Interannual variation of the South China Sea (SCS) circulation is investigated using variable grid global ocean circulation model results from December 1981 to October 2004 forced by the NCEP Reanalysis wind stress. The upper (0--58 m) Luzon Strait transport (LST) correlates with the local wind stress very well, while the lower (58 m to seabed) LST shows a statistically significant correlation with the integral of wind stress over the tropical Pacific according to Godfrey's "island rule," with a delay of about 5 months. The Empirical Orthogonal Function (EOF) analysis shows significant correlation between the first wind stress curl EOF mode and El Ni¿o, with a lag of 3 months. The interannual variation of upper layer currents closely correlates with El Ni¿o, with a maximum correlation coefficient of 0.7, lagging by 5 months. The first EOF spatial pattern shows a basin-scale cyclonic gyre. The interannual variation of subsurface currents marginally correlates with Nino3.4. The model results show that in the winter of 1997/1998, the cyclonic circulation weakens and the associated southward cool water advection is thus reduced. In the summer of 1998, the normal double gyre structure (cyclonic in the south and anticyclonic in the north) of the upper layer currents is replaced by a basin scale anticyclonic gyre, and the offshore current southeast of Vietnam and its associated upwelling vanish. The reduced southward advection in the winter and the disappearance of upwelling in the summer are considered as contributions of the anomalous ocean circulation to the 1998 warm event.