks about 'resetting relations' reflect this dual pressure and represent a hedging strategy that combines military deterrence with diplomatic engagement [14]. The Philippine military authorities aim to enhance practical maritime interoperability through multilateral exercises with the US and Japan, while simultaneously pursuing the dual effect of demonstrating its commitment to sovereignty protection to domestic public opinion [4].

Japanhas explicitly defined stability in the Taiwan Strait as a security interest following its major security policy shift in 2022. The mention of peace and stability in the Taiwan Strait in the US-Japan joint statement was the first in '52 years,' effectively dismantling the diplomatic taboo established since the 1972 framework [11]. While acknowledging the limitations in physically deterring China's military actions, Japan has chosen to expand its partial contributions within the framework of the US-Japan alliance. Notably, designating drone capabilities as a key means of counter-strike power implies an asymmetric response logic to China's A2/AD strategy, structurally deepening the security dilemma between China and Japan [15].

ASEANshares the goal of concluding the COC negotiations within the year, but the divergence of interests persists between the majority of member states seeking to maintain economic ties with China and the South China Sea claimants (Philippines and Vietnam). ASEAN's consensus principle works to China's advantage, and China seeks to leverage this to set the agenda for COC negotiations in a way that excludes external powers [10].

4. Summary of Key Issues

The key issues in the current situation can be summarized across four dimensions.

First, the expansion of gray-zone tactics and the possibility of deterrence failureis a major concern. China's gray-zone tactics, employing the coast guard and maritime militia, are designed to operate below the threshold of 'military conflict' assumed by existing deterrence logic. This exploits the strategic ambiguity regarding the level at which the US and its allies will militarily intervene, accumulating precedents where the status quo can be altered without triggering deterrence failure [1][2].

Second, the shift in strategic balance due to the completion of the nuclear triadis significant. China's acquisition of SLBM capabilities fundamentally challenges the credibility of US extended deterrence based on nuclear superiority. This could alter China's calculations regarding US intervention in the event of a Taiwan contingency and could exert structural pressure, potentially stimulating discussions about independent nuclear armament among regional allies [2][8].

Third, the effectiveness and limitations of the multilateral deterrence networkare being tested. While the multilateral maritime exercises involving the US, Japan, and the Philippines send a deterrence signal, questions arise about alliance cohesion due to the Philippines' attempts to 'reset relations' and the Trump administration's transactional approach to China. China is diplomatically exploiting these fissures while seeking to maintain leadership in COC negotiations [7][9][14].

Fourth, the issue of the practical binding force of COC negotiationsremains uncertain. It is unclear whether the COC, which ASEAN aims to conclude within the year, will possess practical binding force to genuinely constrain China's gray-zone actions. If China succeeds in incorporating provisions to exclude external powers during the negotiations, the COC risks functioning as a tool to institutionally block the intervention of the US and Japan in the region [10][5].

II. In-depth Issue Analysis

China's Escalating Military Pressure on Taiwan and the South China Sea and Regional Deterrence Trends

In-depth Issue Analysis

1. Analysis of the Fundamental Causes of the Issue

China's escalating military pressure on Taiwan and the South China Sea is not attributable to a single cause but is a structural product of intertwined strategic, ideological, and domestic political drivers. At the most fundamental level lies the imperative to redefine spheres of influence, an inevitable challenge for China as it transitions from a 'rising power' to an 'established power.' The Xi Jinping administration has internalized the South China Sea and the Taiwan Strait not merely as spaces for territorial disputes but as symbolic culminations of the rejuvenation of the Chinese nation, thereby framing them as core interests directly linked to regime legitimacy, rather than negotiable diplomatic agendas [8]. This ideological rigidity creates a structure where external pressure elicits a hardline response rather than retreat.

A second fundamental cause is the strategic response to the gradual strengthening of the US-led alliance network. From China's perspective, the launch of AUKUS, the revitalization of the Quad, the revision of the US-Japan defense guidelines, and the deepening military cooperation with the Philippines are all perceived as components of a deliberate containment strategy aimed at encircling China [13]. China's response logic is clear: as US allies expand their military presence in the region, China labels this as 'provocation' and counters by deploying more visible deterrence measures to increase the opponent's costs. The SLBM test launch in July 2025, deliberately timed to coincide with the Australian Prime Minister's security treaty with Pacific island nations, is a typical manifestation of this logic [2].

A third cause is domestic political drivers. The Chinese economy faces structural pressures from the real estate crisis and slowing growth, and this internal vulnerability paradoxically increases the need for nationalistic solidarity through a hardline foreign policy. The analysis stating that 'this SLBM test, deliberately timed to coincide with the Australian Prime Minister's security treaty with Pacific island nations, serves a dual function beyond a mere military technology demonstration: it is a geopolitical signal and a domestic political message aimed at fostering nationalistic unity amidst mounting internal pressure from economic slowdown and the real estate crisis' [2] accurately captures this structure. In other words, military hardline actions possess a dual structure, functioning as both a deterrence signal directed outward and a political message directed inward.

A fourth factor is the structural deterioration of the Taiwan issue. The Chinese authorities' forceful suppression of the Hong Kong pro-democracy movement in 2019 and the enactment of the National Security Law in 2020 have sharply cooled pro-unification sentiment in Taiwan. The proportion of respondents favoring unification has decreased from 12.8% in December 2018 to around 6-7% since 2019, while support for gradual independence has nearly doubled during the same period [8]. From the perspective of Chinese authorities, this leads to the perception that the possibility of peaceful unification is diminishing with time, creating a vicious cycle that increases reliance on military means.

2. Structural Context

Political Structure

At the political level, the current tensions are intertwined with the gradual dismantling of the '1972 framework.' This framework, established through the US-China Joint Communiqué and the China-Japan Joint Statement in 1972, had served to 'seal' the Taiwan issue by ambiguously maintaining the 'One China' principle [11]. However, the mention of the 'importance of peace and stability in the Taiwan Strait' in the US-Japan summit joint statement in 2021, for the first time in 52 years, and Japan's official adoption of counter-strike capabilities through the revision of its three key security documents in 2022, are causing the preconditions of this framework to crumble one by one [11][15]. China perceives these changes as a fundamental challenge to the 1972 framework and seeks to increase the cost of altering the status quo through hardline military actions in response.

In the case of the Philippines, despite the Marcos Jr. government's initial policy of engagement with China, recurring clashes at the Second Thomas Shoal and Scarborough Shoal are structurally worsening bilateral relations. The dual approach of the Philippine President publicly expressing a desire to reset relations with China while simultaneously pursuing multilateral maritime exercises with the US and Japan [14] demonstrates the structural limitations of the options available to a small nation caught between great power competition. Meanwhile, the Southern Theater Command of the Chinese People's Liberation Army strongly criticized the multilateral exercises involving the US, Philippines, and Japan as 'actions by external countries to stir up trouble in the South China Sea' [7], reflecting China's consistent political stance of fundamentally blocking the intervention of external powers in regional affairs.

Economic Structure

From an economic perspective, the South China Sea holds strategic value beyond mere territorial disputes, encompassing energy security and control over maritime traffic routes. Securing control over this sea, through which a significant portion of global maritime trade passes, is directly linked to China's energy import security and export competitiveness. Concurrently, China's economic vulnerabilities paradoxically act as a factor strengthening its hardline military stance. As internal pressures mount due to the real estate crisis and economic slowdown, external hardline actions serve as a safety valve to divert domestic discontent outward[2]. The prolonged US-China trade war also reinforces this structure. As economic interdependence weakens, military deterrence increasingly emerges as a primary means to constrain the actions of the opposing party, thereby increasing the incentive for an arms race for both sides[9].

Security Structure

The core of the security structure lies in the impact of China's completion of its nuclear triad on regional strategic balance. The ICBM test launch in 2024, followed by the SLBM test launch in 2025, signifies China's progress toward securing a survivable second-strike nuclear capability[2]. This not only reduces China's vulnerability to US nuclear deterrence but also enhances China's freedom of action in conventional conflicts. A structural condition is being formed that allows China to act more boldly at the lower end of the nuclear escalation ladder. Furthermore, the Chinese Coast Guard's attempts to exercise jurisdiction within Japan's Exclusive Economic Zone (EEZ) and its deployment to the Pacific waters east of Taiwan exemplify a gray zone strategy that incrementally alters the status quo without direct use of military force[1]. These gray zone activities make it difficult for the opposing party to justify a military response while simultaneously expanding China's de facto control over time.

3. Comparison with Historical Precedents and Similar Cases

China's current pattern of behavior can be compared to several historical precedents. The most direct comparison is China's gradual territorial expansion in the South China Sea since the 1990s. After seizing parts of the Spratly Islands in a clash with Vietnam in 1988, China occupied Mischief Reef, which was under the de facto control of the Philippines, in 1995, and effectively expelled the Philippines from Scarborough Shoal in 2012. This process is a textbook example of what CSIS terms the 'salami-slicing strategy,' where the status quo has been altered in ways that make the opponent's response difficult at each stage[5]. Current gray zone activities are an extension of this strategy, differentiated only by the evolution of tools from military force to the coast guard and maritime militia[12].

In terms of nuclear power development, it can be compared to the Soviet Union's construction of its nuclear triad during the Cold War. Just as the Soviet Union exhibited bolder actions in conventional conflicts after securing submarine-launched nuclear missile capabilities, China's enhanced SLBM capability is expected to have a structural effect of increasing its freedom of action in conventional conflict spaces[2]. However, a key difference from the Soviet Union is that China is building this capability within a network of economic interdependence, which further complicates deterrence calculations.

Regarding Japan's case, a cautious interpretation of the historical context is necessary, as the 2022 security document revision represents an adaptation to the realistic security environment rather than a return to militarism in the 1930s. However, China perceives Japan's acquisition of counterstrike capabilities and enhancement of drone forces as a fundamental shift in the regional security paradigm and is continuously undertaking structural responses to it[15]. The reappearance of the Taiwan Strait in the US-Japan joint statement after 52 years symbolizes the cracks in the 72-year order[11], signifying the end of an era of strategic ambiguity that has persisted since the détente of the 1970s.

The historical context of the COC negotiations is also important. ASEAN and China have failed to conclude a legally binding Code of Conduct (COC) for over 20 years since adopting the Declaration on the Conduct of Parties in the South China Sea (DOC) in 2002. China's dual strategy of participating in COC negotiations while simultaneously strengthening its de facto control supports skeptical views on whether the announcement at the recent ASEAN Foreign Ministers' Meeting to aim for COC conclusion within the year represents substantial progress or merely an exercise in diplomatic management[10].

4. Key Variables in Issue Development

The key variables that will determine the future development of the issue can be broadly categorized into four areas.

First, the consistency of US policy toward China. Following the Trump-Xi summit, there have been signs of a partial easing of the hardline stance toward China, with the US Secretary of Defense assessing US-China relations as "the best in years" and refraining from mentioning Taiwan[9]. If US strategic ambiguity deepens, the credibility of deterrence among regional allies may weaken, and the space for responding to China's gray zone activities may narrow. Conversely, if the US maintains a hardline approach, regional tensions are likely to escalate further in a vicious cycle.

Second, the substantive progress of COC negotiations. Although the ASEAN Foreign Ministers' Meeting proposed a goal of concluding the COC within the year[10], as long as China employs a strategy of maintaining negotiation dominance by framing the Philippines' cooperation with the US and Japan as 'provocative,' the possibility of concluding a substantively binding COC remains limited. The content and level of legal binding force of the COC will be a crucial variable determining the direction of regional order.

Third, the speed of China's nuclear triad completion and the regional response."The most likely scenario, estimated at approximately 55%, is a 'managed tension' state where China's hardline military stance continues while the regional alliance network gradually strengthens"[2]. As China's nuclear capabilities advance, the pressure on regional countries to enhance their own deterrence increases, acting as a structural driver that exacerbates the security dilemma.

Fourth, the strategic choices of the Philippines. The question of whether the Marcos administration can continue its dual strategy of seeking a reset in relations with China while deepening military cooperation with the US and Japan is a litmus test for the future regional balance of power[14]. If the Philippines succumbs to China's pressure or, conversely, adopts a hardline stance against China, it will have different ripple effects on the regional deterrence structure and ASEAN cohesion, respectively. The speed of Japan's enhancement of drone capabilities and realization of counterstrike capabilities is also a key variable determining the intensity of China's response, with a high probability of a security dilemma where the actions of both sides mutually reinforce each other becoming entrenched[15].