U.S. Naval Intelligence believes that China is in the midst of a major naval build up. In 2014 the Chinese began building, launched or put into commission at least sixty vessels a year and apparently is going to continue this pace into 2015 and 2016. Announced naval building plans include several aircraft carriers, 26 destroyers, 52 frigates, 20 corvettes, 85 missile armed patrol boats, 56 amphibious vessels, 42 mine warfare ships and nearly 500 auxiliary craft of which ten percent are large seagoing ships. While a lot of these new ships are to replace older, Cold War era, Russia designs, many are based on Western designs and built to operate long distances from China. Naval air power is also being expanded with additional helicopters, modern fighters, missile carrying bombers and UAVs. China is also building more diesel-electric submarines and continuing to perfect (get to work properly) its nuclear powered subs.
In mid-2013 China also introduced what has become a second navy when the new, larger, and more heavily armed Chinese Coast Guard was officially established. This began with combining four of its five maritime police organizations into one new outfit: the Coast Guard Bureau (or China/Chinese Coast Guard). This was actually the old China Marine Surveillance (or CMS, which belonged to a civilian outfit: the Ministry of Land and Resources) that took over the Coast Guard (belonging to the Public Security Ministry), the fisheries police (of the Agriculture Ministry), and the maritime anti-smuggling police (of the General Administration of Customs). China had multiple coastal patrol organizations because it was the custom in communist dictatorships to have more than one security organization doing similar tasks, so each outfit could keep an eye on the other and ensure loyalty. This was inefficient and confusing, thus the consolidation. This involved several months of effort as hundreds of ships were repainted. Some of these ships had heavier armament installed, as the coast guard is a paramilitary outfit while some of the older outfits were sea-going police.
This reorganization reflects the favorite Chinese tactic for asserting its claims to control most of the South China Sea by avoiding the use of military vessels. Instead it sends out these “police” ships to harass and threaten foreign ships operating in what international law considers the high seas but that China considers its territorial waters. If any of these intruders call in warships, then China will defend itself by calling its own warships and aircraft and protest this act of foreign aggression.
As part of this policy China began enforcing new rules right after its new Coast Guard went into business. This had have Chinese coast guard vessels escorting, or expelling, foreign ships from most of the South China Sea. This move has generated a lot of resistance from the neighbors. At the time China announced that it was not planning on having grey painted navy ships do the intercepting and harassing but white painted coast guard vessels. White paint and slanted vertical red stripes on the hull are an internationally recognized way to identify coast guard ships. Coast Guard vessels are considered much less threatening than warships. China also calls in civilian vessels (owners of these privately owned ships understand that refusing to help is not an option) to get in the way of foreign ships the coast guard wants gone. Thus, if foreign warships open fire to try and scare away these harassing vessels they become the bad guys.
CMS was the most recent of these maritime police agencies, having been established in 1998. It was actually the police force for the Chinese Oceanic Administration, which was (and still is) responsible for surveying non-territorial waters that China has economic control over (the exclusive economic zones or EEZ) and for enforcing environmental laws in its coastal waters. The CMS already had 10,000 personnel, 300 vessels, and ten aircraft before it was incorporated in the new coast guard.
Before 2013 when there was an armed confrontation over contested islands in the South China Sea it was usually CMS patrol boats that are frequently described as "Chinese warships." The CMS and the other coastal police forces had several hundred large ships (over 1,000 tons, including several that are over 3,000 tons) and thousands of smaller patrol boats. Dozens of new seagoing warships are being built for the new Coast Guard. China is also building small bases in the disputed islands that can serve as home port for the small patrol boats. It should be noted that many of these patrol vessels are designed to be equipped with heavier weapons (missiles, torpedoes) in wartime and some are getting this stuff now as they are repainted as coast guard vessels.
The current consolidation of Chinese maritime police forces is mostly about the exclusive economic zones or EEZ and patrolling it more frequently and aggressively. International law (the 1994 Law of the Sea treaty) recognizes the waters 22 kilometers from land as under the jurisdiction of the nation controlling the nearest land. That means ships cannot enter these "territorial waters" without permission. However, the waters 360 kilometers from land are considered the EEZ of the nation controlling the nearest land. The EEZ owner can control who fishes there and extracts natural resources (mostly oil and gas) from the ocean floor. But the EEZ owner cannot prohibit free passage or the laying of pipelines and communications cables. China has already claimed that foreign ships have been conducting illegal espionage in their EEZ. But the 1994 treaty says nothing about such matters. China is simply doing what China has been doing for centuries, trying to impose its will on neighbors or anyone venturing into what China considers areas under its control.
For the last two centuries China has been prevented from exercising its "traditional rights" in nearby waters because of the superior power of foreign navies (first the cannon armed European sailing ships, then, in the 19th century, newly built steel warships from Japan and Europe). However, since the communists took over China after World War II there have been increasingly violent attempts to reassert Chinese control over areas that have long (for centuries) been considered part of the "Middle Kingdom" (or China, as in the "center of the world").
China is particularly concerned about the nearby Spratlys, a group of some 100 islets, atolls, and reefs that total only about 5 square kilometers of land but sprawl across some 410,000 square kilometers of the South China Sea. Set amid some of the world's most productive fishing grounds, the islands are believed to have enormous underwater oil and gas reserves. Several nations have overlapping claims on the group. About 45 of the islands are currently occupied by small numbers of military personnel. China claims them all but occupies only 8, Vietnam has occupied or marked 25, the Philippines 8, Malaysia 6, and Taiwan one.