China’s strategy towards Southeast Asia has to be seen in the context of its realisation that the West-led global order is over (probably the proverbial last nail were the wars in Ukraine and the Middle East), that the vast Global South is desperately looking to improve their infrastructure and connectivity than meagre aid the developed countries have been doling out at a time when global inequality has been widening, and that a multipolar world best suits interests than the U.S. unipolarity. Born out of this conviction was Xi Jinping’s pet enterprise the one trillion-dollar 2013 Belt and Road Initiative.

China’s relations with Southeast Asia have undergone a metamorphosis in the last few decades. In order to understand and appreciate how these relations have gone from strength to strength, one has to recall the charm offensive that was unleashed soon after President Xi Jinping and Premier Li Keqiang took the reins of power after the 18th National Conference of the Communist Party of China in March 2013. A new neighbourhood policy was unveiled, particularly towards Southeast Asia, prompted by rising mistrust and concerns about Beijing’s growing aggressive attitude towards contentious territorial claims and in asserting its status as a rising power. The sheer number of high-level visits following Xi Jinping becoming president was unprecedented—within a few months the three top Chinese leaders visited almost all the countries of Southeast Asia. Xi exhorted that dealing with neighbours “should have a three-dimensional, multi-element perspective, beyond time and space.” That set the stage for Beijing to fashion a comprehensive strategy to engage the regional organisation ASEAN and its member states individually.

Ever since, China spared no efforts to ensure that its relations with Southeast Asia remained on solid ground. Towards that end, it crafted a multi-faceted strategy to engage and deepen relations with ASEAN as well as with all individual member states. Beijing also showed greater alacrity relented its earlier hardline stance on the South China Sea dispute by its readiness to engage with ASEAN to build on the 2012 the Declaration on the Conduct of Parties in the South China Sea (DOC), a non- binding political statement, to an eventual binding Code of Conduct (COC) for maritime activity. It is a different issue that COC has not made much headway so far and is unlikely in view of growing tensions between the Philippines supported by the U.S. and China. Nonetheless, China has made incredible progress in drawing Southeast Asia closer.

Thus, once seen as the biggest threat due to its support to armed movements in several countries, today Southeast Asia’s relations with China are thriving. As relations expand and deepen, something remarkable is happening in Southeast Asia. On one hand, there is a simmering conflict and competition between the U.S. and China for influence in this resourceful, rapidly growing and strategically located at the intersection of the Indo-Pacific, the newest construct that has attracted huge attention as an apt framework to understand profound shifts that are taking place. If the much-vaunted current century is the century of the Indo-Pacific (quite possibly even the next one too if the current trends were to continue), Southeast Asia will be a key cog. On the other hand, ASEAN that had been in the spotlight in the aftermath of the cold war seems to be losing its sheen failing to reach up to the earlier expectations in the management of regional geopolitics. Its ability to engage and influence great powers is waning even as member states increasingly incline to promote their individual interests irrespective of costs to ASEAN. It is true that ASEAN has certain innate shortcomings that show up when times get rough. While China-U.S. political skirmishes are hogging the headlines, not to be left behind India and Japan (and to a limited extent Australia) are trying their best to carve a niche for themselves in the rapidly changing dynamics.

At present, Southeast Asia is at the centre of a growing rivalry between Washington and Beijing. Whereas the U.S. is investing its energies in strengthening its bilateral alliances and strategic partnerships with a focus on geopolitics by abandoning its previous ‘Pivot to Asia’ and ‘Rebalancing’ strategies, China is quietly building multifaceted links with an emphasis on geoeconomics and thus indirectly garnering diplomatic gains. Thus, Beijing’s geopolitical strategy is evident in its geoeconomic policy. Thus, Xi Jinping’s ‘charm offensive’ is in full display in Southeast Asia.

As of now, Beijing appears to have stolen a march over the U.S. and other great powers. Take for instance, the first overseas destination for the newly elected leaders of Southeast Asia’s two top heavyweights (politically as well as economically), that is, Indonesia and Vietnam, is Beijing. Soon after his election as president of Indonesia, Prabowo Subianto visited China in early April 2024 and met with Xi Jinping. He promised to promote stronger economic defence ties. (His predecessor Jokowi Widodo also made Beijing his visit after his election and subsequently made no less than six official visits.)) Similarly, To Lam, who became the president of Vietnam in May 2024 and later the powerful position of General Secretary of the Communist Party of Vietnam, also preferred China as his first sojourn in August 2024. He was accorded an exceptional welcome. It is indicative of how much they value the relationship. The Vietnamese leader described ties to Beijing as a "top priority in Vietnam's external policy" and agreed with Xi to boost cooperation on defence and security. Less than two months later, Chinese Premier Li Qiang landed in Hanoi and signed 10 agreements on a range of things to promote bilateral relations. Bilateral trade is growing rapidly and Vietnam is getting integrated into China’s supply chain. Vietnam-China bilateral trade in 2023 was US$172 billion (Vietnam became the fifth largest trading partner to China) compared to India’s $118 billion. Simultaneously, there have been sporadic incidents of scuffles in the South China Sea where both claim most of the Spratly and Paracel Islands. No question, China-Vietnam relations are undergoing a qualitative shift.

For a long time, Malaysia has been positive on China. While the previous Prime Minister Mahathir Mohamad went out of his way to forge close links with China, the current P.M. Anwar Ibrahim is pursuing a similar path. Anwar visited China twice in 2023 and vigorously defended the China-friendly policy of his government. Looking at the statements and developments on the bilateral front, Malaysia’s tilt towards China is palpable.

Singapore maintained a consistent policy of involving and engaging all great powers. When Manila asked the U.S. to close down its Subic Bay naval base and Clark air base in 1992, Singapore took a bold step by inviting a small American troop deployment at its Changi military base. Ever since it has evolved close defence links with India and Australia. While maintaining vibrant economic relations with China, it refrained from developing close defence relations. Singapore took part in 2007 five-nation Malabar exercises hosted by India despite serious Chinese reservations. This may be changing if one looks at growing defence and security interactions with China.

Irrespective of who is in power, military or civilian, Thailand always attached a lot of significance to ties with China, whereas Laos and Cambodia, big recipients of China’s largesse, have been the most pro-China. In 2012 when Cambodia was the chair, no Chairman's Statement was issued after the ASEAN Ministerial Meeting because Phnom Penh objected to the language critical of China's actions in the South China Sea. Myanmar’s options are limited except to be friendly with China due to political, economic and defence reasons.

Lest we forget, economics always lurks behind in every geopolitical discourse and thus regional security is inseparably linked to regional economic developments. It is well-known that in the postwar period, Japan had been the dominant economic force in the region. Tokyo’s affinity with East Asia has historical roots when Imperial Japan occupied almost entire East Asia during the Second World War and declared the infamous Greater East Asia Co-Prosperity Sphere in 1940 with the goal of creating a pan-Asian military and economic bloc under, of course, Japanese tutelage. What Japan could not do during its colonial rule, it managed to do successfully after it bounced back economically after World War II. Since China was under communist rule, Tokyo initially focused on what later on came to be known as the four Asian Economic Tigers, i.e., South Korea, Taiwan, Hong Kong and Singapore. Their phenomenal economic success paved the way for other Southeast Asian countries such as Indonesia, Malaysia and Thailand, to follow suit. In all these, Japan had been the key player investing heavily, extending generous ODA (aid), and transferring low- end, labour-intensive technology and manufacturing. This in fact gave rise to the famous theory called the Flying Geese Paradigm, which claimed that industrialisation spread to neighbouring developing countries with Japan in the lead.

For over four decades, especially since the founding of ASEAN in 1967, Japan dominated the East Asian economic scene. Indeed, when China introduced radical reforms and opened its economy, Japan was one of the first countries to enthusiastically invest. The two visits by Deng Xiaoping in 1978 and 1979 and the great admiration he expressed for Japanese economic achievements were the turning point. Indeed, a decade later Tokyo’s economic involvement was so entrenched that it went out of its way to get sanctions lifted that were imposed post-Tiananmen incident in 1989 by the West. In more than one sense China tried to emulate Japan and what followed was unprecedented in human history: China logged double-digit growth rates for more than three decades leapfrogging into the world second largest economy and earning the sobriquet the global factory. Without question, it has been a remarkable journey. For perspective, in 1990 (the year India brought in economic reforms) China’s nominal GDP was $395 billion whereas India’s was $321 billion, fast forward to 2023: China’s was $17.89 trillion while India’s $3.6 trillion. (By the end of 2024, China’s per capita income is likely to be $12,758 and India’s $2,730.) Measured in PPP, China has overtaken the U.S. to be the world’s largest economy. Despite the recent slowdown, China is expected to achieve a respectable 5 percent growth rate in the short term. Its technological achievements are also equally stupendous. Along with its economic achievements, its military underwent a transformation and its geopolitical interests also surged rapidly.

China understood the significance of Southeast Asia by the early 2000s and in 2002 quite unexpectedly proposed a free trade deal with ASEAN (as a knee-jerk reaction not to be outdone, both India and Japan also offered similar in 2003), called the Framework Agreement on Comprehensive Economic Cooperation. As the name suggests, it was meant to be ‘comprehensive’ economic cooperation not just trade. Post this agreement, which became operational in 2010, bilateral trade began to take off. China has been ASEAN’s largest trading partner since 2019 and ASEAN overtook the EU as the largest trading partner of China in 2020. ASEAN trade accounted for nearly 16 percent in 2023. The bilateral trade has soared from about US$200 billion in 2010 to $912 billion by 2023. For comparison, Japan-ASEAN trade has increased from nearly $100 billion in 2010 to $240 billion by 2023. China-ASEAN trade has got a further fillip with the 2022 Regional Comprehensive Economic Partnership (RCEP), the world’s largest free trade agreement. Further, China and ASEAN are expected to sign the 3.0 version of their free trade agreement in 2025, which will include, among others, integration of digital infrastructure and electronic payment systems, which will boost bilateral economic relations. By all indications, ASEAN’s trade will continue to grow faster than with any other country for the foreseeable future.

Insofar as investments are concerned, flows from China are two types. One is those that are moving out either for economic or geopolitical reasons as part of the China-Plus shift. The second category is Chinese-owned manufacturing companies who find it unviable to products in China due to rapidly rising wages (average wage has up from 47,600 yuan in 2012 to 114,000 by 2022). As China moves up the ladder with greater value-added manufacturing, it has no option but to relocate some of its labour-intensive industries to other countries. Southeast Asian countries such as Vietnam, Thailand, Malaysia and Indonesia are the biggest beneficiaries of these phenomena. Moreover, besides tapping into the nearly 680 million expanding market, China is also investing heavily in mining and e-commerce. As a result, China invested over $30 billion in manufacturing and mining in 2023, which is more than either Japan or the U.S. Between 2012 and 2022, Chinese investments were much higher than the U.S.: US$218 vs. US$158. Additionally, Southeast Asia has been the largest recipient of Chinese investments in infrastructure and connectivity projects under the BRI.

The third dimension that is aiding in building strong bonds between China and Southeast Asia is connectivity. China shares about 4060 km long land borders with Myanmar, Laos, and Vietnam and maritime boundaries with Indonesia, Malaysia, Vietnam, the Philippines and Brunei. Connectivity spans physical (road, rail, air and sea), institutional, people-to-people, digital, cultural and military. These Southeast Asian links are stronger with China than any other country and thus connectivity is playing a key role in increasing economic and other links substantially. Several roads have been built connecting Kunming, the capital of Yunnan province, such as Kunming-Vientiane-Bangkok highway, Kunming-Hanoi highway, and the highway connecting Myanmar. Thanks to rapidly growing economic relations with Southeast Asia, Yunnan has emerged as a key hub in the BRI vis-à-vis Southeast Asia that it is setting up representative offices in ASEAN several countries. Rail connectivity is another important way China is connecting with Southeast Asia. Pan-Asia Railway Network, also called Kunming-Singapore Railway, is a network of three main routes covering seven of 10 countries. Eastern Route—Kunming-Bangkok via Vietnam and Cambodia, Western Route—via Myanmar, and Central Route via Laos. Once these railway networks are completed, they will transform China-Southeast Asian relations. Another more than US$10 billion mega venture that China has undertaken is the super waterway Pinglu Canal project in China connecting the Guangxi Zhuang Autonomous Region with the Yu River to the Beibu Gulf. Being built to improve trade with Southeast Asian countries. Once completed, the canal will reduce the distance from Western China to the sea by more than 560 km. It will create a cost-effective gateway for trade with Southeast Asia, which could improve trade efficiency and promote economic growth. The canal will provide access to all 10 members of ASEAN.

The fourth dimension through which China is consolidating its links with mainland Southeast Asia is through the Greater Mekong Subregion (GMS) initiative, which was launched in 1992 consisting of China’s Yunnan Province (with the later addition of Guangxi Zhuang Autonomous Region), Cambodia, Laos, Myanmar, Thailand, and Vietnam, and the 2015 Lancang-Mekong Cooperation (LMC).

The fifth facet is the powerful ethnic Chinese community that is spread all across Southeast Asia. Numbering nearly 30 million, they control businesses disproportionately and thus wield enormous political power due to their wealth and closeness to the ruling elite. After China’s liberalization and its rise as a major economic power, overseas Chinese in Southeast Asia took advantage of that and helped in consolidating links.

On more than one occasion, China has wielded the weapon of its citizens visiting overseas as tourists. Nearly 90 million constituting the largest in the world went on international trips spending about US$200 billion in 2023. Out of which about 10 million visited Southeast Asia (compared to four million from India), playing a big role in the revival of tourism-dependent economies of the region and contributing to the economic development. No country would want an adverse political relationship unless willing to forego a major chunk of Chinese tourist revenue.

Finally, China has also strived hard to forge defence and security relations with several Southeast Asian countries but has met with limited success. Except Thaialnd that has been importing a few arms, China has not met with any success with other countries. Surely, the number of bilateral exercises has seen a steady rise in the recent past. Indeed, China held the largest such maneuvers (thirteen) with Southeast Asian countries in 2023. A major, enlarged joint exercise with Singapore (third edition) in early September 2024 in the South China Sea has attracted considerable attention, which is expected to be institutionalized. Unconfirmed reports claim that China has gained ‘exclusive access’ to Cambodia’s Ream Naval Base in the Gulf of Thailand, funded and built by China. Cambodia will also acquire two newly built Type 056 corvettes from China. If China were to gain a foothold here (the second one after Djibouti), it would enhance its strategic reach and may help partially mitigate its ‘Malacca Dilemma’.

Any assessment of China-Southeast Asia relations perforce needs to take into account Southeast Asian perceptions too. According to ISEAS- Yusof Ishak Institute’s 2024 The State of Southeast Asia: 2024 Survey Report, for the first time more Southeast Asian elites said they would choose China over the U.S. if forced to pick between the two. It is probably a clear indication of a decisive shift of fortunes in favour of China. Stagnant or decreasing defence expenditures by the ASEAN countries is another sign that the region (except for the Philippines under Marcos dispensation) is unruffled by the ‘China threat’. They are taking a pragmatic approach and want to reap economic benefits that accrue consequent to a rapidly rising China. Moreover, increasingly the region is heading towards strategic diversification by engaging all great powers but engaging China more deeply. ASEAN, while not wanting to get caught in the China-U.S. geopolitical crossfire, probably prefers great power competition, for it actually enhances ASEAN’s bargaining power. It is a historical fact that Southeast Asia has always been dominated by outside powers: Europeans during the colonial era, Japan during World War II, mostly the U.S. during the Cold War, and now it is China’s turn. It appears ASEAN is willing to play the ball because they have not much to lose but all to gain by cosying up to China. Not only they can embed in China-dominated regional production networks but can also get Chinese funding for several mega infrastructure projects. A case in point is the high-speed rail between Jakarta and Bandung for which China contributed 75 percent of the costs (about US$4 billion). At least a dozen such mega projects funded by China are either already underway or being planned. That China’s sway is growing is reflected in the 2024 Lowy Asia Power Index, which said, “The U.S. has lost influence to China in Southeast Asia over the past five years in all four categories measured by the Asia Power Index: economic relationships, defence networks, diplomatic influence and cultural influence.”

In light of the above, what are India’s options and how should it pursue them are big question marks. Firstly, New Delhi needs to be cognizant of China’s rapidly growing influence in Southeast Asia. Secondly, since the U.S. has its own agenda, falling into the American anti-China trap will not necessarily advance India’s interests. Rather it should make its own strategies by making use of its strengths.

India cannot match China economically anytime soon but it can make efforts to make itself a good partner by quickly finalising the India-ASEAN FTA 2.0 that is being negotiated currently so that trade and investments gather momentum. Secondly, relatively India enjoys a better credibility as a defence and security partner. There is enormous scope to intensify it, which can help reap certain geopolitical benefits. Thirdly, New Delhi can pay a lot more attention to exploiting a huge repository of soft power due to its historical cultural connections. Fourthly, among others, major strides that India has made in digitising its financial activities can be shared with several ASEAN countries. Lastly, India should explore ways to join hands with Japan in particular for a joint role in infrastructure and connectivity development in Southeast Asia.

Author

G.V.C. Naidu

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