For China, a Race to Retain Appeal in Southeast Asia

By Phuong Nguyen

Leaders from Asia-Pacific countries at the 10th East Asia Summit in Kuala Lumpur, November 2015. Source: Wikimedia, used under a creative commons license.

The landslide election in Taiwan of pro-independence opposition leader Tsai Ing-wen to be president has led to speculation of a possible recalibration in Chinese foreign policy, at least in the year ahead. Observers believe that stable cross-strait relations over the past eight years have allowed Beijing the bandwidth to explore greener pastures such as the once-dormant South China Sea dispute and expand its footprint across Southeast Asia.

Regional governments will keenly monitor Beijing’s next steps in handling relations with Taipei as a barometer of China’s risk appetite and strategic focus. Beijing may in fact choose to adjust its calculus toward the region in the short term, but its core interest remains unchanged: Southeast Asia is a critical element in President Xi Jinping’s policy of reshaping China’s neighborhood into a “community of shared interests” with China — first announced in late 2013 — and the success of Beijing’s Maritime Silk Road initiative.

To this end, the expected commencement later this year of a long-planned railway project connecting southwestern China to the capital of Vientiane in Laos — part of a rail system that, when completed, will run from China’s Kunming City to Bangkok and can be extended to the Malay Peninsula — is critical to Beijing’s strategy. In late 2015, a consortium of Chinese companies was also granted a contract to develop another of Beijing’s long-planned projects: a deep-sea port and special economic zone in Kyaukphyu in western Myanmar. Kyaukphyu is a strategic outpost overlooking the Indian Ocean and doubles as the land entry point for the China-Myanmar oil and gas pipelines.

These projects are part and parcel of Beijing’s strategy to bolster its influence through a regional infrastructure push aiming to deepen connectivity between China and fast-growing economies in Southeast Asia, while offering Beijing access to the Indian Ocean and the Gulf of Thailand. To the extent that its investments on this front have proceeded largely unhindered by other major players, Beijing can be expected to redouble its efforts to expand its engagement in Laos, Myanmar, and Thailand in the coming years. Yet managing local conflicts stemming from an anti-Chinese sentiment will pose a real challenge to Beijing, particularly in Myanmar.

The South China Sea, however, is a bigger question mark. Beijing has made clear it will not be subject to the ruling in the case brought against it by the Philippines to the Permanent Court of Arbitration, which is expected as early as mid-2016. Meanwhile, Manila and Washington are betting on the scenario that fear of suffering reputational costs may lead Beijing to eventually accept or abide by the court’s decisions, and force it to clarify its nine-dash-line claims little by little.

China therefore has and will continue to lobby other ASEAN member states, including claimants Malaysia and Vietnam, to take a neutral stand in response to the court rulings at upcoming regional meetings this year. Regional sources are worried that this could mean Beijing is preparing for stepped-up activities in the disputed waters around the time of or shortly after the ruling if only to send a message to ASEAN that a strong response from the grouping would be meaningless or, worse, counterproductive.

Many observers are left wondering whether and why China would risk squandering its relationships in Southeast Asia by taking an assertive course in the South China Sea. This reasoning leaves out Southeast Asian states’ multidimensional view of China: even for countries with high stakes in the region’s maritime security and freedom of navigation such as Indonesia, Singapore, Malaysia, and Vietnam, the South China Sea dispute is but one aspect of their relations with the rising power.

The recent $2 billion-plus purchase of assets from struggling Malaysian state investment fund 1Malaysia Development Bhd (1MDB) by Chinese state-owned companies is an example of China’s indispensable role in regional economies, and is expected to afford it added leverage with Kuala Lumpur.

This ongoing tango points to an interesting pattern: while China may not be able to stop regional countries’ rising threat perceptions about Beijing, it has the means and willingness to affect Southeast Asian governments’ tactics and calculus in responding to China’s actions in the intermediate term.

But the road ahead for China in this increasingly important region is also paved with caution and insecurity. In the past several years, China at times was left playing catch-up with the United States in its efforts to strengthen a regional architecture centered on ASEAN as part of the U.S. rebalance to the Asia-Pacific region.

The irony is plain: Beijing does not wish to see a strengthened ASEAN, but not responding to regional U.S.-led initiatives with its own might leave it at a disadvantage. This explains why China last year sought to convene its own summit between the Chinese defense minister and his ASEAN counterparts in Beijing after a successful retreat of U.S. and ASEAN defense ministers in Hawaii in 2014. This is also why Beijing announced last year the formal establishment of the Lancang-Mekong Cooperation Mechanism with Cambodia, Laos, Myanmar, Thailand, and Vietnam, taking a page from the U.S. Lower Mekong Initiative.

The recently upgraded U.S.-ASEAN strategic partnership, to the extent that it opens more channels of communications and consultation between Washington and Southeast Asian capitals — including those that have traditionally maintained closer ties with China — has piqued Beijing’s curiosity. China’s confident rhetoric toward the region, which is expected to continue this year, continues to be tempered by an insecure undertone that Beijing understands needs to be reconciled.

There is ultimately too much at stake for China in Southeast Asia, which has grown in importance in regional geopolitics in recent years. The situation in Taiwan may prompt Beijing to choose its battles wisely this year, but do not expect Beijing to take its eyes off its strategic objectives in Southeast Asia.

Ms. Phuong Nguyen is an associate fellow with the Chair for Southeast Asia Studies at CSIS. Follow her on twitter @PNguyen_DC.

Phuong Nguyen

Phuong Nguyen

Phuong Nguyen is an adjunct fellow at CSIS focused on Southeast Asia.


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