TAIPEI, Taiwan (TheStreet) -- Beijing's newest wave of landfilling in the disputed, resource-rich South China Sea along with a fresh keep-out warning to the U.S. raises the threat of new upsets, a boost for defense contracts.
The latest move, what defense media describe as construction of an islet 3,000 yards long and at least 200 yards across, anchor Beijing's claim to a 1.4 million-square-mile ocean and reminds growing Southeast Asia of its so far unstoppable expansion. China's 1.35 billion people after all need fish to eat and its $10 trillion economy needs the gas and oil that may lurk under the sea bed.
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To protect its interests, Beijing has twinned its landfill work over the past three months with a Nov. 24 warning to the U.S. described by the official People's Daily paper as "Stay out of it." The U.S. is Southeast Asia's most powerful ally as both sides want China contained.
At some point, maybe this one, more aggressive Southeast Asian contenders in the ocean Vietnam and the Philippines will do more than shout back at China. They'll go on a weapons buying binge. Defense contractors aren't saying much at this point but can't possibly have their heads in the sand.
The Philippines, which tangled with China during a standoff at sea in 2012 and again this year with the arrest of 11 Chinese fishermen, is bracing for a fight.
"I believe on the part of our government, the Armed Forces of the Philippines modernization is a concrete example of a response to these challenges," says Jonathan Ravelas, chief market strategist with Banco de Oro UniBank in Manila.
New York-listed defense contractors Raytheon (RTN) and Lockheed Martin (LMT) , both likely to be sought after because of their business scale and experience overseas, declined to say whether they expected contracts from South China Sea nations. But that doesn't mean the secretive companies have declined to talk with Manila, which lacks China's military might.
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