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Making More than Cents in ASEAN-China Relations

Updated On: Nov 03, 2006

The ASEAN-China Summit held in Nanning earlier this week highlighted the impressive economic development of China and the commercial attraction of China to the ASEAN leaders.

However, it is still uncertain as to whether ASEAN-China relations will extend beyond the economic realm. The Chinese Premier Wen Jiabao has called for trade between China and ASEAN to reach US$200 billion by 2010 from US$130 billion in 2005. There is an investment deficit in the ASEAN-China relations with ASEAN investing $3.1 billion in China in 2005 but China investing only $158 million in ASEAN.

The economic attraction of China is considerable. Almost each of the ASEAN leaders had left home from the summit with some commercial agreements. The Malaysian oil company Petronas officially announced its US$25 billion deal to supply Shanghai with liquefied natural gas (LNG). Petronas’ deal will also benefit Malaysia International Shipping Corporation (MISC), the world’s largest LNG carrier. More significantly, China and Malaysia seems to be drawing closer towards a bilateral economic partnership agreement (EPA), with the agreement to initiate a feasibility study. Malaysia’s Prime Minister Badawi has called for even more cooperation between Malaysia and China in energy resources, automotives and other industries. Badawi also urged Malaysian entrepreneurs not to view China as a threat.

Besides the signing of several deals in energy on Saturday, Indonesia was given a low-interest loan of US$800 million by the Chinese. Both sides also agreed to boost their trade from US$15 billion in 2005 to US$30 billion in 2010.

The Philippines President Gloria Macapagal-Arroyo highlighted the importance of the Chinese markets in helping the ASEAN members reduce their dependence on Western markets. She insisted that increased investment was more important than increased trade. Arroyo called for greater collaboration among the manufacturing industries on products for domestic and global markets. In response to Arroyo’s speech, the president of the Philippines’ Chambers of Commerce and Industry, Donald G. Dee has said that the Philippines should focus on agricultural exports such as mangoes, bananas and coconut-based products to China. A Filipino economist, Winston Conrad Padojinog has pointed out that electronics exports to China has been declining in relative importance to agricultural one.

Arroyo witnessed the signing of five deals in mining, energy and infrastructure, which included the implementation of section two of the $530-million North Rail Project’s first phase. This first phase comprised of an 80 kilometres railway from Caloocan City in Metro Manila to the Diosdado Macapagal International Airport at the Clark Special Economic Zone in Pampanga.

The Philippines is also trying to increase its share of Chinese tourists from its current share of less than 2% of Chinese tourist arrivals in the region to 10%. The Philippines Department of Tourism had allowed for visa-upon-arrival for all Chinese tourists arriving in the Philippines.

Beyond the dazzlingly economic figures, there were a smaller number of non-economic issues discussed and agreed. For instance, Arroyo also said that greater cooperation was needed in political security, development and other regional issues.

Indonesian President Yudhoyono called on China to continue playing an active role to resolve the Korean peninsula issue by reviving the Six Party Talks. The Chinese Premier Wen Jiabao also emphasised the importance of cooperation and coordination between the two countries at the United Nations with Indonesia being a non-permanent member of the United Nations Security Council for the 2007-2009 period.

Indonesia’s cooperation with China looks set to be closer with the Indonesian Defence Minister Juwono Sudarsono announcing that Indonesia was considering buying weapons from China or other countries such as Russia. This was not only due to the lower prices offered by the non-Western countries but also the fact thatIndonesia would be less dependent on Western countries especially with the possibility of arms embargo.

In the joint statement released at the ASEAN-China summit, China has also announced its intention to accede to ASEAN’s Southeast Asia Nuclear Weapons Free Zone (SEANWFZ). Both sides also declared their intention to work for a code of conduct on the South China Sea. This would be a follow-up on the Declaration on the Conduct of Parties in the South China Sea signed by ASEAN and China in 2002. Bilateral cooperation would be focused on 10 priority areas, namely, agriculture, information and communication technology, human resource development, two-way investment, Mekong River Basin development, transportation, energy culture, tourism, and public health.

In a separate event, Singapore’s Minister Mentor, Lee Kuan Yew emphasised that China’s rise was inevitable and that China was not a country to “wish away.” He pointed to the display of “soft power” at the ASEAN-China summit and that China was the future.

If Lee is right, then the ASEAN-China relation needs to be move away from merely dollars and cents to other areas of cooperation. However, given ASEAN’s own poor record of military and security cooperation, could the ASEAN-China cooperation be any better?

Sources:

ASEAN States Chase the Chinese Investment Dollar; Regional Leaders Meet PM Wen to Secure Trade Deals Worth Billions (The Straits Times, 2 November 2006)

China’s Rise Inevitable, Witness Its Soft Power (The Straits Times, 2 November 2006)

ASEAN Will Gain From Rise of China and India: MM Lee (Business Times, 2 November 2006)

Business Agenda Takes Centre Stage in Talks (New Straits Times, 2 November 2006)

China Gas Deal to Benefit Shipping Firm, Petronas Gas (New Straits Times, 1 November 2006)

Priority Issues to Improve ASEAN-China Ties (New Straits Times, 31 October 2006)

ASEAN, China Vow to Enhance Strategic Partnership (Malaysia General News, 30 October 2006)

RI Considering to Buy Weapons from China (Antara, 1 November 2006) 

China To Extend $800m in Loans to RI (Jakarta Post, 31 October 2006) 

Focus on Bigger Market Share (BusinessWorld, 1 November 2006)

GMA: China Must Help ASEAN Thrive (Manila Times, 1 November 2006)

Chinese Arrivals to RP Seen Growing to 150,000 (Manila Times, 1 November 2006)

RP- China Links Pushed (BusinessWorld, 31 October 2006)