The South China Sea is a strategically important and resource-rich area in Asia. Around half of the world's merchant fleets pass through every year carrying an estimated $5 trillion worth of trade. The area is also believed to contain valuable oil and gas deposits.

And ownership is hotly contested. There are ongoing territorial disputes between Vietnam, Malaysia, Indonesia, Philippines and China. One of the most well-known is the Spratly Islands' hydrocarbon deposits valued at $26.3 trillion.

Connect with 101 East

The latest tension is at the Scarborough Shoal, a small cluster of uninhabitable islands which lies about 220km off the coast of the Philippines and falls under its exclusive economic zone according to international maritime law. But China also claims ownership despite its nearest coastline being 900km away. The Scarborough Shoal has valuable resources including fishing, shipping routes and potentially enormous oil and gas deposits. 

In early April, the Philippines' naval forces intercepted eight Chinese fishing vessels in the Scarborough Shoal. They found large numbers of illegally-fished turtles, baby sharks, clams and corals on board. They tried to arrest the poachers but were stopped by the arrival of two Chinese maritime ships leading to a two-month standoff.

The David and Goliath-style situation has forced the Philippines, along with other smaller Asian countries, to work together on joint security. It has also pushed them to cement military ties with the US and Australia.

After more than two decades of double-digit increases in defence spending, China now has the largest fleet of advanced warships, submarines and long strike aircraft in Asia. The Philippines is working hard to get support from allies such as Japan and the US to help it build up its military capabilities.

But months of simmering tension between both sides over the disputed territory is threatening to exact a heavy toll on Philippines' economy and is damaging vital tourism and agricultural sectors. 

Business communities in the Philippines are concerned the ongoing standoff threatens trade relations and investments after China tightened regulations on banana imports from the Philippines and several Chinese tour groups cancelled visits to the Philippines. Energy and infrastructure projects have also been put on hold.

As China flexes its economic and military muscle across the Asia Pacific region, 101 East asks if this escalation is a threat to peace and stability.

101 East airs each week at the following times GMT: Thursday: 2230; Friday: 0930; Saturday: 0330; Sunday: 1630. Click here for more 101 East.