China’s “Charm Offensive” Loses Momentum in Southeast Asia [Part I]

Although the fundamentals of the Southeast Asia-China partnership remain largely unchanged, over the past year or so there has been a discernable change in tone as both sides confront longstanding as well as new problem areas in their relationship. As the nations of Southeast Asia look toward their giant neighbor to the north, the level of concern regarding the impact of China’s rising regional profile has increased markedly. As a result, Southeast Asian countries have demonstrated a greater willingness to articulate their concerns on the diplomatic front on a range of political, economic and strategic issues, putting China on the defensive and prompting its foreign ministry to take action to deflect criticism. Additionally, some Southeast Asian nations are starting to beef up their armed forces to hedge growing Chinese assertiveness in the South China Sea. Conversely, as Beijing looks south, it faces a medley of increasingly serious problems with the three major players in mainland Southeast Asia―Burma (Myanmar), Thailand and Vietnam―which lie on China’s critically important southern periphery. ASEAN-China relations are rife with issues, including controversies associated with the recently launched free trade agreement, the perennial problem of tensions in the South China Sea, negative reaction to Chinese dam-building activities along the upper stretches of the Mekong River, and political strife in Burma and Thailand. Although Chinese leaders try to reassure ASEAN governments that Beijing's intentions are benign, today, Southeast Asians seem much less willing to take these reassurances at face value.

CAFTA Arouses Concern in Indonesia

Southeast Asia-China ties began the year on a relatively upbeat note with the visit of PRC State Councilor Dai Bingguo, who is a leading figure in the formulation of Chinese foreign policy, to the ASEAN Secretariat in Jakarta on January 22. In his speech, Dai was lavish in his praise for the organization’s development over the past 10 years, noting that ASEAN had become “more influential politically, more competitive economically” and had played “an important and unique role in safeguarding and promoting regional stability, development and cooperation,” the latter a nod to ASEAN’s “leading role” in the development of a regional security architecture [1]. China, Dai pledged, would “deepen political mutual trust” and “increase communication” with ASEAN by establishing a permanent representative office at the Secretariat. Dai juxtaposed his praise for ASEAN by acknowledging China’s enormous economic progress over the past decade, but conceded that this growth might be “somewhat fearful” for other countries. China, the State Councilor reassured his hosts, was not to be feared; Southeast Asia should regard the PRC as a “reliable neighbor and friend,” that seeks neither hegemony nor the expulsion of the United States from Asia.

Dai moved on to spotlight what is likely to be the most significant event of ASEAN-China relations this year: the launch of the China-ASEAN Free Trade Area (CAFTA) on January 1. First proposed by China in 2001, CAFTA removes barriers on thousands of goods and services between China and the ASEAN countries― Indonesia, Malaysia, Singapore, Thailand, the Philippines and Brunei in 2010 followed by the less developed economies of Burma, Cambodia, Laos and Vietnam in 2015―to create the largest free trade area by population and third largest in trade volume after the European Union and North American Free Trade Area. Dai described the creation of CAFTA as “a major happy event for the China-ASEAN family.” Ironically, however, Dai lauded CAFTA in the one country in Southeast Asia where opposition to the agreement is at its strongest―Indonesia.

CAFTA has long been a source of anxiety for Indonesian manufacturers, who have seen competition from China devastate the textile, garment and footwear industries, and who predict the agreement will swamp the domestic market with Chinese goods, force local enterprises out of business, result in job losses of between one to two million, and exacerbate the trade deficit (in 2009 Indonesia’s trade with China was $4.6 billion in the red) (Jakarta Post, April 19). As CAFTA loomed, Indonesian businessmen and trade associations―many of whom had supported President Susilo Bambang Yudhoyono’s successful re-election in 2009―lobbied the government to renegotiate CAFTA or at least postpone the removal of tariffs on more than 200 items. Although the government remained committed to CAFTA in principle, ministers appeared divided over its potential impact; Trade Minister Mari Pangetsu argued the free trade agreement was good news for Indonesian exports (particularly raw materials) and would attract much needed foreign investment from the PRC; Industry Minister M.S. Hidayat, however, warned of massive job losses in the coming months as CAFTA came into effect (Straits Times, January 20).

Despite Pangetsu’s upbeat assessment, the government was acutely aware of CAFTA’s unpopularity, and sought ways to calm the jitters. In a meeting with PRC Commerce Minister Chen Deming on April 13, Indonesia secured agreements from China to establish a joint working group to settle problems arising from CAFTA’s implementation as well as a commitment from the Chinese to pursue balanced trade (Antara, April 5). In a move to partially offset the trade deficit, Chen also pledged nearly $2 billion in export buyers’ credit to finance infrastructure projects (Straits Times, April 4). A month earlier, the state-owned China Railways Group had secured a $4.8 billion contract to build and operate a coal transportation network in South Sumatra―another indication of China’s growing economic presence in Indonesia (Financial Times, March 25).

Yet it remains to be seen whether these initiatives will assuage the concerns of Indonesia’s business community. If the trade deficit continues to balloon, and job losses eventuate, it raises the prospect of the Indonesian government erecting non-tariff barriers and implementing anti-dumping duties on Chinese goods, measures that could spark a trade war between the two countries. Prime Minister Wen Jiabao was scheduled to visit Indonesia on April 22-23, with trade and investment issues high on the agenda. Yet, Wen postponed his trip due to the Qinghai earthquake on April 14. Just as U.S. President Barack Obama had had to postpone his trip to Indonesia in March due to the passage of health care reform legislation, for Wen, too, domestic exigencies had trumped foreign relations.

While Indonesians have been the most vocal in their complaints about CAFTA, their concerns over the inability of local industries to compete with their Chinese counterparts are shared across Southeast Asia. Nevertheless, ASEAN leaders maintain the hope that the long-term benefits of the agreement will outweigh short-term pain.

Further Tensions in the South China Sea

In his speech at the ASEAN Secretariat, Dai Bingguo made only oblique references to the thorny problem of overlapping sovereignty claims in the South China Sea. He advised that ASEAN and China should “expand common interests and minimize differences” and that, “[p]ending a solution, we must not complicate or even aggravate the issues, for it would consequently affect our overall cooperation.” As far as some of the ASEAN members are concerned―particularly Vietnam―by its actions, it is China that is complicating the dispute, and this has contributed to an uptick in tensions over the past two years [2].

Over the past six months, Vietnam and China continued to cross verbal swords over their competing sovereignty claims in the South China Sea. In late 2009 and early 2010, Hanoi condemned China’s decision to establish local governing bodies in the Paracel Islands (a group of islands 200 miles southeast of Hainan Island, occupied by the PRC in 1974 but still claimed by Vietnam) and develop the archipelago’s tourism industry as a violation of Vietnamese sovereignty (Vietnam News Agency, November 16, 2009; Straits Times, January 5).  Hanoi has also been flustered by the increasing frequency with which its fishing vessels have been seized by Chinese authorities in the South China Sea. Vietnamese trawlers were detained in waters near the Paracels on December 7 and 8, March 22 and April 13. China has been vocal in its criticism of “illegal” fishing activities conducted by foreign trawlers and the arrest and alleged mistreatment of Chinese fishermen by the maritime enforcement agencies of other countries [3]. In a bid to enforce its jurisdictional claims in the South China Sea, in early April Beijing announced the dispatch of two large fishery patrol vessels to the Spratly Islands to protect Chinese fishing vessels, the first time it has done so outside the period of its unilateral fishing ban in the sea that usually takes place between May and August (Straits Times, April 5).

In reaction to this string of events, President Nguyen Minh Triet visited one of the Vietnamese occupied atolls in the Spratlys and defiantly declared his country would “not let anyone infringe on our territory, our sea, our islands. We won’t [sic] make concessions, even an inch of ground, to anyone” (Deutsche Presse-Agentur, April 2). Vietnamese Prime Minister Nguyen Ta Dung had earlier called on the state-controlled media to better publicize the country’s sovereignty claims and reject “incorrect information” from other countries (Deutsche Presse-Agentur, February 24, 2010). Vietnamese efforts to fix “incorrect information” included complaints to the National Geographic Society for labeling the Paracels as Chinese territory on its maps, and, more legitimately, an error on a Google map which showed the Vietnamese border town of Lao Cai inside China (VOV News, March 14, 2010; Deutsche Presse-Agentur, March 22). Thus, at the outset of the Sino-Vietnamese “Year of Friendship” to mark 60 years of diplomatic relations, amity has been in very short supply.

In the first quarter of 2010 there was a modicum of good news concerning attempts by China and ASEAN to manage the South China Sea dispute and ameliorate tensions. Last year, talks between the two sides on drawing up guidelines to implement the Declaration on the Conduct of Parties in the South China Sea (DoC)―the 2002 agreement aimed at freezing the status quo and promoting cooperative confidence building measures (CBMs)―stalled due to a disagreement over which countries should participate. ASEAN wanted to sit down with China as a group to discuss the DoC while China’s preference was to talk to the individual ASEAN claimants (Vietnam, Malaysia, the Philippines and Brunei) on a bilateral basis (The Nation, October 19, 2009). China, it seems, was worried that Vietnam would attempt to rally fellow ASEAN members to its cause and “gang up” on the PRC in bilateral discussions.

In January 2010, Vietnam took over the rotating chairmanship of ASEAN and was determined to break the deadlock. Within weeks of becoming chair, Vietnam had hosted a meeting of ASEAN foreign ministers in Danang to build consensus on the way forward―a consensus that has been sorely lacking in ASEAN over the past few years. ASEAN leaders attended a summit meeting in Hanoi in April, and while the final communiqué made no reference to the dispute, at a post-summit press conference, Prime Minister Nguyen announced that ASEAN and Chinese officials had agreed to hold meetings to “discuss solutions to push the implementation of the DoC,” suggesting that China had finally agreed to meet with ASEAN as a group (DPA, April 9). At the first of these meetings in Hanoi on April 16, the two sides reportedly discussed ways to operationalize CBMs outlined in the DoC. Concrete proposals will likely be considered at the ASEAN-China Senior Officials Meeting later this year (Vietnam News Agency, April 17).

As ASEAN and China dither over implementing the 8-year-old DoC, the military balance of power is quickly shifting in China’s favor, putting the Southeast Asian disputants at a disadvantage and rendering the status quo unsustainable. In particular the rapid modernization of China’s navy has become a source of anxiety in some of the capitals of Southeast Asia. Over the past decade, the People’s Liberation Army Navy (PLAN) has put into service a slew of modern submarines, destroyers, frigates, amphibious landing ships and patrol vessels, and this has considerably strengthened Beijing’s hand in the South China Sea. The navy and maritime law enforcement agencies have increased the frequency of their “presence missions” in contested waters, and, given their improved airborne early warning control and aerial refueling capabilities, the PLA can now perform extended air operations over the South China Sea. According to The South China Morning Post, the frequency, scope and sophistication of Chinese military exercises in the South China Sea increased markedly in 2010 (SCMP, April 20). If present assessments are correct, China will commission an aircraft carrier in 2012―the 67,000-ton ex-Soviet carrier Varyag currently being retrofitted in Dalian―which is likely to be home ported at the Sanya Naval Base on Hainan Island [4]. The Varyag will provide the PLAN with organic air cover in the South China Sea, a potential game changer in the territorial dispute.

The strategic implications of China’s rapid military build-up have not been lost on Southeast Asians, who have become less reticent about airing their concerns. In March, for instance, at a meeting of the ASEAN-China Defense and Security Dialogue in Beijing, PLA officials were pointedly asked by a delegate from the Philippines what guarantees the PRC could give that its armed forces would not be used aggressively. In response, Senior Colonel Chen Zhou of the PLA Academy of Military Sciences voiced the standard line that the development of the PLAN was to safeguard China’s maritime interests and would not be used for power projection purposes in pursuit of hegemony (Xinhua News Agency, April 1).

Southeast Asians are not only voicing their concerns, but also taking more concrete actions, including strengthening their naval capabilities. In 2009 Malaysia took delivery of two Scorpene-class submarines that will be based in Sabah near to the disputed Spratly Islands, while reports suggest that in December Vietnam placed an order with Russia for 6 ultra-quiet Kilo-class submarines to defend its territorial claims in the South China Sea. On the sidelines of conferences in Southeast Asia, Chinese scholars and military officers have described these acquisitions as “destabilizing,” an incredible assertion considering that the PLAN now operates 60 submarines.

Since the early 2000s, China, through its diplomatic “charm offensive,” has attempted to convince ASEAN leaders that its rising power presents an economic opportunity rather than a strategic threat. As China’s increasing economic penetration of the region brings problems, and as the PLA grows in strength however, Southeast Asians have become more aware of the gap between rhetoric and reality. As a result, China’s platitudes are wearing thin.

Notes

1. Address by H.E. Dai Bingguo, State Councilor, The People’s Republic of China, at the ASEAN Secretariat, Jakarta, January 22, 2010.
2. Clive Schofield and Ian Storey, The South China Sea Dispute: Increasing Stakes and Rising Tensions, James town Foundation, November 2009.
3. Robert Sutter, “China-Southeast Asia Relations: Myanmar, South China Sea Issues,” Comparative Connections: A Quarterly E-Journal on East Asian Bilateral Relations (October 2009).
4. Statement of Admiral Robert F. Willard, Commander U.S. Pacific Command before the House Armed Services Committee on Recent Security Developments Involving China, January 13, 2010.

[Part I of this two-part series examines Southeast Asian concerns over China’s economic role and recent moves in the South China Sea; Part II will examine problem areas in China’s relations with the countries of mainland Southeast Asia.]