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

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Chinese tourists sing and dance to patriotic songs on Silver Islet in the Paracel Islands. Photo: SCMP Pictures

Published: 11:02am, 19 Sep 2016Updated: 2:38pm, 19 Sep 2016

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.

Cruising the disputed Paracel Islands

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.

Silver Islet, on the Observation Bank of the Paracel Islands, is an unlikely tourist destination. Photo: SCMP Pictures

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.