China to Invest $1.6 Billion on Disputed Islands, Herald Reports

China plans to spend more than $1 billion building an airport, piers and other infrastructure on islands at the center of a territorial dispute with Vietnam and the Philippines, the 21st Century Business Herald reported.

The central government approved plans to invest 10 billion yuan ($1.6 billion) in infrastructure for areas administered by the city of Sansha, the newspaper reported today, citing Jiang Dingzhi, governor of Hainan province, which holds jurisdiction over the city. China set up Sansha in June to oversee the Paracel and Spratly islands, parts of which are also occupied or claimed by Vietnam, the Philippines, Taiwan, Malaysia and Brunei.

Tensions between China and its neighbors in the South China Sea have spurred concern that competing territorial claims will disrupt economic relations between the Association of Southeast Asian Nations and the group’s largest trading partner. A dispute over control of the Diaoyu, or Senkaku, islands in the East China Sea is also weighing on trade between China and Japan.

The funds for Sansha will also be spent on marine law enforcement and ocean fisheries, according to the 21st Century Herald, which is based in the southern city of Guangzhou. Construction of some facilities has already started, the newspaper reported, without giving more detail.

Vietnam Ousted

Sansha is located on Yongxing, the largest island in the Paracels, with an area of 2.1 square kilometers (0.8 square miles). China ousted Vietnam from the 30 islets and reefs that comprise the Paracels, known as Xisha in China and Hoang Sa in Vietnam, in a 1974 battle that killed 71 soldiers.

“Sansha’s immediate work is for airports, ports, piers and other important infrastructure, as well as law enforcement vessels, supply ships and other projects to be established,” Hainan Governor Jiang was quoted as saying by the newspaper. “In the long term, we need to implement a platform for Sansha’s development.”

To contact Bloomberg News staff for this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

To contact the editor responsible for this story: John Liu at jliu42@bloomberg.net