After 30 years of close relations with ASEAN countries, China now feels that the Association of Southeast Asian Nations (ASEAN) is heavily dependent on it.
With a combined gross domestic product (GDP) of US$3.11 trillion and a population of 673 million people, the fast-growing ASEAN region is a lucrative market for China.
Beijing is already using its economic clout in the form of trade, investments, aid, loans and tourists to influence countries like Cambodia, Laos and Myanmar.
China was able to divide ASEAN through these three countries on several occasions. But the true question remains: Is ASEAN really dependent on China? Or vice versa?
The latest economic data shows a new trend. ASEAN, which was established on Aug. 5, 1967, wants to be in the driver’s seat in regional matters, though it has neither the political nor military clout to do so. The ASEAN Way, which is basically through consensus, has become ASEAN’s Achilles heel. Many scholars consider ASEAN as a weak organization.
China is the only country that has exploited all of ASEAN’s weaknesses ever since its association with the grouping in 1991 as a dialogue partner. It sings praises about its strategic partnership with ASEAN. However, its true goal is to use its economic power to coerce certain ASEAN countries.
This year, China and ASEAN are celebrating their 30 years of friendship and cooperation.
“The China-ASEAN relationship has grown into the most successful and vibrant model for cooperation in the Asia-Pacific and an exemplary effort in building a community with a shared future for mankind,” Chinese President Xi Jinping said last year.
In a short time, China has emerged as an important player in the ASEAN region, starting from a full dialogue partner in 1996 to a strategic partner of ASEAN in 2008. Both China and ASEAN signed a free trade agreement in 2002 to establish an ASEAN-China Free Trade Area (ACFTA), which became effective in 2010.
In the last 12 years, China has developed into ASEAN’s largest trading partner. Its trade, investments and people-to-people contacts with ASEAN have grown tremendously.
For the first time in 30 years, ASEAN has become China’s largest market and trading partner. Meanwhile, ASEAN has acquired a new economic clout against China.
This happened at a difficult time. On one side, the whole world was hit by the COVID-19 pandemic in 2020, leading to a double crisis – a health crisis and an economic crisis – across the globe.
On the other, China was severely hit by an economic war launched by the US, China’s biggest market. The European Union (EU) has also become a hard nut to crack for China.
China has found an important and strategic market in ASEAN as an alternative to the US and EU markets. It made extraordinary efforts to tap into the ASEAN market and succeeded.
China’s trade with ASEAN grew by 7 percent year-on-year to reach a record high of US$731. 9 billion in 2020, an impressive growth from $641.46 billion in 2019.
With its $14.12 trillion GDP and 1.44 billion people, China might look like an attractive market for everybody, including ASEAN. Past experience has shown that ASEAN cannot benefit much from China, be it from trade, investments, loans or tourists.
Everything was tightly controlled by the Chinese government to bring the most benefit to itself, rather than to ASEAN. Although ASEAN countries benefitted from China’s huge market, they did not have the capacity and products to fully tap into the Chinese market.
China has been enjoying a huge trade surplus with several ASEAN countries for several years. Cheap Chinese goods have been flooding ASEAN markets since 2010, thanks to the ACFTA.
Almost all ASEAN countries have been suffering a trade deficit with China since 2010. For example, China enjoyed a trade surplus of $77.58 billion from its trade with ASEAN in 2019.
Surprisingly, ASEAN is the biggest investor in China in terms of FDI. For example, in 2019, ASEAN countries’ combined FDI in China reached $124.61 billion, much bigger than China’s FDI of $112.30 billion in ASEAN in that year. Due to COVID-19, total FDI inflows to ASEAN contracted by 31 percent in 2020 to $107 billion in 2020.
People-to-people exchanges, especially in the tourism sector, have been growing rapidly between China and ASEAN countries.
In 2019, 169 million Chinese visited abroad, while 145.31 million foreigners visited China. Interestingly, more ASEAN tourists have visited China than Chinese tourists who have visited ASEAN countries.
For example, 32.28 million Chinese tourists visited ASEAN destinations in 2019. Meanwhile, 32.72 million ASEAN tourists visited China. This number was slightly higher than the total number of Chinese tourists who visited ASEAN in 2019.
All is not well for ASEAN when dealing with China in non-economic matters.
With its growing economic and military might, China has become a regional bully or hegemon, especially in the South China Sea (SCS). China claims more than 90 percent of the SCS and a small portion of Indonesia’s North Natuna Sea based on its controversial Nine-Dashed Line map, which is against international maritime laws, including the 1982 United Nations Convention on the Law of the Sea (UNCLOS).
Vietnam, the Philippines, Malaysia and Brunei Darussalam claim certain parts of the SCS. Indonesia is not a claimant country in the SCS, but China claims a portion of Indonesia’s exclusive economic zone in the North Natuna Sea.
Communist China has a bad history in Southeast Asia. Many countries in Southeast Asia do not fully trust China. It intervened in Indo-China wars and helped communist movements in Southeast Asia in the 1960s and 1970s.
As a result, Indonesia cut off diplomatic ties with China from 1967 to 1990. The Philippines established diplomatic ties with China only in 1975 as the former considered the latter as a security threat. Likewise, Malaysia established diplomatic ties only in 1974. Thailand also did the same in 1975. Brunei Darussalam established diplomatic ties with China only in 1991 due to problems relating to communism and ethnic Chinese.
China was the first claimant to use force against Vietnam to occupy the Paracel Islands and some parts in the Spratly Islands. It also illegally occupied Scarborough Shoal, a territory claimed by Philippines, China and Taiwan, in 2012.
China frequently harasses fishermen from Vietnam, the Philippines, Malaysia and Indonesia. It threatens energy exploration and fishing activities of Vietnam, the Philippines and Malaysia in their own territories.
In 1979, China invaded Vietnam, the first war involving a foreign power since the end of the Indo-China wars. Vietnam, which shares its border with China, still faces a major security threat from Beijing.
Recently, China reclaimed the land in the SCS and illegally constructed several artificial islands, turning some of them into military installations. Its illegal activities pose a big threat to international freedom of navigation and overflight in the SCS.
With its coercive and bullying acts in the SCS, China has emerged as a big threat to ASEAN’s peace, stability and unity. So far, China looks like a foe in the guise of a friend.
What can ASEAN do?
In the present situation, the US, EU, India, Japan and Australia are challenging China’s influence as well as its coercive acts in the SCS.
ASEAN countries, unfortunately, are not realizing that China is heavily dependent on ASEAN, not the other way around. Since 2020, ASEAN has become China’s biggest market. ASEAN’s investments are much bigger than Chinese investments in ASEAN. More ASEAN tourists are visiting China than Chinese tourists are visiting ASEAN.
The time has come for ASEAN to use this new economic leverage collectively to tame the aggressive China. ASEAN must not allow China to dictate its terms to ASEAN.
So far, China has been reaping huge benefits from ASEAN. Now, ASEAN must think about how to balance its trade with China and seek mutual benefits on equal footing. It must forge new partnerships with other global players to balance Chinese hegemony in the region.
Once the recently signed Regional Comprehensive Economic Partnership (RCEP) becomes effective in the coming years, ASEAN will become a fiefdom of China. The RCEP is expected to benefit China more than ASEAN. Let us hope that it will not be too late for ASEAN to act.