December 4, 2003

“China and Southeast Asia”

Wang Gungwu

Director, East Asian Institute, National University of Singapore

When the People’s Republic of China (PRC) was established in 1949, most of Southeast Asia was in the throes of decolonization. Several of the countries in the region had new leaders who looked to the Soviet Union and China to provide support against any effort to enable the colonial powers to remain. They feared that these colonial powers would seek to perpetuate their control over the region’s economic and strategic centres by leaving power in the hands of dependent and anti-communist nationalists. Others, however, were determined not to let the communists take over when their countries became independent. Southeast Asia had clearly become one of the arenas where a global struggle for power between the capitalists and communists was being fought.

By the 1960s, the divisions were clear. The commitment of the United States to defend former French Indo-China and hold the line in Vietnam was largely seen as a war to prevent the region from going communist and more specifically to stop the PRC from advancing southwards into Southeast Asia. The United States decision to send troops could not prevent a communist victory, but two other events had profound results for the region. They were both the result of power struggles. The first occurred in Indonesia in 1965 when an attempted coup ended with the removal of the neutralist President Sukarno from office and the installation of a military leader, General Suharto, who was a staunch anti-communist. The other had its roots in the breakdown of Sino-Soviet relations in the early 1960s, but emerged as a deep internal struggle within the PRC when Mao Zedong launched the Great Proletarian Cultural Revolution that nearly destroyed the Chinese Communist Party.

Although this did not stop the Vietnamese armies from winning the war against the United States, the two events cleared the way for a coalition of anti-communist forces in at least six of the ten countries in Southeast Asia. These were Indonesia, the Philippines, Thailand, Malaysia, and the two small states that did not in the end become part of Malaysia, Singapore and Brunei. Indonesia’s break in diplomatic relations with the PRC, however, marked the turning-point. That made possible the coming together in 1967 of five of those countries (Brunei joined later) to form the Association of Southeast Asian Nations (ASEAN).

The PRC was greatly distracted by numerous problems at the time. Soviet and Vietnamese suspicion if not hostility towards what Mao Zedong was doing to the communist cause was one. China’s own paralysis as different factions fought one another to the bitter end in both domestic and foreign affairs was another. And then there was the near-destruction of China’s urban industrial economy that left the people poorer than ever. The formation of ASEAN in the midst of these troubles as an anti-communist coalition that sided with America and its allies was anathema to the Chinese leaders, but they were helpless to do anything about that.

This is the context of China-ASEAN relations for much of the next decade. It began to change when the United States responded in 1972 to the growing divide between the PRC and the Soviet Union, but little progress was made in Sino-ASEAN relations until after the end of the Vietnam War. Following the establishment of diplomatic relations by three of the ASEAN members, Thailand, the Philippines and Malaysia, the foundations were laid for a new understanding. The United States military withdrawal from mainland Southeast Asia, the death of Mao Zedong in 1976, the reaching out of ASEAN towards the three now independent Indo-China states, as well as the start of bilateral trading relations between China and the core ASEAN states - all happening within a couple of years - marked a new realism in the region. But nothing could have prepared anyone for the dramatic economic reform program initiated by Deng Xiaoping in 1978.

The ASEAN states remained suspicious for years after these reforms were systematically implemented. Chinese diplomacy at the time was still dominated by a post-Maoist rhetoric that did not fit the language of ASEAN discourse. ASEAN efforts to admit the three Indo-China states as new members were interpreted by some of the Chinese leaders as moves to make the organisation a bulwark against China. Most of all, China’s historical claims to sovereignty over most of the islands of the South China Sea were threatening to several ASEAN countries and this remained for another two decades a sensitive issue in many of the meetings between Chinese and ASEAN officials.

But underneath the surface, profound economic changes were occurring that eventually overcame some of the initial fears about a resurgent China. It had begun with the flow of Japanese, US, Taiwan and Hong Kong investments to each of the ASEAN countries during the 1960s and 1970s and with the productive way many of its businessmen responded to the new opportunities. After the end of the Vietnam War, the flow was augmented by new capital from South Korea and various countries of Europe. The fact that the investments in export-led industries made with the Japan model in mind were so successful created confidence and creativity in economic activities that the nations of Southeast Asia had never before experienced. Whether or not PRC’s economic reforms after 1978 played a part in promoting the later stages of this growth-centred environment is not clear. Certainly, the increased attention that China paid in the 1980s to developments in Cambodia and Myanmar enabled Chinese leaders and their diplomatic corps to enter into closer relations with their counterparts in the region. It was inevitable that better understanding should follow after that.

No less important was the easing of suspicion in each ASEAN country of the economic role of its population of Chinese decent. That these people of Chinese origin were knowledgeable about China, and were welcomed by the Chinese authorities to invest in China, helped to improve the flow of trade with Southeast Asia. It soon became clear that this relationship would become a growth area that would greatly stimulate economic development within the region itself. On its part, China began to pay more attention to the quality of diplomatic exchanges. A new generation of Beijing officials was encouraged to think afresh about the countries that bordered the country’s soft underbelly.

A notable shift in attention occurred in the aftermath of the Tiananmen tragedy of June 4th 1989. When the rich Western countries turned away from the Beijing regime, China were grateful that its neighbours were not condemnatory but ready to deepen their economic links further. This was also the time when the Soviet Union collapsed and the Cold War ended. For the region, this was followed closely by the resumption of official relations between Indonesia and China which, in turn, enabled Singapore to establish formal diplomatic ties - an act that completed the normalization of China’s relations with the whole region. The role of that island republic had been recognised by Deng Xiaoping after his visit there in 1978, but a fuller flowering of that relationship had not been possible earlier. There is reason to believe that Singapore was able more directly than before to help Sino-ASEAN relations move to more comfortable levels. The boldness of Singapore’s Suzhou Industrial Park proposal was much appreciated even though both sides encountered more difficulties in implementation than expected. Many lessons were learnt there that, if anything, accustomed more Southeast Asians to observe the Singapore experience and think beyond simple trading.

China’s extraordinary economic growth is only 20 years old and the completion of the ASEAN Ten project to include Vietnam, Laos, and Myanmar, and finally Cambodia, even more recent. Close relations between China and this enlarged and renovated ASEAN simply had not been possible much before the year 2000. Yet it is now clear that events beyond the control of either side helped to promote a closer relationship even before ASEAN had completed its enlargement. This was when the financial crisis hit the region in 1997 and brought a decade of the rapid development of the original five members of ASEAN to an unexpected stop. It no longer matters whether China’s decision not to devalue the renminbi did in fact soften the blow to the region. What mattered was that China, unlike many Western and Japanese banks and multinationals, was perceived to have been helpful and caring at a time when the region badly needed support.

Since 1997, while Southeast Asia fought to overcome economic stagnation, China has sustained an annual growth rate that averaged 7-8%. Foreign direct investment (FDI) to China did not grow but was still healthy, valued about US$40-45 billion annually. During the same period, FDI to all the ASEAN countries combined dropped sharply for three years running and then held the line at about US$15 billion per year, about one third that of China. More significantly, China has been gaining rapidly in the export of manufactured consumer goods to the United States, Japan and Europe. In comparison, the growth in ASEAN trade in these products have slowed greatly where it has not actually declined.

The trend that characterises the past six years is clear. The momentum is with China and all ASEAN members know that. There are many different views in the region as to what this means for the region in the future. The impact on the region’s economy is growing. How are the members of ASEAN taking it? ASEAN is an association, not a community, of nations. It has only recently expanded to include four countries whose economic and political systems are quite different from those of the founder members. The earlier members have been successful in minimizing diplomatic and security problems among themselves, but they have been far less successful in the area of economic cooperation. The new members will not make the task of regional integration easier, especially when at least three are much closer to China and are still being influenced by their historical links.

There are now two sets of developments that deserve the closest attention. China’s economic power may be alarming to some ASEAN members, but it is also seen by China’s smaller neighbours as offering opportunities for them to ride on that growth. The initiatives taken since 2000 by China towards ASEAN, especially those linked to Free Trade Agreements and the readiness to be the first from outside the region to sign the Treaty of Amity and Cooperation, have had ramifications. They have aroused Japan, South Korea and India to act in response, and have spurred ASEAN to speed up its efforts at economic cooperation. At the same time, recalling that ASEAN had always cooperated more readily on diplomatic and security matters, their leaders have moved towards negotiating some kind of security community. In the context of the post-9/11 global developments in which China and older allies like the US and Japan appear to be on the same side, this is likely to advance quickly and prove to be a fruitful step forward.

In short, ASEAN is now more ready to revive its efforts towards some kind of regional integration in the longer term than they have ever been. It is also now prepared to make moves towards a larger regionalism of East Asia that it had been wary about in the past. Again, it is China’s new position on this matter that has made the difference. Since the mid-1990s, the steps taken towards ASEAN + 3 (that is, China, Japan and South Korea), followed by China’s push for ASEAN + 1 (with China alone) meetings, have galvanised the region and beyond. China’s success has not been limited to economic pressures on ASEAN members to perform better, but also to persuade them to think big and beyond its original box.

The biggest challenge is whether ASEAN can shape itself to act as an effective community while so many changes are going on at the same time. External pressures to increase cooperation are coming at it fast and furious while the realities on the ground are not necessarily pushing its members in the same direction. On the one hand, its older seaward-looking members are further away from China and perhaps more confident of extra-regional support for their relations with China. On the other, the members on the mainland can deal with China overland, or by ancient river routes that are being modernised, and these relationships have different political and strategic implications for the region. At the same time, advances in communications technology will provide new avenues for a larger regional role for ASEAN. Nevertheless, its members would still have to conduct their relations with China at several levels. Below that of the ASEAN network itself, there will continue to be profitable local trading links and a wide range of bilateral connections. These latter have been established by China with each respective government and each would feel the pressures of specific local and national interests.

The picture as a whole has to be multi-layered. Above that of ASEAN would be the several regional groupings that ASEAN supports, the most prominent being that of Asia-Pacific Economic Conference (APEC). But, given the size of that group, it is understandable why ASEAN is simultaneously attracted to the much more manageable concept of a East Asian region. It is towards this East Asian “community”, emerging from the regular meetings of ASEAN + 3, that China seems to be moving its neighbours forward. As long as ASEAN remains as one more or less united player and, as long as a Northeast Asian equivalent (an Association of Northeast Asian Nations, or ANEAN) is not in sight, the prospect of a comfortable relationship emerging between China and Southeast Asia looks promising.