This article contributes to the discussion about China's divisive influence on the Association of Southeast Asian Nations (ASEAN). It argues that recent China-ASEAN relations are based on Beijing's successful implementation of a dual strategy of coercion and inducement. The effectiveness of this strategy is tested against the South China Sea disputes - the issue that lies in the core of regional security and a key platform of power display. The article outlines Beijing's recent interaction with individual ASEAN member-states and its implications for the regional multilateral diplomacy. While by no means identical, Beijing's dual strategy of coercion and inducement with individual ASEAN states have resulted in an effective abuse of the ASEAN consensus principle - a tactic often referred to as 'divide and rule'. Consequently, the group's internal discord has further eroded and affected the institutional confidence of ASEAN. This article draws attention to the psychological effect of coercion as a perception of punishment, and inducement as a perception of reward.