China-ASEAN Cooperation in a Changing World Order

Abstract

The conventional wisdom about ASEAN-China relations

The term "hedging" is used widely to describe ASEAN states' strategic response to the rise of China. In contrast to the concepts of "balancing" and "bandwagoning," "hedging" encapsulates how ASEAN states cooperate simultaneously with US and China to cope with the opportunities and challenges in the face of China's rise (Gerstl, 2022, p. 1). Although some contend that the adoption of the hedging strategy by some ASEAN states, such as Singapore and Malaysia, has more to do with the ruling elites' domestic legitimation and less with the great power politics (see: Chen-Chwee, 2008), in recent years the debate's focus has shifted from questioning whether ASEAN states engaged in hedging against China, toward understanding different variations of hedging strategies ASEAN states employed.

The discussion has been driven by the uncertainties and anxieties experienced by ASEAN states concerning the rise of China, which derives from three distinct observations, or conventional wisdom, concerning the regional order in Southeast Asia. First, the perceived waning of US global leadership and its diminishing commitment to Southeast Asia. Second, the prospect, if not the impending rise, of a Sino-centric order taking shape in Southeast Asia. Third, the persistent economic reliance of ASEAN on China. On the surface, these observations appear intuitively accurate. However, a more nuanced understanding emerges when we subject each observation to critical scrutiny within the broader context of world order in transition.

The decline of US global leadership?

First and foremost, it is crucial to dispel the notion that US global leadership is in a state of decline or that its commitment to Southeast Asia has waned. Scholarly discourse has extensively explored the power transition from the United States to China, particularly in light of the rise of China and the perceived decline of the liberal international order. The perception of China's ascendancy toward global leadership gained further attention following the Global Financial Crisis of 2008 and subsequent events such as Trump's trade war and the Biden administration's proclamation of "strategic competition" with China.

However, the decline of US global leadership has been significantly exaggerated. The United States maintains global military supremacy, with over 750 military bases across 80 countries. Its GDP growth rate continues to outpace that of other developed economies. The US dollar remains the global currency, accounting for 60% of total allocated currency reserves held by central banks. Moreover, the United States is still widely regarded as a crucial provider of international public goods in Southeast Asia. According to a survey conducted by ISEAS Yusof Ishak Institute in 2022, 36.6% of respondents from ASEAN countries expressed the strongest confidence in the United States to uphold the rule-based order and international law, compared to 13.6% who placed their trust in China (Sharon et al., 2022, p. 26).

The United States has also intensified its security frameworks and military alliances within the region, including AUKUS, the Quadrilateral Security Dialogue (QUAD), the Five Eyes alliance, and establishing a trilateral military network involving South Korea and Japan. Furthermore, the United States has redirected its resources from the Middle East and bolstered its presence in the Indo-Pacific region with renewed vigor.

The prospect of a Sino-centric order in Southeast Asia?

Secondly, the notion that China possesses the capacity to establish a Sino-centric order within Southeast Asia is far from accurate. It is important to recognize that the region encompasses multiple power centers. Thailand, Laos, and Cambodia form a Buddhist world with strong civilizational ties with India. Their diplomatic relationship was elevated to one of the Comprehensive Strategic Partnerships in November 2022. In Indonesia, Brunei, and Malaysia, where most of the population adheres to Sunni Islam, relations with the Islamic world remain crucial in domestic and foreign affairs. Japan still leads in infrastructure investment in Southeast Asia, contributing $330 billion to infrastructure projects in ASEAN countries by the end of 2022, surpassing China's contribution of $100 billion (Gabriel, 2022). Following the US, countries including France, the United Kingdom, South Korea, and Germany have launched their Indo-Pacific Strategy.

Most importantly, ASEAN centrality remains the greatest common denominator for major stakeholders in the region. Biden remarked on ASEAN's centrality as the "linchpin for maintaining the resilience, the prosperity, and security of our shared region" (The White House, 2022). China's foreign policy explicitly underscores its adherence to ASEAN centrality. A 2022 Position Paper by the Chinese Foreign Ministry reaffirmed China's "unswerving support" for ASEAN centrality in the evolving regional architecture and its commitment to ASEAN's leadership in regional and international affairs" (FMPRC, 2022).

ASEAN's economic dependence on China?

Achieving a more balanced bilateral trade relationship is a crucial factor for the future of ASEAN-China cooperation. China has maintained its position as ASEAN's largest trading partner since 2009. However, ASEAN has faced a widening trade deficit with China over the years, reaching $10.8 billion by 2021. The trade deficit has raised concerns among many ASEAN states regarding the economic dependence of ASEAN on Chinese imports.

However, it is crucial to recognize that asymmetrical trade relations are subject to change. As China aims to move up the global value chain, certain industries, such as garment manufacturing and textiles, have been relocated to countries like Vietnam, Cambodia, and Myanmar. Multinational corporations mindful of geopolitical risks have sought to diversify and de-risk their supply chains by shifting their production bases to ASEAN countries. A research paper on ASEAN-China trade highlights that the supply chain disruptions (caused by geopolitical tensions and the pandemic) have led to a decline in intra-industry trade in 2021 (Li, 2021, p. 9).

This process is partly contributed by China's BRI, which has brought significant infrastructure investments to ASEAN, creating better connectivity and vertical integration between the industrial hubs across the Southeast Asian region.

One of the most prominent trends in China-ASEAN trade is the shift in the balance of China's export to more intermediate goods (that is, semi-finished articles for manufacturing final goods). Some media outlets touted that ASEAN has emerged as a "China alternative." Whereas the veracity of this claim remains debatable, there is little doubt that ASEAN has assumed a central role in the global value chain. For ASEAN countries, a more diversified global value chain shifting from offshoring to nearshoring offers enormous growth potential for the manufacturing sector and a change in the trade structure between ASEAN and China.

The importance of ASEAN centrality

Despite the geopolitical tension, a paradox of the regional order in Southeast Asia is the region's rapid economic growth. Historically the regional stability of Southeast Asia has been maintained by two pillars: economic interdependence and ASEAN's diplomatic inclusiveness. As others have covered the first aspect exhaustively, I would like to shed more light on the latter.

The ASEAN way is critical to the stability of regional order in Southeast Asia. This is not only because ASEAN maintains its political neutrality in the face of great power politics but also because ASEAN allows its member states to maintain a healthy distance from great powers.

American political scientist Robert Putman's theory of the "two-level game" is often used to explore ASEAN states' response to China. The two-level game refers to a situation where negotiators on each side must satisfy audiences at the international and domestic levels. But in fact, ASEAN-China relations resemble not a two-level but a three-level game. Between audiences at the international level and the domestic level, policymakers also need to respond to demands at the regional level. This is a crucial mechanism to stabilize regional order: When conflicts arise, decision-makers can de-escalate by referring to the strategic necessity of adhering to the principle of ASEAN centrality. Policymakers thus do not have to give in to domestic pressure for more assertive policymaking so easily, a typical situation in two-level games. Efforts to maintain cooperation with the other side are not interpreted as weak or dovish but as a necessary move to protect regional interests. After all, China does not have maritime conflicts with ASEAN.

Concluding remarks