Beijing’s climbdown in Bali: What is next in the South China Sea?

A key outcome of President Barack Obama’s Asia tour is an apparent tactical withdrawal by China on drilling rights in the South China Sea. This does not mean that Vietnam, the Philippines and others in the sea can proceed with abandon, but — at least for now — Chinese naval ships may be less likely to interrupt oil and gas exploration. Locally there is some elation, with The Times of India calling it a "climbdown" by China.

The issue of who owns what waters in the East China and South China seas is wrapped up in both fortune and stature — though the seas are relatively unexplored, some experts believe many billions of oil and gas lie underneath; in addition, China regards sovereignty over the waters as a sign of its great-power status. So over the last two years, numerous diplomatic and military confrontations have occurred between China and the oil-drilling plans of its neighbors. In 2010, it was particularly unseemly to observe Japan reduced to effective groveling after a confrontation with China over rare-earth minerals.

China being much larger, some of its intimidated neighbors have welcomed a stepped-up U.S. presence as an equalizer. That has played into narratives unfolding in the United States — angst over a widely perceived national decline, along with Obama’s difficult re-election battle.

All of these layers were on display Saturday, when 16 of 18 leaders gathered in Bali for an Asian summit one after another mustered their nerve and told Chinese Premier Wen Jiabao of their worry over the security of the waters off their shores. Obama expressed the same concern in the forum.

Until now, China’s official position has been to divide and rule — the South China Sea must be discussed bilaterally on a country-by-country basis, Beijing has said, and meanwhile the U.S. should butt out. On Saturday, however, with China’s neighbors raising the subject anyway, Wen appeared to seek peace while holding his poise, from what one can judge by reports of the closed meeting.

The Wall Street Journal’s Jeremy Page quoted Wen’s response, contained in a Xinhua report: "I don’t want to discuss this issue at the summit. However, leaders of some countries mentioned China on the issue. It’s impolite not to make a return for what one receives. So, I am willing to reiterate China’s stance." According to the New York Times’ Jackie Calmes, quoting a U.S. official who briefed reporters afterward, Wen proceeded to say that "China goes to great pains to ensure that the shipping lanes are safe and free."

Afterward, Chinese officials went to some lengths to paper over the diplomatic faceoff. Assistant Foreign Minister Liu Zhenmin, quoted by Bloomberg’s Daniel Ten Kate, described the U.S. as "an important player in Asia ever since the Second World War." Notwithstanding the gloating by the Times of India and others, this does not mean a full Chinese retreat. In the official China Daily, for instance, an op-ed writer accused the U.S. of masking "espionage operations" under the guise of the freedom of navigation.

Yet, diplomatic advantage is on the Tigers’ side after Obama’s visit. Here is a good summary by Gary Li, an analyst with London’s Exclusive Analysis, quoted by Bloomberg’s Kate: "In circumstances when they are outnumbered diplomatically, and with the U.S. hovering on the sidelines like a school prefect, China usually goes back into its shell."