Beijing’s Regional Strategy and China-ASEAN Economic Integration

Publication: China Brief Volume: 8 Issue: 10

China is leading the new wave of regional cooperation in Southeast Asia, and China-driven mechanisms for regional cooperation look set to overwhelm all possible areas of economic and political cooperation. For economic, security, diplomatic and military reasons, China has been developing stronger relationships with Association for Southeast Asian Nations (ASEAN) countries. China’s “charm offensive” has become an integral part of its overall strategy to shape a new regional structure, which is more conducive to China’s evolving strategic interests in the region. China-ASEAN cooperation has spearheaded a new type of intra-Asian regional cooperation with China at its apex. The new Asian regionalism stimulated by the China-ASEAN Free Trade Agreement (CAFTA) would dominate the future economic landscape of Asia, in which the United States may not have a substantial role to play under a multilateral environment. With CAFTA taking effect for China and six ASEAN countries in 2010 and expanding to all ASEAN countries by 2015, China is now laying the bricks of its foundation through the construction of multiple economic corridors in the Greater Mekong Subregion (GMS), particularly the North-South Economic Corridor. This effort will involve water transport along the Upper Lancang/Mekong River covering China, Laos, Myanmar, Thailand, and Vietnam; and rail and road links that will stretch down from Yunnan Province of China to Chiang Rai of Thailand and eventually connect to ASEAN’s Singapore-Kunmin Rail Project [1].

The third GMS summit that took place on March 31 in Vientiane, Laos, issued the Joint Summit Declaration, and leaders from six GMS nations (Cambodia, China, Laos PDR, Myanmar, Thailand, and Vietnam) agreed to endorse the Vientiane Plan of Action for GMS Development for 2008-2012, which emphasizes the significance of pushing substantial and early progress on transport and energy in the subregion. Since the second GMS summit held at Kunmin in 2005, China has actively contributed to the North-South Economic Corridor by providing training and various development projects to GMS members and is taking a leading role in developing the GMS Information Superhighway Network [2]. Since January 2006, China has unilaterally given 83 trading items for zero tariffs to Cambodia, 91 items to Laos, and 87 items to Burma. China’s continued effort to promote GMS cooperation and play an active role in major coordination mechanisms is premised on the strategic calculation that emphasizes deepening economic cooperation in the subregion. Since GMS economic cooperation is a China-ASEAN-Asian Development Bank (ADB) joint effort, China’s serious commitment to sub-regional cooperation also reflects the main thrust of its “good neighbor” diplomacy. Based on a comprehensive security strategy that aims to facilitate regional stability through cohesion, China’s real intention on China-ASEAN cooperation can be found in its keen effort in pushing GMS integration. Many analysts believe that as China builds more institutional frameworks for regional economic cooperation, these institutions would accelerate further economic and political interdependence between China and ASEAN countries.

For ASEAN, the immediate effect of the Asian financial crisis in 1997 brought about a strong desire to accelerate intra-regional cooperation. China’s firm policy against market pressure of depreciating the Renminbi was widely seen as having saved China’s neighbors from the brink of failure, because depreciation of Renminbi would further weaken their export competitiveness and make a devastating impact on their economies. Regional countries would not forget how, in a time of crisis, Western countries imposed harsh requests for domestic reforms and left a negative impression of their conditional assistance to the region and its people. In a broader strategic sense, the growing sophistication of China’s foreign policy in the region can be attributed to it capitalizing on this disconnect by emphasizing its geographic and historical proximity to region, and underscoring that its aims are unlike that of Western countries, which is to facilitate better relationships with its close neighbors, and consequently create a favorable environment that could be cultivated in China’s favor.

Regional integration in East Asia is largely considered driven by the momentum of China’s economic rise. It is obvious that the progress of regional integration is very much in line with the pace of China’s economic advancement in the region. Major economic powers in the region have also reacted to China’s successful advance. For instance, Japan’s comprehensive economic partnership initiative in January 2002 is considered a prompt response to China’s free trade agreement (FTA) initiative with ASEAN. India is also accelerating its pace of negotiating FTAs with ASEAN countries.

China’s Dynamic Initiatives toward Southeast Asia

The establishment of CAFTA augurs comprehensive cooperation between China and ASEAN countries. It is quite conceivable that once the proposal was initiated, all existing cross-border interactions become institutionalized under the strategic framework. For this, China has made tremendous efforts in trying to settle its common border disputes with neighboring countries. Two additional sub-regional economic initiatives were proposed to deepen cooperation between China and Southeast Asian countries. Those new initiatives came from both the levels of national and provincial governments in China.

Based on the ideas of reinforcing sub-regional cooperation, in 2004 Chinese Premier Wen Jiabao and Vietnamese Prime Minister Phan Van Khai reached a consensus on the new initiative “two corridors and one ring,” where areas stretching from Kunming (Yunan Province of China) via Lao Cai to Hanoi, Hai Phong, and Quang Ninh (Vietnam), and from Nanning (Guanxi Zhuang Autonomous Region, GZAR) via Lang So to Hanoi, Hai Phong, and Quang Ninh as two corridors, and along the Beibu Gulf Rim as one ring. This initiative of economic cooperation, which focuses on developing three different levels of industrial division of labors—first, Peral River Delta, electronics, telecommunications, and service; second, Yunan and Guanxi, labor and capital-intensive industries; third, Vietnam, consumer market—ties China’s southern provinces, Yunan and Guanxi, with Vietnam [3].

In July 2006, on the occasion of the 1st Pan Beibu Gulf Economic Cooperation Forum, the Guangxi government proposed a China-ASEAN M-shape regional economic strategy, which would work on:

1. Extending sea links with Malaysia, Singapore, Indonesia, Brunei, and the Philippines;

2. Constructing a Nanning-Singapore economic corridor through highway and railway projects linking Nanning, Hanoi, Phnom Penh, Bangkok, Kuala Lumpur, Singapore;

3. Deepening GMS cooperation among all member states and enhancing communication and cooperation between China’s southern provinces and Southeast Asian countries.

To take advantage of its geographic location as China’s gateway to Southeast Asia, Guanxi has been advocating the combination of maritime economic cooperation, mainland economic cooperation, and Mekong sub-region cooperation. With this ambitious economic strategy in place, Guanxi is moving one-step further to try to institutionalize an economic cooperation framework with ASEAN neighbors. On the strategic level, it will be critical for China’s relationship with ASEAN, as the initiative attempts to develop sea links among all countries surrounding the South China Sea, including Vietnam, Malaysia, Singapore, Indonesia, Brunei, and the Philippines, and rail links that will connect with the Singapore-Kunmin rail project.

In the same vein, since 1992 the GMS Program, sponsored by the ADB, has provided various development projects along Lancang River on the China side and Mekong River along Laos, Thailand, Cambodia and Vietnam. The GMS works generally on developing regional strategic frameworks through infrastructure linkages, cross-border trade and investment, and upgrading competitiveness of regional countries. In order to become a prosperous, integrated, and harmonious subregion, GMS member states have adopted a strategy to enhance connectivity, improve competitiveness and promote a sense of community. Their joint efforts have been put forward in nine priority sectors—agriculture, energy, environment, human resource development, investment, telecommunications, tourism, trade and transport—and three priority geographical areas—North-South Economic Corridor, East-West Economic Corridor, Southern Economic Corridor.

The Implication of China’s Advance to the Region for the United States

The entire region understands the implication of China’s success in advancing into Southeast Asia and Central Asia by different economic means. It is important to note that China has managed well not only through bilateral economic cooperation but also by initiating or participating in multilateral economic mechanisms. By the same token, the region has also observed the rapid decline of U.S. influence in all related policy areas. Especially on various joint statements announced by regional countries on occasions of regional multilateral forums, China postures itself with more confidence and a much firmer position in initiating new cooperative proposals and leading the ways of regional cooperation. In effect, regional economic and political interdependence between China and ASEAN countries is blossoming, though the degree of ASEAN dependency on China is accelerating, especially for those members of GMS. Through various development projects of GMS, China is quickly developing solid connections and networking with its partners.

How substantial is China’s influence over its GMS partners? What would be the rationale for China’s enthusiasm for sub-regional cooperation? How can one understand the right direction of China’s policy intention? The overall policy strategy, which China has taken for the past decade, emphasizes reshaping a peaceful image and helpful attitude of accommodation toward its neighbors. Thus the settlement of border disputes with its neighbors came up as the top priority on Beijing’s foreign policy agenda. On economic cooperation and foreign aid, as China’s economy booms, the central government launches “cross-border economic zone” initiatives toward its southern neighbors and encourages provincial governments to utilize all possible resources to deepen interaction and communication with its neighbors. Currently, all related economic initiatives toward Southeast Asia can be summarized into three general forms: China-ASEAN Free Trade Area on the strategic level, cross-border economic corridors, and the Beibu Gulf Rim economic sphere based on sea transport networking among coastal countries of the South China Sea. In a nutshell, what Chinese sub-regional initiatives have brought forward is paving the way for China-ASEAN cooperation. With such high profile national investment in facilitating cross-border relations, ASEAN countries have already heightened the degree of dependency upon China’s economic and political development.

While many observers are worrying about not paying enough attention to catching up to China’s new efforts in the region, they also discovered that the United States does not have much to do apart from existing bilateral security cooperation. Although China’s continuous advance into the region does not necessarily mean that the United States’ substantial role has been replaced, experts in the region have commonly concurred that U.S. influence is seriously declining. To say the least, U.S. policy toward Asia is not keeping pace with the new dynamics of regional economic integration that has been spearheaded by China’s economic advancement in the region. What Asian countries need for substantial economic cooperation initiatives does not seem to be reflected in Washington’s Asian policy orientation now. In the region’s important juncture of historical development, we may begin witnessing a new structure of regional cooperation shaping up in Asia without a strong U.S. presence.

Conclusion

In the past few years, China’s policy toward Southeast Asia has noticeably been thriving. The preparation for CAFTA to take effect is progressing steadily. Through several sub-regional economic cooperation mechanisms, the relationship between China and ASEAN is much closer than readily observed. The environmental and social impact of the GMS development projects is however creating a backlash in regional communities, this may serve as a great challenge to China, as demand for the implementation of those projects increases.

The new round of the GMS summit formally endorsed the Vientiane Plan of Action for GMS Development for 2008-2012. The general direction of this four-year action plan indicates that in addition to accelerating substantial progress of nine sectors, much of GMS resources will be injected to strengthen the institutional framework and mechanism to push cooperation forward. Meanwhile, China is also very keen on initiating new sub-regional economic cooperation, e.g. “two corridors and one ring” plan. Although the cross-border economic cooperation initiatives mostly benefit the border provinces, it represents China’s endeavors to explore economic, diplomatic, and security interests in the region. Based on Beijing’s grand strategy, the new sub-regional economic cooperation implies more than its provincial economic development zone. China is trying to utilize its strategic location to extend its influence in economic development for broader market access in Southeast Asia.

The fundamental idea of the Beibu Gulf Rim economic cooperation and the like reflects China’s geopolitical and geo-economic deliberation via economic rather than political means. CAFTA opens up bilateral framework for cooperation on the strategic level. The GMS and other sub-regional frameworks facilitate the progress of bilateral cooperation from the grassroots level. More importantly, the region of the GMS for years has been China’s geo-political constituency. What China expects to gain is through the process of economic cooperation: first, trying to convey a deliberate message to the region that the rise of China will be peaceful; second, bringing about economic development in its southern provinces; and third, making Kunmin a regional operation center for trade and transport. In sum, China’s active role in the GMS projects its strategic vision of a strengthening relationship with ASEAN.

Notes

1. “GMS Flagship Initiative: North-South Economic Corridor,” Asian Development Bank, June 26, 2005. http://www.adb.org/GMS/Projects/flagshipA.asp

2. “Country Report on China’s Participation in Greater Mekong Subregion Cooperation,” National Development And Reform Commission,PRC, Ministry of Foreign Affairs,PRC, Ministry of Finance, PRC, 2008-03-28, http://www.fmcoprc.gov.hk/eng/zgwjsw/t419062.htm

3. “China-Vietnam ‘two corridors and one ring” with great potential,” Nan Boa Woan, March 22, 2005. http://www.caexpo.org/gb/news/special/visit-sanguo/lianglangyiquan/t20050322_34873.html