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China And Southeast Asia: Why Economic Interests Can't Make Old Grudges Go Away

Article illustrative image Partner logo ASEAN flags

Politically cold, economically hot. That was the best way to describe the atmosphere as Xi Jinping, China’s Vice President, showed up for last month's 9th China-ASEAN Expo, the summit between Beijing brass and the leaders of ASEAN (Association of Southeast Asian Nations).

Economic interests right now are juxtaposed with strategic risks. At the opening ceremony, Xi Jinping described the meeting of the ASEAN leaders as “like relatives who frequently visit each other.” But later, during his meeting with Vietnamese Prime Minister Nguyen Tan Dung, he stated that, although South China Sea territorial disputes do not represent the whole of China-Vietnam relations, they would affect the two countries’ bilateral relations if not dealt with properly.

At his meeting with the Philippines’ presidential envoy, Interior Secretary Mar Roxas, he pointed out that China-Philippines relations have been encountering difficulties for some time, but that after effective bilateral communications, the situation has eased. He said he hoped that the situation would not go backward, and that bilateral relations would return to normal.

Meanwhile, among the four proposals put forward by Xi Jinping for the future development of China-ASEAN relations, three of them relate to economy and trade, which goes to show how important these are in bilateral relations.

Since the beginning of China-ASEAN relations 21 years ago, bilateral trade volume has jumped from $7 billion to $362.8 billion in 2011, with an average annual growth of more than 20%. The China-ASEAN Free Trade Area (ACFTA), which covers 11 member states and 1.9 billion people, came into effect in 2010. Since then, China has become the Southeast nations’ top trading partner, while the 10 ASEAN countries have jointly become China’s third-ranking trading partner.

China’s disputes with nearly half of the ASEAN’s member states over sovereignty in the South China Sea have been going on for a long time.

The friction with the Philippines over Huangyan Island started to increase in April this year, and on September 12, Philippine President Benigno Aquino III signed an executive order to rename the South China Sea the "West Philippine Sea."

In June, the Vietnamese Congress passed the Law of the Sea of Viet Nam, which added China's Xisha and Nansha Island groups to Vietnam's “sovereignty” and “jurisdiction.” The Chinese authorities have responded by creating a new city (Sansha, on Yongxing island) to administer the islands.

Economic incentives

Two major factors have contributed to the rapid development of the China-ASEAN trade partnership in recent years. First, there is globalization. Second, the weak recovery of the U.S. and European economies has also played an important role in the mutual economic interests of China and the Southeast nations.

At the same time, at the strategic level, the rise of China is exacerbating the concerns of the ASEAN countries, who are hoping to be able to pull the U.S. into their regional affairs in order to counterbalance China. This plays into the hands of the Americans, who are shifting their strategic center of gravity eastward. This is why the American Secretary of State, Hillary Clinton, has played a high-profile role in ASEAN and regional affairs.

But attention should be paid to the fact that while wrestling with China, the ASEAN is not monolithic. The 10 states all have individual ideas. Each of them has had historical issues as well as current disputes with China. At the same time, they also each want a bigger share in bargaining with China. It’s difficult for them to work as a unit.

With the relative rise of China and decline of the U.S., as well as the interdependence of China-U.S. economic and trade relations, the United States is bound to be more cautious in its use of the ASEAN states as pawns, especially in disputes over sovereignty.

It is unlikely that the U.S. would give the ASEAN countries the full support that they expect, as shown by the Philippines’ misjudgment of the U.S. attitude to the Huangyan Island issue; the U.S. said it would not take sides.

Based on these two points, and coupled with China's continued rise, there will be no breakthrough in the short term on sovereignty disputes between China and the ASEAN countries. Tensions will continue to be the norm.

The question is, can warmer economic and trade relations be sustained without mutual political and strategic trust?

With the rise of globalization, economic and strategic interests will be relatively independent from the rest of bilateral relations.

Even the closest political relations may suffer tensions over economic questions. For example, the U.S. and Japan enjoy close relations but have many differences in the area of trade. And the opposite is true: the frequent economic and trade exchanges between China and the U.S. may also lead to a strong political relationship.

History's war record

Accordingly, there is some truth in the statement of Lin Kangxian, the Deputy Secretary-General of the ASEAN Secretariat, on September 21: “I don’t worry that the territorial disputes in the region will affect the promotion of these nations’ economic relations.” However, everything has two sides, and there is a striking historical counter-example.

In 1910, British economist Norman Angell wrote in his book, The Great Illusion, that because the European powers were very dependent on each other economically, “a war between them is unimaginable.” Yet, World War I occurred less than five years later.

Economic interests are not a fundamental guarantee of stable bilateral relations in the long term, though deep-rooted economic and trade exchanges would make each nation more cautious when considering strategic issues.

However with the rise of national sentiment and intensification of conflict, economic and trade ties may be obliged to give way to political and strategic considerations.

Therefore, if the China-ASEAN relations are to maintain long-term stability, their relationship cannot be limited merely to the level of economic interests. In the future, when the time is ripe, we will need to introduce a new bilateral exchange mechanism.

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