Testimony

U.S.-China Economic and Security Review Commission

December 4, 2003

China’s Role in Southeast Asia

David I. Steinberg

Distinguished Professor & Director, Asian Studies

School of Foreign Service

Georgetown University

It is a great honor to be asked to testify before this commission on the subject of China’s role in Southeast Asia.  It is a topic of great potential importance to the United States, but one that I feel has been neglected, and thus I am delighted to see that this Commission is interested in it. Although the U.S. concentration on the threat of terrorism in that region, and especially in Indonesia, is a critical issue facing both the United States and the Southeast Asian countries, the new and expanded role of China is a subject about which we should be aware.  This is not necessarily to argue that the Chinese role is inimical to U.S. interests, but there are disturbing signs about a new state of equilibrium in the region in which China will play a dominant role and for which the U.S. may not be prepared and in which the U.S. may play a less important part than our national interests may dictate with two treaty allies in that region (Thailand and the Philippines).

In connection with this testimony, I would like to insert for the record three documents on China and Southeast Asia in which I have been involved.  These are:

1. China and Southeast Asia Roundtable, which I chaired, a part of the Stanley Foundation’s 44^th Strategy for Peace Conference October 2003.

2. ‘Southeast Asia Looks North: New Dynamics with China',a draft chapter in Georgetown Southeast Asia Survey 2002-2003, published in May 2003, of which I was co-editor.

3. Strategic Rivalries on the Bay of Bengal: The Burma/Myanmar Nexus. Conference I organized on Sino-Indian relations, February 2001.

United States relations with China have recently been exceptionally good.  The U.S. designation of a Uighur separatist organization in Xinjiang Province in west China as a terrorist group has pleased the Chinese, who obviously have been concerned that separatist fundamentalist or terrorist Muslim movements in Central Asia could spread to Xinjiang.  China has been most helpful, even essential, to attempts to solve the North Korean nuclear crisis. Taiwan straits issues have been quiescent of late, although there is evidence that they may well heat up before the Taiwan presidential election in April 2004.

In Southeast Asia, Chinese behavior has been the most benign in recent memory.  Its approaches are twofold: regional, through dealing with the Association of Southeast Asian Nations (ASEAN), which now includes all ten countries of that region, and bilaterally.  Bilateral relations should be of most importance to the United States in Burma/Myanmar because of several reasons: the extent of Chinese economic and military penetration of that country; the potential of Burma as a pivotal element in any potential Sino-Indian dispute; the Chinese access to the Bay of Bengal and the Malacca Straits; and the spill-over effects of mismanagement and abuses in Burma that affect our treaty ally, Thailand.  It seems evident that other ASEAN states have also been concerned about the Chinese influence there.  That China is on a campaign to present its best image was evident in Hu Jintao’s 2002 visit to Singapore and Malaysia.  In a sense, China may be trying to recapture the ‘soft power’ status it traditionally held as the cultural center of East Asia.

China has engaged in an extensive campaign to downplay the disagreements over the potential sovereignty of the oil and gas reserves offshore in the South China Sea.  Previously China has claimed this area as its territory, but it or portions of it have been claimed by all the neighboring Southeast Asian nations. China has signed a protocol with ASEAN, the Declaration on the Conduct of Parties in the South China Sea, that, although not resolving the disputes, has put them on hold and indicates a desire for an amicable settlement of the dispute sometime in the future.  Chinese interest in expanded energy resources is indicated by the China National Offshore Oil Corporation acquiring assets in Indonesia.  China has indicated it would support an eventual free trade zone in ten years that would include all of ASEAN and China, although some ASEAN member states feel they might be swamped by Chinese industry.  China is a member of the ASEAN Plus Three group, as well as a member of the ASEAN Regional Forum.  China will likely benefit disproportionally when the Multi Fiber Agreement ends after December 31, 2004, at which time businesses that have invested in textile production in the low-wage states of Southeast Asia to evade quotas will move their factories to China.  This is likely to exacerbate urban unemployment, especially among women, in many Southeast Asian nations, and could have internal political overtones there.

Chinese trade with Southeast Asia has expanded markedly: at about 75 percent a year between 1993 and 2001.  Population and thus business links between the 30-40 million Chinese in Southeast Asia of Chinese or partial Chinese extraction are critical, now with overseas Chinese reinvesting in the mainland at heightened rates. Although China no longer claims that these millions of overseas Chinese are citizens of China (a position of previous Chinese governments and in the earlier period of Communist rule), the bonds between and among them prompt ease of business transactions, giving them important roles in those societies. For example, the Chinese population of Indonesia of three percent own 70 percent of the capital.  The Chinese position in Malaysia has been dominant economically, although the Malays hold political control.

The Chinese role has become important in Cambodia and Laos, where Chinese trade is said to dominate, and although previous Chinese-Vietnamese relations were strained to the point of border conflict, Chinese trade has become important in Vietnam as well.  In Indonesia, Chinese imports were $2.2 billion in 2001, and in Burma $1.8 billion or about 23 percent of all imports.  Chinese imports to Cambodia and Laos had doubled between 1999 and 2001 to $169 million and $49.4 million respectively.

The most important avenue of Chinese advancement in Southeast Asia is Burma/Myanmar.  The Chinese presence has become ubiquitous. Although the Burmese are a highly nationalistic people who certainly do not want to see their state or their economy dominated by any foreign group, and who believe they can handle Chinese influence, there are disquieting signs.  Burma is beholden to China for its military rearmament, have received at least $1.8 billion in military assistance equipment.  Burmese are trained extensively in China as well.  The Chinese have built, expanded, or rehabilitated a wide variety of infrastructure throughout the country, including road, railroads, dams, port facilities, and airfields.  Whether there are Chinese naval bases or port facilities on the Bay of Bengal is a question, but it is evident that the traditional trade routes from Yunnan Province in Southeast China by road to Bhamo in Burma’s north, and then down the Irrawaddy River to the Bay of Bengal gives the Chinese potential access to an area that India has long considered its strategic reserve.  Chinese-built infrastructure is close to the western reaches of the Malacca Straits, the most important natural waterway in the world and through which Japanese and Korean oil and products are shipped, and which is the U.S. lifeline to Diego Garcia, our base in the Indian Ocean on which we depend for some of our Middle Eastern activities.

International figures on Chinese trade with Burma are grossly undercalculated.  The overland trade is undervalued and smuggling is rife, and most Chinese investment does not go through the Myanmar Investment Commission and is thus unreported in international figures.  Chinese illegal immigration is widespread, and there are estimates of between one and two million recent Chinese immigrants into Burma.  Mandalay, the seat of Burmese culture, is said by the Australian Foreign Ministry to be one-fifth Yunnanese Chinese, and others say that Lashio, the most important city north of Mandalay and the terminus of the old Burma Road, is now half Chinese.  Chinese penetration into the Wa areas on its southern border with Burma is extensive, and a UN survey indicated that instruction in primary schools  was primarily in Chinese. China has recently granted $200 million in economic assistance to Burma and additional funds for technical assistance.  Japan is greatly concerned over China’s preeminent position in Burma and has attempted to use its foreign assistance program to counter Chinese predominance.  Burma was enabled to join ASEAN in July 1997 over strong U.S. objections, but one factor in ASEAN interest in having Burma join was that it might lessen Burmese dependence on China.

That dependence has grown as a result of U.S. sanctions and those of other states.  Burmese have remarked informally to visitors and among themselves that they can withstand sanctions, which are hurting the common people–especially women–as State Department testimony indicated, because they can rely on China.  There is anecdotal evidence that in the one-to-three month para-military training now required of males from 18 to 50 years old, some Burmese officers when queried as to the usefulness of the training indicated that it was to allow the Burmese to conduct a ‘holding’ action against the Americans until the Chinese come to their aid.  The Burmese military have officially written that the interest that the United States has in ‘regime change’ in Burma is that Burma is the weakest link in the U.S. containment policy toward China,

There is no doubt in my mind that sanctions and other U.S. actions have intensified Burmese reliance on China to the detriment of U.S. strategic and national interests.  The U.S. has a one strand foreign policy toward Burma–human rights.  It should be a part of any policy, but it should be considered along with other U.S. interests, which include our strategic concerns, trade, and investment, narcotics issues, the effects of war and economic underdevelopment on the outflow of refugees and illegal workers into Thailand, causing great concern for our ally. We should also consider that the Indian Foreign Minister a couple of years ago pronounced China as the primary potential enemy of India.  From Delhi’s vantage point, with China to the north, and Pakistan--a close Chinese ally--to the west, and Burma infiltrated by China to the east, there is considerable concern, which is why India changed its policy toward the military from antagonism to friendship to try to counter Chinese influence.  It is not insignificant that India tests its missiles in the Bay of Bengal, and Chinese tracking stations on Burmese soil would enhance their capacity to monitor such tests. This is a volatile region.

The U.S. sanctions regime may make both the Congress and the administration feel morally good, but it is most unlikely to achieve its objective, which is regime change.  That does not mean that pressures should not be brought on the military to reform and democratize within a reasonable period, but rancorous public statements simply require a vociferous negative reaction from the Burmese government, which should be quite expected.  Sanctions succeed in further cutting off Burma, and making reliance on China more extreme.  This is not in either the U.S. or Burmese national interests.  We are, I am afraid, engaged in a policy that both will not work and will cause harm to U.S. national interests and the Burmese peoples.