Strategic trust crucial in China-Asean ties

Relations between the Association of South-east Asian Nations (Asean) and China have hit a rocky patch in the last few years, exacerbated by a mix of economic and geopolitical stresses.

The negative effects of China’s “new normal” of slower economic growth have cascaded down to Asean economies, which all but meant that Asean’s ride on the Chinese gravy train will be bumpier. In addition, the dark clouds billowing from the South China Sea have cast a pall on ties.

It is hard to imagine that — given the bad press of late on Asean-China relations — that both parties have enjoyed warm and close ties for over two decades.

For instance, in 2002, Asean and China signed the Asean-China Free Trade Area (Afta) Agreement, which came into effect in 2010 and was upgraded at the end of last year. The deal was Asean’s and China’s first free trade agreement. China was also the first major power to accede to the Treaty of Amity and Cooperation, doing so in 2003.

Before that, China played the role of Asean’s white knight during the 1997 Asian Financial Crisis where it resisted the temptation to devalue the yuan, a move that helped to ease pressure on the Asian currencies that had been battered down throughout the crisis. Beijing also supported the Chiang Mai Initiative, a network of bilateral currency swaps designed to prevent a reoccurrence of the crisis, committing US$38.4 billion (S$52.2 billion).

Asean took notice of these magnanimous gestures and reciprocated by forging closer relations with China.

To gauge how far Asean-China relations have progressed, one only has to look at the transformation of the trade relations, which saw the volume of bilateral trade expanding an astonishing 43 times between 1991 and 2015, to hit US$345 billion last year.

Accounting for 15 per cent of Asean’s trade in 2014, China is the grouping’s largest trade partner collectively and for eight of the 10 members states, Brunei and the Philippines being the exception. Tourist arrivals from China also topped the list in 2014, with some 13 million visitors, sustaining Asean’s tourism sector as the one bright spot in an otherwise slowing regional economy.

While trade figures and other statistical benchmarks point to a vibrant and dynamic partnership, there is a growing sense of disquiet and unease in the relationship. Where did Asean and China go wrong?

Many attribute it to the US factor in stoking up the South China Sea storm, which has led China to fear the presence of another major power in its sphere of influence. Others blame China’s assertiveness in the South China Sea as the primary source of discord in driving a wedge between Asean and China.

Both factors contribute, in different ways and measures, to the widening divergence between Asean and China, but there are also other underlining causes.

For starters, the relationship has primarily been driven by economics and the political-security leg was inadvertently neglected.

Beijing never fails to remind Asean that China is its largest trade partner and would just as quickly pull out all the stops to prevent discussions on political issues such as the South China Sea. Politics is Asean-China’s Achilles’ heel, a weakness laid bare when the relationship was put to the test in the South China Sea issue.

The bilateral ties will continue to be strained unless the political-security dimension is strengthened. However, this would entail Beijing giving Asean more space to discuss, manage, and whenever possible, contribute to resolving regional issues, including the South China Sea. In this context, Prime Minister Lee Hsien Loong’s pledge that “Singapore — as coordinator of Asean-China relations — would work with Beijing to fast-track negotiations” on a legally-binding Code of Conduct, should be seen by China as a welcome and friendly gesture to improve relations between Asean and China.

Without strategic trust and a stable political relationship, the gains made on the economic front will be transient at best. In the worst case scenario, Asean’s vibrant trade relations with China could be a double-edged sword when the former’s trade dependency could be used by Beijing as a tool to narrow Asean’s policy options and influence its internal political dynamics.

The picture even in the most successful aspect of the relationship, economics, is not entirely rosy either. Trade has ballooned, but so too has Asean’s trade deficit with China. Asean ran up a US$77 billion deficit with China last year, which amounts to 22 per cent of their total bilateral trade. In other words, trade has become lopsided and benefits China more than it does Asean. China has also been slow to invest in Asean, with only a commitment of US$8.1 billion last year, a sum that is less than half the amount invested by Japan and just slightly more than Australia and New Zealand combined.

While it is convenient to blame tensions in the South China Sea for straining Asean-China ties, there are multiple stress points in other facets of the relationship.

On the whole, the past 25 years of Asean-China dialogue relations have been a positive and mutually beneficial one. What the future holds for the next 25 years remains to be seen.

However, Asean-China relations will remain on an even keel if both sides stay on course and build trust.

Mr Lee’s point that “China’s success benefits the region, and it is also in China’s interest for Asean to succeed” should serve as the guiding principle to advancing the Asean-China partnership.

ABOUT THE AUTHOR:

Dr Tang Siew Mun is head of the Asean Studies Centre at Iseas-Yusof Ishak Institute. These are his own views.