BMI View: China has embarked on a major diplomatic push to improve relations with its neighbours in Southeast Asia - with the pointed exception of the Philippines. Beijing is furious with Manila's decision to refer their territorial dispute over Scarborough Shoal to a UN tribunal, and is working to isolate and punish the Philippines for going against its wishes. To improve its regional image, Beijing has agreed to begin talks about the formulation of a new Code of Conduct for the South China Sea, although there has not yet been any substantive progress. Tensions over the disputed Diaoyu/Senkaku Islands with Japan also remain a concern.
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