Chinese Official: Turn South China Sea Island into Cayman Islands-Style Bank

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Subi Reef, South China Sea (DigitalGlobe via Getty Images)

China’s chess game to seize control of the South China Sea may take an interesting turn if an influential businessman’s suggestion is followed and Beijing turns one of the disputed islands into its very own Cayman Islands-style offshore bank.

The idea, as explained by The Washington Postis to establish a sizable offshore banking complex on Woody Island, which the Chinese call Yongxing, located in the Paracel chain. At the moment, about a thousand people live on the island, the majority of them military personnel.

Businessman and Chinese government official Han Fangming, through his Charhar think tank, suggested Beijing “should learn from the experiences of other international offshore financial centers and make Yongxing Island a pioneer in the country’s reform of the financial system and modernization of the governance system.”

Han noted that a number of large Chinese companies–including Alibaba, the Chinese answer to Google–are registered in the Cayman Islands. “In some senses, it caused a loss of national assets,” said Han, who proposed China should recapture those assets by creating its own offshore financial haven.

The Washington Post sees an agenda that goes beyond banking convenience for mega-corporations: “Making the island look and act like an ordinary Chinese city (plus palm trees) would bolster Beijing’s claim that these islands serve civilian purposes–an idea it’s keen to sell, both at home and abroad.”

In other words, military power provides an aggressive tool for seizing territory, but there is no better way for China to consolidate its hold on these islands than to build cities and stuff them with civilians as quickly as possible.

Even as Chinese ministers rhapsodize about the South China Sea as the beloved stomping ground of their ancestors for centuries, skeptical observers like Ian Storey of the Yusof Ishak Institute say that “it’s just a game” and “nobody believes it.”