The South China Sea (SCS) is affected by two types of tropical cyclones (TCs): those locally formed in the SCS (local TCs) and those traversing the SCS (nonlocal TCs). In this study, the characteristics of these two types of SCS TCs are investigated for the period of 1979–2016. It is shown that only 2.3 per year (10.9%) form in the SCS (local TCs) and 5.5 per year (25.5%) pass from the western North Pacific (WNP) into the SCS (nonlocal TCs). Nonlocal TCs tend to form in the WNP west of 160°E and cross the Philippines into the SCS with typical straight westward tracks. Local TCs mostly move northwestward or northeastward, and they have shorter tracks, are less intense, and have shorter lifetime compared to nonlocal TCs. Annual TC rainfall in the SCS is primarily attributed to nonlocal TCs, but the slower motion of local TCs (with weaker intensity) increases TC rain-rate and intensity of extreme rainfall. Their genesis locations (tracks) migrate with large-scale environments (steering flows) associated with variations of the monsoon trough and the subtropical high in the WNP. Furthermore, the annual numbers of local and nonlocal TCs exhibit a significant inverse relationship on both interannual and interdecadal timescales; this is especially evident on interdecadal timescales. This interdecadal relationship may be explained by the interdecadal variability of sea surface temperature (SST) in the central Pacific, which drives the changes in the low-level westerlies and the monsoon trough.