• Beijing is employing "gray zone tactics" against the Philippines in the South China Sea, says Lowy Institute's Rahman Yaacob, following a recent clash at a contested shoal.
• China may continue its aggression, but it would likely take the use of kinetic weapons to trigger a U.S.-Philippines defense pact and create a wider conflict, he said.

China is employing "gray zone tactics" against the Philippines at the contested Second Thomas Shoal reef, a move likely aimed at avoiding U.S. intervention in the region, according to Lowy Institute's Rahman Yaacob. 

Last week, Philippine officials said Chinese forces damaged the country's boats and injured several sailors near the Second Thomas Shoal — claimed by both Beijing and Manila — in the Spratly Islands of the South China Sea. 

Speaking to CNBC's "Squawk Box Asia" on Monday, Yaacob, Southeast Asia Program research fellow at the Lowy Institute, said that while China was testing its boundaries at the Shoal, it has strategically avoided triggering a wider conflict despite the latest escalation. 

"The Chinese, they are experts at operating just below conventional warfare; They are good at employing gray zone tactics against their opponents," he said, adding that the incident was unlikely to trigger an existing defense pact between the U.S. and the Philippines. 

Gray zone tactics refer to "coercive actions that are shy of armed conflict but beyond normal diplomatic, economic, and other activities," according to Rand Corporation.

In 2020, Chinese soldiers engaged in a border clash with India in a disputed region of the Himalayas. While 20 Indian soldiers were killed, weapons were not fired, and it did not escalate into a direct military conflict, Yaacob pointed out.  

Philippine officials have so far avoided invoking the mutual defense treaty with the U.S. even as they have decried Chinese ships' "illegal and aggressive actions" of disrupting its resupply missions to the Shoal.

"But, I suspect if the Chinese use kinetic force, like firing missiles or using guns against Philippine military forces, this may actually trigger the defense treaty," Yaacob warned. 

Beijing has disputed any wrongdoing, with a spokesperson saying on Thursday that the country had taken "necessary" measures to "safeguard its sovereignty" during the latest Second Thomas Shoal clash.

Philippine officials said the country will continue to resist China's "reckless behavior" in the South China Sea. On Friday, officials said they had "challenged" four Chinese military vessels in the Philippine waters of the Balabac Strait. 

"I think China is keen to avoid a conventional war with the U.S. for now, because it knows it will have terrible consequences," Yaacob said, adding that Washington was also dealing with conflicts in Eastern Europe and the Middle East. 

Philippines President Ferdinand R. Marcos Jr. said on Sunday that the country was not in the business of instigating wars and would not resort to the use of force and intimidation.

While Yaacob said that de-escalation between the Philippines and China, as well as the U.S., was currently in the best interest of all parties, the Chinese might get more aggressive and try to seize Filipino boats, potentially causing harm to Filipino Navy personnel.

"This is something the U.S. and Philippines must consider carefully," he added.