The Maritime Silk Road And China-Southeast Asia Relations – Analysis

By Zhao Hong*

July 12, 2015

ASEAN-China relations have improved dramatically since the inking of their strategic partnership in 2003. Bilateral trade increased more than six-fold from US$60 billion in 2003 to over $500 billion in 2014, and Chinese investment in Southeast Asia increased from US$0.12 billion in 2003 to US$7.3 billion in 2013. While the degree and nature of China’s economic importance vary among individual ASEAN countries, China is a critical economic partner for all ten of them. It is the most important export market for Malaysia, Singapore, Laos, and Cambodia and the largest foreign investor in Cambodia, Laos and Myanmar.

However, greater economic cooperation with Beijing since 1990s seems to have failed to spill over into the political security realm, and Southeast Asian states continue to be concerned to varying degrees about China’s growing military capabilities and the lack of transparency about its intentions. Although the past few years have witnessed increasing economic ties between China and Southeast Asia, Beijing has found that its growing geo-economic strength does not necessarily translate into concomitant geopolitical influence and mutual trust.

Thus it is believed that China needs to ease up on its “economy-oriented” policy, and to take into consideration the political and security demands of its southerly neighbours.1 Chinese analysts have indeed opined that the best way for China to build its “international reputation” is by “taking on more responsibilities in international security” which means “providing the entire world and all regions with more public security goods”.2 It would seem therefore that Beijing, through policies such as the promotion of free trade agreements, infrastructure investment and the development of maritime cooperation, hopes to mend and improve its security relations with Southeast Asian countries. It was against such a background that it the New Maritime Silk Road initiative was proposed.

THE MARITIME SILK ROAD AND THE CONCERNS OF ASEAN COUNTRIES

Chinese President Xi Jinping proposed the Maritime Silk Road (MSR) – now a part of the “One Belt, One Road” initiative – during his visit to Indonesia in October 2013. The main aim of this broader initiative is for China to develop its landlocked western provinces and enable them to access the markets of Southeast Asia and the Middle East. The MSR is an attempt to promote economic cooperation and connectivity by reviving the ancient maritime Silk Road trading route, and US$40 billion has been pledged to the Silk Road Fund to this end. China has also established the Asian Infrastructure Investment Bank (AIIB) to develop infrastructure along the route.

While Southeast Asian countries may laud some of Beijing’s initiatives, their view of the long-term trajectory of their economic ties to China is also tinged with caution, for two reasons. First, as the economic size and power of China have expanded tremendously relative to Southeast Asia since the 1990s, this growing asymmetry alone worries some in the region, and poses an important obstacle to China’s ability to convince ASEAN countries that its intentions are benign. Thus, as an analyst has said, “even given China’s and ASEAN’s common sense of vulnerability and common grievances against larger Western powers, China remains a major power in the eyes of ASEAN”.3 This suggests that ASEAN governments continue to view China’s foreign policy with some measure of mistrust and suspicion with regards to the stability of the region.4

This is especially so in light of Beijing’s growing assertiveness in terms of its energy resource exploration, maritime claims and frequent military activities in the South China Sea. In Myanmar, the desire to balance overwhelming dependence on China is frequently cited as a strong impetus for the country’s political and economic opening in 2011 and its efforts to establish positive relations with the EU, Japan and the US.

In Vietnam, popular anger over China’s large economic role, coupled with a strongly nationalistic response to maritime disputes with China, has cast a large shadow over economic relations between the two. China is Vietnam’s largest trading partner and their bilateral trade had increased by a phenomenal amount, from US$8.2 billion in 2005 to $103.5 billion. In the process, Hanoi suffers a growing trade deficit with China which reached US$64 billion in 2014.5 Vietnam is closely integrated into regional supply chains, and many of its factories depend on inputs from China. Its leadership is acutely aware of deep public mistrust and antipathy towards China and that safeguarding Vietnam’s interests in the South China Sea is therefore critical to the government’s legitimacy.

Second, ASEAN countries may worry that being overly dependent on China economically would allow Beijing to undermine their foreign policy. For example, the Philippines, the second largest Southeast Asian state by population, seems to be excluded from the Maritime Silk Road. Some Western scholars believe that China may have intentionally avoided the Philippines, implying that “the smaller countries around China need to accommodate themselves to the values and interest of China to avoid the loss of rights and privileges in the Community of Common Destiny sponsored by China”.6 Indeed, ASEAN is concerned that China might “use economic incentives to lead ASEAN into broader and deeper ‘all-dimensional’ cooperation” and threaten the regional body’s unity.7 They fear that “in the long run, when China’s growing economic power morphs along more strategic-oriented pathways, pressure will mount on ASEAN members to reciprocate China’s regional and global interests.”8

ASEAN’s caution and concerns are not surprising. After all, the share of ASEAN’s trade with China in its total external trade increased from 7.6% in 2003 to 13% in 2012, and China’s FDI in Southeast Asian countries rapidly increased from US$120 million to US$7.3 billion in 2013 although its share in ASEAN’s total FDI inflow is still limited. The relationship is not a balanced one: ASEAN registers a substantive trade deficit with China, which increased from US$2.4 billion in 2008 to $63.7 billion in 2014.9 ASEAN also invests more in China, but at a much slower than China’s capital inflow into the region. What is more striking is that China’s economic growth has profoundly changed the structure of the regional political economy by causing most Southeast Asian economies to become significantly reoriented into a regional production network centred on China,10 and it has been suggested that “the Silk Road clearly reflects China’s ambitions to create a China-centric, albeit still open, Asian order”.11

THE SOUTH CHINA SEA AND THE MARITIME SILK ROAD

Under President Xi Jinping, China’s South China Sea policy has undergone a major adjustment, from an emphasis on rhetorical sovereignty claims to vigorous maintenance of rights through selective actions. On the other hand, with its new periphery diplomacy, Beijing considers its strategy on the South China Sea issue to be crucial to its ASEAN policy, driving it to adopt some flexible measures. China conditionally welcomes a CoC (Code of Conduct) arrangement based on a six-point guidance for China-ASEAN negotiations under Indonesian auspices;12 put forward the South China Sea “two-track approach”, which states that China would cooperate with ASEAN collectively to de-escalate tensions, and simultaneously work with each claimant on resolving differences through consultation.13 Indeed, if everything remains at the status quo, the South China Sea issue is low in Beijing’s diplomatic priority, especially in the framework of China-ASEAN relations.

Yet, the South China Sea dispute is far from being resolved and could become an obstacle in the building of the Maritime Silk Road. For example, the prospect for joint development of maritime resources in the South China Sea has been under discussion since the early 1990s. Yet little progress has been made up. From the Southeast Asian perspectives, Beijing has not suggested that the ‘shelving’ of the territorial disputes and the promotion of joint development mean that their sovereign claims have become less strong or that joint development would lead to longer-term prospects for territorial compromises,14 as China had indicated that “Beijing would only concede to joint cooperative activities if the other claimants first acknowledge Chinese sovereignty over the South China Sea”.15 While China believes that domestic regime change and resource nationalism are the main factors for the failure of joint development,16 as in the case of the Philippines where it has been claimed that “a joint venture with China on equal terms would be a violation of the country’s constitution”.17 Hence, the claimant states have continued to argue over the sovereignty issue instead of temporarily shelving it to benefit the establishment of a joint development scheme.

For China, the construction of “One Belt One Road” is the primary strategic objective for the time being. It cannot be easily separated from the South China Sea question, especially in light of the new round of dispute escalation since April this year. It is essential for China to still (or at least significantly reduce) the security concerns of ASEAN countries. Thus, as some Chinese scholars suggest, it is necessary for China to move on to the following matters instead: clarifying its South China Sea assertion and substantiating its insistence on the nine- dotted line;18 putting forward its own roadmap for dispute resolution and promoting a new collective security concept. A new security concept can be broad and flexible, and include binding multilateral security mechanisms, multilateral forms, bilateral security consultations and non-official academic security dialogues.19 Moreover, taking into account the fact that the large-scale construction of islands will have an impact on the claims of ASEAN countries, it is appropriate for China to disclose information relating to the island’s construction scale and its overall use.20

Some scholars have suggested that China should adjust its terrestrial conception of bounded space. For example, Hans Dieter-Evers holds that the South China Sea is one of many “Mediterranean seas”. It is typically bordered by a number of distinct states and surrounded by narrow outlets to oceans or other seas.21 All Mediterranean seas experienced periods of intensive trade relations, exchange of knowledge, economic prosperity and the flowering of science, religion and innovation.

But unlike other Mediterranean seas, in spite of intensive trade relations and cultural exchanges, the South China Sea remains an entity only in name. Indonesians, Malaysians and Filipinos concentrate on their own seas, such as the Sulu, Sulawesi and Java seas and the Strait of Malacca, and theirs is basically a maritime conception of free and undefined space; while the Chinese view appears to be land based, and considers the South China Sea as a bounded and exclusive sovereign territory.22 This adds difficulty to the resolving of maritime disputes. One illustration is that “China has long called for joint development, but other claimant-states’ unease with Beijing’s premise of ‘indisputable sovereignty’ has prevented any progress on the idea”.23 Dieter-Evers hopes that “the Chinese terrestrial conception of bounded space can be changed into a maritime conception to allow a solution of the claims to the South China Sea.”24

Southeast Asia has since ancient times been an important hub along the ancient Maritime Silk Road. The Chinese people had ventured into Southeast Asia, traditionally called Nanyang by them, and China had in fact already been conducting maritime activities along its coastline and in the Nanyang well before Admiral Zheng He’s expeditions (1405-1433). By the Song Dynasty (960-1280), Imperial China had established tributary relations with many states in the Nanyang, and the tribute-bearing missions were, as observed by Harvard’s eminent historian John K Fairbank, a convenient “cloak for trade”.25

The new MSR initiative aims to create a modern network of high-speed railways, motorways, pipelines and ports stretching across the region. Beijing has also called for building a community with “shared interests, destiny and responsibilities” which entails further embracing of the international marketplace, and provides a vision for durable security for the region.

Indeed, as the largest country among the claimant states in the South China Sea and a major power in Asia Pacific and the world, China should exercise more leadership in facilitating joint development in the South China Sea. This holds prospects for longer-term territorial compromises and can become an underpinning factor for peace and stability in the region.

CONCLUSION: TOWARDS A NEW REGIONAL ORDER?

ASEAN countries have an immense stake in maintaining good relations with China, but many of them are certainly apprehensive about how China will choose to use its power. As of now, ASEAN continues to adopt a dual approach towards the US and China. While most ASEAN states “have welcomed America as a hedge against growing Chinese power, their economies have become increasingly dependent upon China and they don’t want to be a party to any potential conflict between these two giants”.26 While they continue to rely on the US on security matters, they have responded enthusiastically to China’s numerous economic initiatives. The disconnection between China’s economic strength on the one hand, and the significant security role assumed by the US on the other highlights the imbalance of power in the region.27

Good relations with ASEAN countries remain a priority of China’s foreign diplomacy. After disputes in the South China Sea heated up in 2013, China offered an upgraded version of the FTA with ASEAN, and to continue negotiations to develop the CoC, and proposed setting up the AIIB and the Maritime Silk Road fund. This strongly suggests that the importance of the ASEAN region in China’s overall diplomacy layout is on the rise.

The US may still be the predominant power that provides the security public goods that have facilitated the rapid economic growth of most of Asian states, and continue to play an essential role in setting norms and rules for global commerce, but American predominance is being challenged – in part because of the rise of China and other emerging powers and in part because of the relative decline of the US itself. The Obama administration’s strategy to pivot towards Asia and to give higher priority to its relations with ASEAN was aimed to counter- balance China’s growing regional influence, as it sees the AIIB as a political tool for China to pull countries in Southeast Asia tighter into its orbit.28

The relationship between China and the US is one between a rising power and an established dominant power. Competition in Southeast Asia is inevitable although “the balance of interests in the region strongly favours China because the various diplomatic and territorial quarrels roiling East Asia are of much greater salience and concern to China than to the US”.29 While it has become difficult for the US to hold its primacy in the region, China cannot be a single power of domination in the region either. The two powers will have to develop a clearer mutual understanding and greater mutual acceptance, and work together to maintain a balance of power in the region to limit strategic rivalry.30

ASEAN is at the centre of this big power relationship and has been able to establish platforms that could play a supplementary role in channelling the US-China relations in more predictable and constructive directions. American and Chinese interests do intersect in Southeast Asia, and ASEAN is a relatively neutral body friendly to both.31 Therefore, Southeast Asia can help determine whether China and the US can build a new model of big power relations, based on rules and dynamic changes of economic relations developed in the region.

About the author:

* Zhao Hong is Visiting Senior Fellow at ISEAS; e-mail: zhao_hong@iseas.edu.sg

Source:

This article was published by ISEAS as ISEAS Perspective Number 35 (PDF)

Notes:

1. 陈琪、管传靖,“中国周边外交的政策调整与新理念” (China’s peripheral diplomacy adjustment and new ideas),《当代亚太》2014年第3期(Contemporary Asia-Pacific, no.3, 2014).

2. Ibid.

3. Alice D. Ba, “Who’s socializing whom? Complex engagement in Sino-ASEAN relations”, in Theorizing Southeast Asian Relations, edited by Amitav Acharya and Richard Stubbs, Routledge, 2009.

4. Denny Roy, “Southeast Asia and China: balancing or bandwagoning”, Contemporary of Southeast Asia, vol.27, no.2, 2005.

5. China’s Customs Statistics.

6. David Arase, “China’s Two Silk Roads: Implications for Southeast Asia”, ISEAS perspective, #2, 22 January 2015.

7. David Arase, “Explaining China’s 2+7 initiative towards ASEAN”, Trends in Southeast Asia, 2015, #04.

8. Kavi Chongkittavorn, “Pushing East Asia Summit to new level”, The Strait Times, 11 November 2014.

9. China Customs Statistics.

10. Evelyn Goh, “The modes of China’s influence”, Asian Survey, Vol. 54, Number 5, 2014.

11. Yong Deng, “China: the post-responsible power”, The Washington Quarterly, Winter 2015.

12. In his Southeast Asian trip in May 2013, Foreign Minister Wang Yi reiterated Beijing’s willingness to work with ASEAN for a mutually acceptable CoC. But Beijing insists that the CoC is for crisis management and should not touch on EEZ demarcation.

13. Xinhua News Agency, 9 August 2014.

14. Philip Andrews-Speed and Roland Dannreuther, China, Oil And Global Politics, Routledge, 2011, p.147.

15. Ralf Emmers, Resource Management and Contested Territories in East Asia, Palgrave Macmillan, p.61.

16. Cha Wen, “feilibing nanhai zhengce zhuanbian beihou de guonei zhengzhi yiinsu”, (Domestic political factors behind Philippines’ shift in its South China Sea policy) Journal of Contemporary Asia-Pacific Studies, no.5, 2014, pp.120-139.

17. Jeffrey Ordaniel, “The geopolitical stakes of the 2016 Philippine election”, The Diplomat, 28 May 2015.

18. You Ji, “China’s civil-military strategies for South China Sea dispute control”, EAI Background Brief, No.1002, 25 February 2015.

19. Zhang Biwu, “Chinese perceptions of U.S. return to Southeast Asia and the prospect of China’s peaceful rise”, Journal of Contemporary China, 2015, Vol. 24, No.91, 176-195.

20. Xue Li, “China and the US did not enter the South China Sea military conflict countdown”, FT Chinese network, 27 May 2015.

21. Hans Dieter-Evers, “Understanding the South China Sea: an explorative cultural analysis”, IJAPS, Vol. 10, No. 1 (January 2014).

22. Ibid.

23. Jeffrey Ordaniel, “The geopolitical stakes of the 2016 Philippine election”, The Diplomat, 28 May 2015.

24. Hans Dieter-Evers, “Understanding the South China Sea: an explorative cultural analysis”, IJAPS, Vol. 10, No. 1 (January 2014).

25. John Wong and Lye Liang Fook, “Revising the ancient Silk Road: China’s new diplomatic initiative”, East Asian Policy, volume 6, no.3, Jul/Sep 2014.

26. Michael Yahuda, “China’s new assertiveness in the South China Sea”, Journal of Contemporary China, 22:81, 2013.

27. 薛力,“‘一路一带’ 折射的中国外交风险” (China’s diplomatic risk reflected by ‘one road one belt’), FT Chinese net, 30 December 2014 

28. Jane Perlez, “U.S. opposing China’s answer to World Bank”, The New York Times, 9 October 2014.

29. Suisheng Zhao, “A new model of big power relations? China-US strategic rivalry and balance of power in the Asia-Pacific”, Journal of Contemporary China, 24:93, 2015, 377-397.

30. Ibid.

31. Bilahari Kausikan, “The idea of Asia”, The Straits Times, 8 November 2014.