Southeast Asia is win-win arena, not only from China’s perspective

By Ding Heng

Chinese Premier Li Keqiang is in Singapore this week to attend a series of meetings centered on the Association of Southeast Asian Nations (ASEAN). This is regarded as a good chance for China and the 10-country regional bloc to seek ways to work more closely with one another. China and Singapore upgraded a bilateral free trade agreement on Monday. A China-ASEAN summit on Wednesday saw the release of a new action plan which lays out the goals in trade, investment, infrastructure links, people-to-people ties, etc. The two sides are looking to achieve that plan by 2030.

Leaders attending the 21st China-ASEAN (10+1) leaders' meeting in Singapore pose for a group photo on Wednesday, Nov. 14, 2018.[Photo: gov.cn]

China has remained as ASEAN’s largest trading partner for the past 9 years. In 2015, for example, China-ASEAN two-way trade was 472 billion U.S. dollars. Last year, China’s M&A investment in Southeast Asia surged 268% year on year despite a 32% downturn in China’s entire outbound investment, according to data compiled by Ernst & Young. Most Southeast Asian nations are actively taking part in China’s Belt and Road Initiative.

Frankly speaking, there remain lingering suspicions or concerns over the rising influence of China in the region. To ease such worries, China is displaying, through words and deeds in this region and elsewhere, that its expanding economic involvement in the region does not necessarily mean losses for others. A win-win or mutual benefit strategy has been the pursuit of China in its involvement in this region and beyond.

A zero-sum mentality flies in the face of the fundamental goal of the East Asia Summit which is to take place later this week. Since the regional forum was established in the early 2000s, it has provided opportunities for Southeast Asian nations to strengthen ties with a number of powers including the United States, Japan, India, Russia, China, Australia, and New Zealand. A key underlying message is that each of these countries has a lot to gain by working closely with ASEAN. Of course, external countries may compete with each other in the region, especially on the business and commercial front. But as long as their rivalries are on an open and fair basis, ultimately they will deliver maximum benefits to the region.

Amazon and Alibaba, dominant e-commerce players in the United States and China respectively, are currently rivaling one another in Southeast Asia. The simple fact is that local consumers are getting more online shopping options because of such competition, and retailers are also finding more channels to sell their products. This in return will help boost the whole e-commerce sector in the region. A joint report from Google and the Singaporean sovereign wealth fund Temasek forecasts that the size of the Southeast Asian e-commerce market will grow more than 30% each year to reach 88 billion U.S. dollars by 2025. The growth potential represents huge opportunities for both Amazon and Alibaba, as well as for other e-commerce firms and logistics providers.

Chinese Premier Li Keqiang speaks at the 21st China-ASEAN (10+1) leaders' meeting in Singapore on Wednesday, Nov. 14, 2018.[Photo: gov.cn]

Even beyond competition at a corporate level, zero-sum games also play little role. It’s true that China, through the Belt and Road Initiative, is investing tens of billions of U.S. dollars to help build infrastructure in Southeast Asia. But Chinese capital alone is by no means capable of undertaking everything. According to estimates by the Asian Development Bank, Southeast Asia needs a yearly infrastructure investment of at least 210 billion U.S. dollars from 2016 to 2030. With this in mind, it is actually a good thing that the U.S. President Donald Trump recently signed a new act into law to spur up to 60 billion dollars of investment into “Indo-Pacific infrastructure”. One could argue that this move by the United States is aimed at competing with and countering the Belt and Road Initiative. But the result is that Southeast Asia is getting more money to close the gap in its infrastructure funding and all players will eventually benefit from their engagement, even more so if they were to coordinate their investment under the “third-country cooperation” principle.

There is therefore, apart from competition, also a lot of room for cooperation. The China-Japan experience is a good example. These two countries have competed fiercely in bidding for infrastructure deals in Southeast Asia, including a 5.1 billion U.S. dollar high-speed railway project in Indonesia. As time went by, however, both sides came to realize that their bidding wars had led to unnecessary higher construction costs for both sides. Therefore, China and Japan began to take a more pragmatic approach, seeking to cooperate where possible, in third-party markets. The two sides signed an MoU to this effect during a visit by Premier Li Keqiang to Tokyo in May. More progress was achieved during Prime Minister Shinzo Abe’s visit to Beijing in October. According to Japan’s Trade Minister Hiroshige Seko, Chinese and Japanese firms are likely to jointly build a railway project in Thailand for the first time. Bringing together the respective strengths of Chinese and Japanese railway builders, the project, once it materializes, will represent a ‘win-win-win’ situation for all three countries involved. If Japan can take this approach, then there is no reason why other countries cannot do the same, unless they are unwilling to.

Other than economics, security as another area where there is a conflict of interests? They often go together. Take the disputes and dispute-management discussion process for the South China Sea issue for example. Every year, more than 100,000 merchant vessels sail through this shipping lane, one of the busiest in the world, and there’s never been a major case of freedom of navigation being hampered, except for piracy. The reality is that despite China’s disputes with a few ASEAN countries, the South China Sea has in recent years remained peaceful. Is it conceivable that China, as the world biggest trading nation, which depends heavily on this shipping lane, would take action likely to disrupt normal and free navigation there and hinder its own trade?

As a matter of fact, China has been holding regular consultations with ASEAN with the aim of creating a code of conduct on the South China Sea, which will be a legally binding agreement. The foreign ministers of China and ASEAN agreed on the framework of the deal last August. Speaking in Singapore on Tuesday, Premier Li Keqiang said China is looking to reach agreement with ASEAN within three years.

Instead of hindering flows of commerce, China is doing the opposite. The 5.1 billion dollar Indonesian high-speed railway project, currently being built by the China Railway Corporation, is designed to cut travel time between Jakarta and Bandung from three hours to 40 minutes. Since 2015, China has been collaborating with Singapore to push forward an infrastructure-based program named the “Southern Transport Corridor” in order to build more trade and investment links between southwestern China and Southeast Asia. Driven by the program, Singaporean companies have signed 118 deals worth more than 21 billion U.S. dollars with Chinese business partners this year alone.

As China opens wider, to buy more, sell more and to increase mutual investment, one can expect more engagement between China and rest of the world. Southeast Asia, as it’s on China’s doorstep, is definitely a priority.

As momentum grows for the creation of a Regional Comprehensive Economic Partnership, a free trade pact involving ASEAN and six other countries, including China, such win-win, mutually beneficial trade and development model will inevitably become the norm.

Note: Ding Heng is a reporter with China Plus. The article reflects the author's own views.