China-ASEAN : making new partnership

China-ASEAN:Making New Partnership

China – ASEAN: Making New PartnershipISBN 978-1-84464-053-9

This section is taken from pages 115-177 of the text: Making New Partnership

CONTENTS

6. Evolution of the Relations between China and ASEANLu JianrenⅠ. Relations in the History 115Ⅱ. Relations during the Cold War 117Ⅲ. Relations after the Cold War 124Ⅳ. Strengthening Economic Relations 131Ⅴ. Prospects of China-ASEAN Relations 133

7. Dealing with a Rising China in the New Millennium:a View from ASEANLee Lai ToⅠ. The Setting 136Ⅱ. Three Cheers to Multilateralism 138Ⅲ. The Balancing Act 141Ⅳ. Building a Closer Security Relationship 143Ⅴ. ASEAN-China Strategic Partnership: an Assessment 145Ⅵ. Concluding Observations 151

8. ASEAN and China Relations: Seeking forEconomic CooperationBui Truong GiangⅠ. Overview of ASEAN-China Economic Relations 153Ⅱ. Dealing with a Rising Chinese Economy 159DGJWQ.indd 2 2008-2-13 16:37:55Content /Ⅲ. Roles of ASEAN-China FTA 162Ⅳ. ASEAN and China in the Regional Cooperation 171Ⅴ. Future of ASEAN-China Economic Relations 173

6 Evolution of the Relations between China and ASEAN

Lu Jianren A

ASEAN is a regional organization including all ten Southeast Asian countries. Ten ASEAN countries are all close neighbours of China: Vietnam, Laos and Myanmar are adjacent to China; the other seven countries——Thailand, Cambodia, Malaysia, Singapore, Indonesia, the Philippines and Brunei are located on the Indo-China Peninsula to the south, and around the South China Sea to the southeast of China.

Ⅰ. Relations in the History

China and Southeast Asian countries have a long history of interactions. According to Chinese historical literature, as early as the 2nd Century BC, in the Qin Dynasty 2200 years ago (221 BC to 206 BC), the Chinese ancestors had established communication with Vietnam and Burma by land. In the Western Han Dynasty, that is 206 BC to 25 BC, Chinese ancestors explored a “Marine Silk Road”, and started interactions with people on Southeast Asian islands. During the reign of Emperor Wu (140 BC to 87 BC) of Han Dynasty, Chinese ships disembarked from Nanhai (now Xuwen of Guangdong Province) with loads of gold and silk, travelled by today’s Vietnam, Thailand, Malaysia,

A Lu Jianren, Professor of Institute of Asia-Pacific Studies, Chinese Academy of Social Sciences.

DGJ02.indd 115 2008-2-13 16:40:55

116 / Making New Partnership

Indonesia, Myanmar and India to exchange for their local products, and returned from Sri Lanka. Through marine silk trade, this route connected China with Southeast Asia including Sumatra, with South Asia including India, with the Arabian region including Da Shi(as it was called by ancient China). Those regions were hubs of Chinese silk trade, as well as central locations of world political, economic, religious and cultural centers. While developing silk trade, the Marine Silk Road also promoted the communication between the peoples of China and Southeast Asia.

In about the 3rd Century, several kingdoms appeared on the Indo-China Peninsula and the Indonesian Archipelago. They sent delegations to China, and began friendly interactions with the dynasties of Wei, Jin, and the South and North Dynasties of China (3rd——6th Centuries). In Sui and Tang Dynasties(6th——9th Centuries), the Chinese maritime transportation was highly developed, in particular the route between Guangzhou and the Malay Peninsula. China and Southeast Asian countries sent delegations to each other, and were engaged in frequent trade and economic exchanges. Archaeological study proves that during the Sui and Tang Dynasties, China exported a lot of porcelain and silk to Southeast Asia, and imported a lot of perfumery, jewellery and medicines. Later in Song and Yuan Dynasties (9th——13th Centuries), Chinese marine businessmen explored another trade route on the Eastern Seas from the southeast coast of China to the Philippine Archipelago. The communication between the peoples of China and Southeast Asia thus expanded further. A

During 28 years of early Ming Dynasty from 1405 to 1433, Zheng He, as a Chinese friendship envoy, travelled to the “Western Seas” seven times with his huge fleet and crew. His destinations extended east from Liu Qiu (Ryuku-gunto), the Philippines, and the Maluku Sea of Indonesia and west to the Mozambique Strait and wide coastal areas of Southern Africa. Along a mileage over 500000 kilometres, he interacted with over 30 countries on the way, which is remembered as a miracle in world navigation history. Southeast Asia was a necessary path of Zheng He’s voyages, and the Malaka Kingdom at the

A See Deninget Nie al., Quanqiuhua xia Zhongguo yu Dongnan Ya Jingmao Guanxi de Lishi, Xianzhuang jiqi Qushi (The History, Current Situation and Trend of Economic and Trade Relations between China and Southeast Asia under Globalization), Xiamen University Press, 2006, p.55.

DGJ02.indd 116 2008-2-13 16:40:55

6 Evolution of the Relations between China and ASEAN / 117

Malacca Strait became an important place for Zheng He’s crew to meet and store supplies. The Malaka Kingdom also became a trade centre of Southeast Asia. The voyages of Zheng He to the Western Seas greatly promoted the friendly relations between the countries and peoples of China and Southeast Asia. The principles advocated by Zheng He, that is “not to discriminate against the minority; not to bully the weak; to interact friendly; and, to share peace”, expressed the concept of peaceful diplomacy of the Chinese nation since ancient times. Under the influence of Zheng He’s voyages, many residents of the southeastern coast of China travelled overseas to settle in Southeast Asia and contributed to the development of the South Seas. In the 1840s, there were about 1.5 million overseas Chinese in Southeast Asia. A

China and Southeast Asian countries not only started friendly exchanges from a very early time, but also share similar historical experiences. After the Opium War in 1840, China gradually degraded into a semi-colonial semi-feudal society. Around that time, Southeast Asian countries and regions also became colonies of Western powers. Both China and Southeast Asian countries suffered from brutal invasions of imperialists including the Great Britain, France, Holland and Japan. However, the brave peoples of China and Southeast Asia did not surrender to cruel colonial rule, but fought together and supported each other. In the Asian revolution storm in the mid-19th Century, the Taiping Tianguo Movement in China and the anti-colonial movement of Javanese in Indonesia propelled and supported each other indirectly. The Xinhai Revolution in China in the early 20th Century also boosted the anti-colonial movements in Vietnam and Indonesia. During World War Ⅱ, the peoples of China and Southeast Asia fought together against Fascist Japanese invasions and won the final victory.

Ⅱ. Relations during the Cold War

On October 1, 1949, the People’s Republic of China (PRC) was established.

A Fengbin Wu ed., Dongnan Ya Huaqiao Tongshi (The History of Overseas Chinese in Southeast Asia), Fujian People’s Press, 1993, p.259.

DGJ02.indd 117 2008-2-13 16:40:55


Among Southeast Asian countries, Vietnam, Indonesia and Myanmar first recognized and established diplomatic relations with China in 1950. Later, Cambodia and Laos established diplomatic relations with China in 1958 and 1961 respectively. Other Southeast Asian countries did not have diplomatic relations with China for a long time because of the post Cold War structure.

The Cold War, represented by the bipolar antagonism between the US and Russia, caused long-term opposition between the so-called capitalist camp and the socialist camp. In such historical conditions, diplomatic relations is dominated by politics and ideology; even neighbouring countries might cut off relations and hold resentment towards each other. Some Southeast Asian countries were fearful of China, thinking that China tried to “export revolution”, to support the Communist militants in Southeast Asia and to propagate radical leftist thinking of “the Cultural Revolution”. There was also a problem of overseas Chinese. Therefore they regarded China as a significant threat. China, on the other hand, saw these countries as pro-US and anti-China and anti-Republic. From the 1950s to the mid-1970s, China and Thailand, Malaysia and the Philippines were in such an opposition.

In 1954, in order to deter the expansion of Communism in Southeast Asia, the US set up the Southeast Asia Treaty Organization, A and dragged Thailand and the Philippines to the track of the Cold War. Malaysia did not join the organization, but still kept alliance with the UK. These three countries followed the US publicly and were against China. At the Bandung Conference in 1955, China proposed the “Five Principles of Peaceful Coexistence”. The relations between China and Thailand and the Philippines ameliorated for a while but not very long. In the late 1950s, relations between China and Thailand, the Philippines and Malaysia deteriorated again. In 1958, China established relations with the Kingdom of Cambodia. The Thai government was extremely pro-

A In September 1954, the US, UK, France, Australia, New Zealand, Thailand, the Philippines and Pakistan signed the Southeast Asia Collective Defence Treaty, or the so-called Southeast Asia Treaty Organization (SEATO). This was a military group formed by the US during the Cold War. The motivations of the US to form this organization were to establish a regional anti-Communist alliance; to contain China; to oppose the 1954 Geneva Agreement regarding the Indochina problem; and to consolidate and expand its sphere of influence in Asia Pacific. The SEATO was dissolved in June 1977.

DGJ02.indd 118 2008-2-13 16:40:55


US and anti-China, and viewed the establishment of relationship between China and Cambodia as a move of China to expand influence in Southeast Asia and to subvert Thailand. Therefore Thailand adopted massive domestic and international anti-China, excluding-Chinese policies. A When Malaysia became independent, it followed the UK and US and refused to recognize PRC. It adopted a series of anti-China policies to resist China’s influence, such as closing the Bank of China in Kuala Lumpur, prohibiting Chinese publications, and opposing China’s seat at the United Nations.

When the Vietnam War broke out in the early 1960s, Thailand and the Philippines sent troops to Vietnam to support the American army, while China fully supported Vietnam to combat the US. The bilateral enmity increased. In 1967, “the Cultural Revolution”broke out in China, and Beijing started to“export revolution” to Southeast Asia because of radical leftist thinking. China directly supported the Communist Parties in Thailand, the Philippines and Malaysia. Bilateral contention culminated.

The relations between China and Indonesia, the biggest Southeast Asian country, have been up and down. In the early 1950s, bilateral relations were good, although the duel citizenship of overseas Chinese was an uncertain factor. During the Bandung Conference in 1955, China and Indonesia signed the agreement that local Chinese should give up duel citizenship and choose one voluntarily. This agreement enhanced Indonesia’s trust towards China. In September 1956, President Sukarno visited China for the first time and bilateral relations warmed up. However, soon because of dramatic changes in domestic conditions in Indonesia after the coup by rightist army, a huge wave of anti-Chinese movements happened and bilateral relations went back.

In the early 1960s, the anti-China wave gradually receded. Sino-Indonesian relations ameliorated. In March 1961, the two countries signed the Agreements of Friendship and Cultural Cooperation. In April 1964, Chinese leader Liu Shaoqi visited Indonesia and promoted bilateral relations to a new stage. China then provided Indonesia with a series of political support and economic aid. For instance, China supported Indonesia to reclaim territory (West Irian),

A See Xizhen Zhang, Contemporary Southeast Asia Politics, Guangxi People’s Press, 1994, p.467.

DGJ02.indd 119 2008-2-13 16:40:56


oppose Malaysia and hold the New Powers Games. A The bilateral relationship entered a honeymoon, and was called by Western countries as the “Beijing-Jakarta Axis”.

In 1965, the“9·30” Incident happened in Indonesia; the regime changed and the militarily-strong Suharto came into power. He carried out a three-year “cleansing Communist” movement. Hundreds of thousands of suspected Indonesian Communists or leftists were arrested or killed, including many overseas Chinese. In 1967, an unprecedented anti-Chinese wave engulfed Indonesia; many Chinese were prosecuted and killed. That was also during the climax of “the Cultural Revolution”in China. Bilateral relations deteriorated quickly. In October of the same year, Indonesia declared to cut off relations with China. However, nobody predicted that the two countries would not resume diplomatic relations until after 25 years.

On August 8, 1967, ASEAN was established. It was the first association in Southeast Asia made of independent developing nations. Southeast Asian countries came together for regional economic growth, social advancement and cultural development. However, in the Cold War structure, China and ASEAN was still in a status of mistrust and opposition.

In the early 1970s, international conditions changed significantly and Sino-ASEAN relations improved gradually. In 1969, border armed conflict broke out between China and Russia because of ideological differences. The Socialist camp disintegrated. In order to contain China, Russia proposed an Asian Collective Security System. In order to resist Russia’s threat and improve relations with antagonist Southeast Asian countries, China’s view towards ASEAN changed. When ASEAN published the Neutrality Declaration, China gave its approval. China was also aware that because the US and UK started to reduce their military force in Southeast Asia, ASEAN countries started to reduce dependence on the West and to pursue neutrality.

In October 1971, China regained the seat at the UN and its international status was greatly improved. In February 1972, American President Nixon visited China. Sino-US relationship defrosted and the US policies towards China changed. That had a great impact on the foreign policies of Thailand,

A Xizhan Zhang, Contemporary Southeast Asia Politics, p.464.

DGJ02.indd 120 2008-2-13 16:40:56


the Philippines and Malaysia. They had to look for new China policies. In 1973, Japan, America’s biggest ally in East Asia, established relations with China, which again impacted heavily on the foreign policies of those three ASEAN countries and prompted them to consider establishing relations with China. The three countries gradually realized that opposing the biggest regional neighbouring country, China, would not help eliminate the “China threat”; nor would it help solve the domestic problem of Communist parties; that recognizing PRC was an irresistible historical trend. Besides, mending relations with China could reduce Beijing’s support for Southeast Asian Communist parties.

In 1974, Malaysia established diplomatic relations with China first, followed by Thailand and the Philippines in 1975. However, these three countries were still wary of China. They were worried that China would still support the Communist militants in their countries; there was the problem of overseas Chinese as well. In order to dissolve their worries, Chinese leader Deng Xiaoping visited Malaysia, Singapore and Thailand in November 1978, and proposed to develop friendly relations with Southeast Asian countries on the basis of the Five Principles of Peaceful Coexistence and not to“export revolution”.Afterwards, the two sides made fruitful cooperation during the process of solving the Cambodia problem by political means. On the other hand, China stopped material support to Southeast Asian Communist parties, promised not to interfere in other countries’ domestic politics with the reason of overseas Chinese, denied duel citizenship, and encouraged overseas Chinese to obey the local laws. These policies laid a solid foundation for the establishment and development of friendly Sino-ASEAN relations.

It is worth mentioning the tortuous Sino-Vietnamese relationship here. The two countries have a lot of historical connections. Sino-Vietnamese relationship from the end of World War Ⅱ to the end of the Cold War can be roughly divided into three periods.

The first period is from 1945 to 1965. In September 1945, under the leadership by Ho Chi Minh, the Democratic Republic of Vietnam was established. However, it could not get international recognition. On January 18, 1950, the PRC first recognized and established diplomatic relations with

DGJ02.indd 121 2008-2-13 16:40:56


Vietnam. Then, Russia and East European countries set up relations with Vietnam and included it into the Socialist camp. During this period, especially the first ten years, China and Vietnam kept stable and close “comrade-cum-brother”relationship. China fully supported Vietnam in the war against France (1950-1954), supplying Vietnam with weapons and military provisions while Russia shunned international responsibilities. A

After the 20th Conference of Russian Communist Party, Sino-Russian relations declined because of ideological differences. However, during Ho Chi Minh’s time, Vietnam was basically pro-China and anti-Russia. China supported Vietnam in the war against the US. Sino-Vietnamese relationship was good till the early 1960s.

The second period is from 1965 to 1975. In 1960, Le Duan became the First Secretary of Vietnam Workers’ Party, a position only after Ho Chi Minh, and gradually gained power. In 1963, the differences between Chinese and Russian Communist Parties were publicized. In 1964, Brezhnev replaced Khrushchev and became the General Secretary of the Russian Communist Party, and changed foreign policies. He increased aid to Vietnam and tried to persuade Vietnam to contain China. Le Duan became pro-Russia, and taking the advantage of Ho Chi Minh’s seniority, secretly changed the traditional pro-China cause. In 1965, Vietnam used historical problems to publish anti-China articles, which was the first undercurrent in bilateral relations. Since then, Vietnam started to change from pro-China and anti-Russia to pro-Russia and anti-China. In 1969, Ho Chi Minh died of illness, and the Party Leadership was assumed by the pro-Russia faction of Le Duan. At that time, Sino-Russian relations had completely split. Vietnam fully shifted to the Russian side. In 1971, Sino-American relations ameliorated. Vietnam accused China of using it to bargain with the US. In 1974, China reclaimed the Xisha Islands occupied by Vietnam, which was denounced by Vietnam as “invasion”. In 1975 when Vietnam liberated the South, it occupied many islands in the Nansha Islands, which belong to China, and requested sovereignty over the Xisha Islands. At the same time, armed conflicts at land borders started. The bilateral relationship

A Ming Guo, 40 Years of Changing Relations between China and Vietnam, Guangxi People’s Press, 1992, p. 55.

DGJ02.indd 122 2008-2-13 16:40:56


was at the brink of complete debacle.The third period is from 1975 to 1991. In 1975, South Vietnam was liberated

and integrated with the North. In 1976, Vietnam changed its name to the Socialist Republic of Vietnam. After integration, Le Duan thought that China’s long-term support for Vietnam’s anti-US battle was not important anymore and continued to follow Russia in containing China. In 1977, Vietnam started to expel and persecute overseas Chinese on a massive scale. By the end of 1978, 200000 overseas Chinese became refugees and flooded into China. In 1978, the 4th Plenary Conference of the Vietnamese Communist Party labelled China as “the most dangerous enemy” and“the new battle’s target”, A and challenged China at the border areas with armed forces. In January 1979, Vietnam invaded Cambodia and wanted to establish the so-called “Indochina Federation”. Out of righteousness and considerations of national security, China opposed Vietnam’s regional hegemony and supported Cambodia’s national resistance forces. In February 1979, after repeated challenges by Vietnam, China was forced to launch the border defensive battle. Bilateral antagonism continued since then until 1991.

China’s relations with Myanmar, Cambodia and Laos were significantly affected during this period of time. Myanmar is China’s important neighbouring country. The two countries share a border of 2100 km and a history of interaction for over 2000 years. During World War Ⅱ, the peoples of two countries fought shoulder to shoulder to resist the Japanese fascist invasion. Myanmar declared independence in 1948, and was one of the first countries to recognize the PRC. In 1954 China and India formulated the Five Principles of Peaceful Coexistence. Among China’s neighbouring countries, Myanmar was the first country to resolve border issues peacefully with China (in 1960). From 1949, when the PRC was founded, to 1988, high-level visits were frequent between the two countries. In 1988 when the military government came into power in Myanmar, the two countries still kept close peaceful and friendly relations. They are praised as an example for friendly cooperation between the two countries with different political systems.

Cambodia is China’s close neighbour. The two countries have a history of

A Xizhen Zhang, Contemporary Southeast Asia Politics, p.458.

DGJ02.indd 123 2008-2-13 16:40:56


about 2000 years of peaceful and friendly interactions. In 1955, Premier Zhou Enlai met with King Sihanouk and turned a new page in Sino-Cambodian friendly relationship. On December 19, 1960, China and Cambodia signed the Treaty of Friendship and Mutual Non-aggression. In the 1970s, when Cambodia was invaded, King Sihanouk stayed in China for a long time, and China fully supported his battle to gain state independence and national liberation. China also made long-term effort to solve the Cambodia problem peacefully. Since 1993 when Cambodia resumed peace, the leaderships of China and Cambodia have visited each other frequently, and bilateral friendly communications have been strengthened.

China and Laos are friendly neighbours with adjacent waters and mountains. The peoples have been in peaceful coexistence since ancient times. In April 1961, China and Laos established diplomatic relations. When the US invaded Laos, China provided the anti-US battle led by the Lao Patriotic Front with altruistic support and military and economic aid. On December 2, 1975, the Lao People’s Democratic Republic was founded. Half a year later, or in June 1977, Laos signed a Friendship Agreement with Vietnam for 25 years, stipulating that Vietnam could deploy army in Laos. Vietnam wanted to include Laos into its so-called “Indochina Federation”to contain China. Under the complex structure of Sino-Russian contention, Sino-Vietnamese splitting, and the Lao-Vietnamese“special relationship”, Laos chose a cause to be close with Vietnam and distant with China. Since 1978, Laos carried out a series of unfriendly moves, for instance, requiring China to withdraw the embassy, to limit the number of the Chinese embassy staff, to stop construction aid projects, and to stop activities of the Xinhua News Agency in Laos. A In July and August 1980, Chinese and Lao Ambassadors were withdrawn, and the relationship between the two countries entered an abnormal status.

Ⅲ. Relations after the Cold War

With the end of the Cold War, significant changes happened in Southeast Asia. China established or resumed diplomatic relations with all Southeast Asian

A Dunxin Du and Zhao Heman eds., Manuel of Vietnam, Laos and Cambodia, Shishi Press, 1988, p.147.

DGJ02.indd 124 2008-2-13 16:40:56


countries soon after the Cold War. Since then, the relations between China and ASEAN countries have entered a whole new historical period.

China started Reforms and Opening in 1978 and adjusted its foreign policies accordingly. Beijing clearly abolished radical leftist policies of“exporting revolution”that was adopted during“the Cultural Revolution”and changed the mindset to distinguish friends and enemies based on ideology. These changes greatly helped improve China’s relations with Southeast Asian countries. A big breakthrough is the normalization of the relations between China and Indonesia. In 1985, President Suharto allowed direct trade with China, which was the first step to mend bilateral relations. China also reiterated its willingness to normalize relations with Indonesia. In February 1989, President Suharto met with Chinese Foreign Minister Qian Qichen in Tokyo and expressed his wish to resume relations with China. On August 8, 1990, at the occasion of the 22nd Anniversary of ASEAN ( Indonesia as the chair), China and Indonesia finally resumed diplomatic relationship. This directly stimulated ASEAN members like Singapore and Brunei to follow suit.

Another change happened between China and Vietnam. In September 1990, the Vietnamese leadership publicly expressed its wish to normalize relations with China. In November 1991, the highest-level Party and state leadership of Vietnam visited China. The two countries announced normalization of relations.

Earlier in June 1991, China resumed exchanges of ambassadors and normalized relations with Laos.

China did not establish relations with Singapore until 1990. However, during the 25 years before that, A the two countries had peaceful relations and close economic interactions. Singapore is a small Chinese-dominated non-Islamic country, located between two big Malay-dominated Islamic countries, and therefore had to be careful on the overseas Chinese issue and on relations with China. Lee Kuan Yew insisted that Singapore consider relations with China until all the other ASEAN countries established relations with China. This“one-step-slower”tactic embodied Singapore’s independent foreign policy, and was beneficial for domestic political stability.

A Singapore became independent on August 9, 1965.

DGJ02.indd 125 2008-2-13 16:40:56


Brunei is the smallest ASEAN country, with a population of only over 300000. Brunei and China had interactions in ancient times. However, since Western imperialists invaded Brunei, official interactions between the two countries were cut off. In 1984, Brunei became independent, and China immediately showed support. In 1988, the foreign ministers of two countries had formal communications during the UN conference. Since then, official interactions increased. The two countries established diplomatic relationship in 1991. By 1991, China established diplomatic relations with all Southeast Asian countries (See table 6-1 for the date of each country).

Table 6-1 Calendar of China’s establishment of diplomatic relations with ASEAN countries

Country Vietnam Indonesia* Myanmar Cambodia Laos

Date 1950.1.18 1950.4.13 1950.6.8 1958.7.19 1961.4.25

Country Malaysia Philippines Thailand Singapore Brunei

Date 1974.5.31 1975.6.9 1975.7.1 1990.10.3 1991.9.30

* Indonesia and China established relations in October 1967, and resumed relations on August 8, 1990.

ASEAN was founded in 1968, when it was the climax of“the Cultural Revolution”in China. Against such a background, the two sides could not have interactions. In the mid-1970s, international situations ameliorated, and China established diplomatic relations with major ASEAN members like Malaysia, the Philippines and Thailand, and acknowledged the legitimacy of ASEAN as a regional international organization.

In November 1978, Chinese leader Deng Xiaoping visited Thailand, Malaysia and Singapore, and proposed to develop friendly relations with Southeast Asian countries on the basis of the Five Principles of Peaceful Coexistence, and cultivate economic, trade and technological relations. His proposal was appreciated and praised by ASEAN countries. In November 1988, when Chinese Premier Li Peng visited Thailand, he stated four principles for China’s relations with ASEAN countries. First, uphold the Five Principles of Peaceful Coexistence as the political foundation for establishing, resuming and developing relations with ASEAN countries. Second, oppose hegemony. China would not assume hegemony or interfere in other countries’ domestic

DGJ02.indd 126 2008-2-13 16:40:56


politics. Third, keep the principles of mutual benefits and shared development; strengthen bilateral cooperation in economic, trade and technological areas. Fourth, follow the principles of independence, mutual respect, close cooperation and mutual support in international affairs. A These four principles of the Chinese government helped dissolve the doubts of medium and small ASEAN countries about China. The two sides were both willing to establish friendly, equal and mutually-beneficial relations.

In the 1990s, ASEAN economies grew fast and political influence increased as well. In order to maintain the peace, stability and development of Southeast Asia, ASEAN established several dialogue mechanisms. On the other hand, after over ten years’ reforms and opening, China started to pay more attention to the stability of the neighbouring environment. The two sides shared a lot of interests and conditions to set up dialogue and cooperation relations.

The first formal contact between China and ASEAN happened in July 1991, when Chinese Foreign Minister Qian Qichen was invited as an“important guest”to the opening of the 24th ASEAN Foreign Ministers Meeting, and talked with the foreign minister of each country. Qian stated that China would like to construct close political, economic, technological and security cooperation, and to set up coordination and dialogue mechanisms with ASEAN countries. China advocated setting up a new fair international political and economic order and would respect and support ASEAN to form the Zone of Peace, Freedom and Neutrality. China showed support to ASEAN’s efforts to strengthen regional economic cooperation, protect national resources and economic rights and the effort to establish a new international economic order. B This was the first time that China officially acknowledged ASEAN’s role in the region and clearly stated China’s position and policies towards this organization. After this successful meeting, China and ASEAN became dialogue partners.

Since China and ASEAN established Dialogue Partnership, bilateral relations went through the following three periods. C

A Xinhua News Agency, “Major Events in Sino-ASEAN Relations”, http://service2.xinhuanet.com/ssjj/zrjcf/files/b2.htm.

B China Daily, July 21, 1991. C For the division of three periods, see Report of the ASEAN-China Eminent Persons Group,

Beijing: World Affairs Press, 2006.

DGJ02.indd 127 2008-2-13 16:40:56


1.1991-1996: Putting in Place a Comprehensive Dialogue FrameworkSince the first dialogue in 1991, bilateral relations quickly warmed up. In

July 1992, Chinese Foreign Minister Qian Qichen attended the 25th ASEAN Foreign Ministers Meeting. China was upgraded from an“important guest”to a“consultative partner”of ASEAN. A

In September 1993, at the invitation of China, the Secretary-General of ASEAN Dato’ Ajit Singh led an ASEAN delegation for a visit to Beijing. The two sides reached broad understanding in strengthening ASEAN-China cooperation in the fields of trade, economic relations, and science and technology.

In July 1994, China was invited to the first ASEAN Regional Forum (ARF), and became a founding member. That opened Sino-ASEAN cooperation in regional security. At the same time, the two sides announced to establish two joint committees, on trade and economic matters and on science and technology.

In April 1995, the first ASEAN-China Senior Official Consultation (SOC) was held in April 1995 in Hangzhou, which opened a new mechanism for deepened bilateral dialogues. In July 1996, China officially became ASEAN’s full dialogue partner.

In only five years from 1991 to 1996, the relations between China and ASEAN developed fast. On the basis of sincere dialogues, the two sides started to construct a relationship of mutual trust and cooperation. During this period, bilateral relations between China and each ASEAN country were consolidated and developed as well. As a group of developing countries and important neighbour of China, ASEAN’s position in China’s diplomatic strategy is rising. ASEAN is also more positive about China’s role in the Asia Pacific.

2. 1997-2002: Towards Good Neighbourliness and Mutual Trust1997 was another mileage in Sino-ASEAN relations. In July of that year, a

serious financial crisis hit ASEAN countries. China maintained a policy of not devaluing its currency and extended financial assistance to ASEAN member countries that were affected by the crisis, which prevented ASEAN economies from further deteriorating. ASEAN recognized the important role of China as a

A Xinhua News Agency, “Major Events in Sino-ASEAN Relations”.

DGJ02.indd 128 2008-2-13 16:40:57


regional big power and significantly increased its trust on China. In December, ASEAN initiated the first “ASEAN plus Three Meeting” (ASEAN 10+ China, Japan and Republic of Korea [ROK], known as“10+3”summit) and also “ASEAN plus One meeting” ( dialogue between ASEAN and China, Japan and ROK separately). During the first informal summit between ASEAN and China, the two issued a joint statement by announcing the establishment of a “partnership of good neighbourliness and mutual trust oriented toward the 21st Century”.

Between 1998 and 2000, China signed framework documents on bilateral relations towards the 21st Century or announced cooperation programmes with each of the ten ASEAN member countries, significantly propelling the overall relationship between China and ASEAN. The bilateral relationship upgraded from a full dialogue partnership to a partnership of good neighbourliness and mutual trust.

Entering the 21st Century, faced with the opportunities and challenges brought by globalization and regionalization, the mutual trust and cooperation between China and ASEAN increased significantly. The need for cooperation became more earnest, and the two sides started substantial cooperation in political, economic, security, social and cultural areas.

During these five years, the following major events happened in bilateral relations:

In 2000, the Chinese leader proposed to ASEAN to study the feasibility of a China-ASEAN Free Trade Area (FTA). In 2001, the two sides agreed to form an FTA within 10 years. In November 2002, the leaders of both parties signed the Framework Agreement of Comprehensive Economic Cooperation between ASEAN and China.

In May 2001, the first consultation meeting between ASEAN and nuclear weapon states was held in Hanoi. China was the only one of the five nuclear powers to agree to sign the Southeast Asian Nuclear-Weapon-Free Zone Treaty.

In 2001, after “9·11”, China and ASEAN decided to strengthen cooperation in non-traditional security such as anti-terrorism, and deal with transnational problems together. In November 2002, the two sides issued China-ASEAN Declaration on Cooperation on Non-Traditional Security Issues.

DGJ02.indd 129 2008-2-13 16:40:57


In November 2002, China tabled the friendly and partnership neighbourliness foreign policy to direct the relations with ASEAN and other neighbouring countries. In October 2003, China came up with the policy to build a “harmonious, tranquil and prosperous neighbourhood”, further expanding the contents of China’s good-neighbourliness foreign policy. ASEAN’s position in China’s diplomacy became more prominent.

In November 2002, after three years’ consultation, China and ASEAN signed the Declaration on the Conduct of Parties in the South China Sea, which laid a foundation for stabilizing conditions in the South China Sea.

3. 2003 to the Present:Consolidating and Developing a Strategic PartnershipIn October 2003, China acceded to the Treaty of Amity and Cooperation

(TAC) and became the first non-ASEAN country to accede to the Treaty. A Joint Declaration on ASEAN-China Strategic Partnership for Peace and Prosperity was also signed, making China the first strategic partner of ASEAN.

In September 2004, all the ASEAN member countries unanimously recognised China’s full market economy status. In November of that year, the two sides issued the China-ASEAN Plan of Action to Implement Joint Declaration on the China-ASEAN Strategic Partnership for Peace and Prosperity. Under the Framework Agreement of Comprehensive Economic Cooperation between ASEAN and China, the two sides signed the Free Trade Agreement on Trade in Goods and the Agreement on the Dispute Settlement Mechanism. China also announced the expansion of the scope of the special preferential tariff treatment for Cambodia, Lao PDR and Myanmar.

In December 2004, when the Indian Ocean earthquake triggered a huge tsunami, the Chinese government immediately gave assistance to disaster management, and provided human resources, funding and material aid to Indonesia, Thailand, the Philippines and Myanmar. That was another example of natural disaster management cooperation after the SARS and bird flu epidemic in 2003.

In spring 2005, the Chinese People’s Congress passed the Anti-Secession Law. ASEAN immediately issued presidential statement at the Informal Foreign Ministers Meeting on the Taiwan issue and reiterated its “one China” policy, which embodied ASEAN’s sincerity in supporting China’s unification.

DGJ02.indd 130 2008-2-13 16:40:57


In 16 years since 1991, the relations of China with ASEAN countries have achieved extraordinarily fast developments.

Ⅳ. Strengthening Economic Relations

Economic relationship is the foundation of Sino-ASEAN relations, as well as the most successful and fast-developing area.

Trade RelationsSince 1991, the trade between China and ASEAN has developed very fast.

In 1991, the total bilateral trade volume between China and ASEAN was only $7.96 billion. By the end of 2006, it has increased to $160.84 billion, as high as 20.2 times, at an average annual rate 25.8%, far exceeding the increasing rate of trade between China and other countries. ASEAN has now become the fourth biggest import source and the fifth biggest export destination.

Figure 6-1 Import and Export between China and ASEAN (1991-2006)

Trade with ASEAN in China’s total foreign trade has increased significantly. In 1991, it only accounts for 5.9%. Since 2003, this rate has risen to around 9.2%. This shows the importance of ASEAN in China’s foreign trade. The rate of China’s imports from ASEAN is much higher than that of China’s exports to ASEAN. China has been in deficit in the trade with ASEAN since 1993 and it has been increasing. The Philippines, Malaysia and Thailand have been the major sources of trade deficit of China. The structure of products in Sino-ASEAN trade is upgrading fast. In the early 1990s, China mainly

DGJ02.indd 131 2008-2-13 16:40:58


imports resource products from ASEAN. However, after 2000, the category of China’s imports from ASEAN has expanded; in particular, machinery, electric appliances and electronic products have increased significantly. On the other hand, China’s exports to ASEAN are changing from textiles, apparel and vegetables to machinery and electric appliances. That is the result of China and ASEAN participating in intra-industry trade and production chains. From 2000 to 2006, the annual increase rate of high-tech products trade has exceeded 42%.

InvestmentsIn 1991, ASEAN investments approved by China were only $332 million,

but by the first half of 2006, the actual investment from ASEAN to China has increased to 40 billion or 120 times higher. 70% are from Singapore, followed by Malaysia and Thailand.

In comparison, the investment from China to ASEAN is smaller. However, with the development of bilateral economic relations, especially in recent years Chinese enterprises have started to adopt the strategy of “going abroad”. More and more Chinese firms are investing in ASEAN. China’s investment to ASEAN has increased over 60% annually in the past several years. By the first half of 2006, China’s direct investment (FDI) to ASEAN has reached $1.29 billion.

In order to encourage Chinese enterprises to invest in ASEAN countries, the Chinese government came up with a preferential policy, which provides $5 billion preferential loan to Chinese companies to invest in ASEAN. Now this policy is being implemented. The top three destinations have been Singapore, Thailand and Vietnam. Besides, China has been the biggest investor to Cambodia in the past three years.

Economic CooperationThe economic cooperation between China and ASEAN has developed

very fast. In 2001, the two sides listed five areas as the focuses of cooperation: agriculture, information and telecommunication, human resources development, bilateral investment and the Mekong River development. In 2005, China suggested to add transportation, energy, culture, tourism and public health. In the ten areas of cooperation between the two sides, economic cooperation covers eight areas, which shows its importance. The cooperation in those areas

DGJ02.indd 132 2008-2-13 16:40:58


has achieved excellent results.In the financial area, China and ASEAN has established a set of bilateral

swap arrangements under the Chiang Mai Initiative (CMI). They have also reached agreements on regional financial issues, such as promoting the Asian bond market and the cooperation on East Asian foreign reserves.

China has increased its economic assistance to less developed countries of ASEAN. In November 2002, China announced to reduce the debt obligations of Cambodia, Laos, Myanmar and Vietnam, and from January 1, 2004, to give preferential tariffs to imports from Cambodia, Laos and Myanmar. In December 2005, China announced to provide 1/3 of its preferential loans for developing countries to ASEAN countries.

Moreover, since 2004, the annual China-ASEAN Expo has been held in Nanning. Moreover, Guangxi Autonomy Region has listed the economic cooperation in Pan-Beibu Gulf as an important development strategy, which has received support from the central government. Pan-Beibu Gulf cooperation will become a new area in Sino-ASEAN economic cooperation.

FTAIn November 2002, the two parties signed the Framework Agreement

on Comprehensive Economic Cooperation starting with the Early Harvest Program (EHP). This is one of the few FTAs in the world that start tariff reduction from agricultural goods. In November 2004, the two sides signed the Agreements on Trade in Goods and on Dispute Settlement Mechanism. From July 2005, the tariffs of over 7000 products were reduced. In January 2007, the Agreement on Trade in Services was signed and took force on July 1, 2007. The Agreement on Trade in Services is an important stage in China-ASEAN FTA process. It will create more trade opportunities for both parties and lay a solid foundation for achieving the FTA on time. The construction of China-ASEAN FTA has wide influence and propel the process of East Asian FTAs.

Ⅴ. Prospects of China-ASEAN Relations

Since 1991, in 16 years, China and ASEAN have formed a healthy, solid and mutually-beneficial relationship. The two sides have established cooperation

DGJ02.indd 133 2008-2-13 16:40:58


mechanisms in 28 areas including politics, economy, security, and culture. Such a large-scale comprehensive cooperation relationship is unprecedented in China’s relations with its neighbouring countries. On the other hand, to ASEAN, the relationship with today’s China is the most substantial and lively relationship among that with all its dialogue partners.

The reason why Sino-ASEAN relationship could develop so fast and comprehensively is that the two sides have held on to the principle of “equality and mutual trust, cooperation and win-win”.They respect and trust each other and pursue a win-win situation. Although the two sides always have differences or contentions, they seek similarities while keeping differences and improve mutual trust. Moreover, the two sides have set up multi-level dialogue mechanisms and the mechanism of frequent meetings between the leaders, which provides insurance to policymaking and deepening cooperation. That was another factor in the successful development of bilateral relations.

This new type of strategic partnership between China and ASEAN has set an example in the international society for how countries, big or small, could peacefully coexist, cooperate and pursue a win-win situation.

In order to further consolidate the strategic partnership, the two sides still need to make an effort to solve some existing problems, mainly:

(1)How to improve political mutual trust? Some people in ASEAN are still worried about China’s rise and doubtful of China’s peaceful development strategy. China should also further understand ASEAN’s regional cooperation strategy of big-power balancing and making ASEAN Community the core.

(2)South China Sea is still a sensitive issue in bilateral relations. The two sides signed the Declaration on the Conduct of Parties. China, the Philippines and Vietnam signed the Agreement on Joint Work on the Ocean and Earthquake in the Partial Region of South China Sea. However, incidents in South China Sea area still happened from time to time. Some countries are still expanding new deployments in the sensitive regions.

(3)The two sides should strengthen communication on regional cooperation and reach a consensus. China firmly supports ASEAN’s leading role in East Asian regional cooperation. ASEAN shoulders the triple responsibilities of constructing the ASEAN Community, the East Asian Community and acting

DGJ02.indd 134 2008-2-13 16:40:58


as the initiator of the East Asian Summit. It still needs to solve the problem of how to coordinate and balance these three tracks. The two sides should deepen consensus on important issues such as how to propel East Asian cooperation and construct the East Asian Community.

(4)There is still a gap in the depth and width of bilateral cooperation from the positioning of a strategic partnership. Most cooperation is still at the preliminary level. It is imperative for bilateral cooperation to rise to a new level. The two sides should strengthen the mindset of coordination and common participation, increase interactions and allocate resources for cooperation together.

As long as the two sides are determined and sincere, those above problems are certain to be gradually solved. Even a difficult problem like the South China Sea issue is likely to be eased.

The next decade is important for both sides to realize their respective development goals. China will become a well-off society, and ASEAN will complete the ASEAN Community building. The interests of the two sides are coherent. Therefore, the bilateral strategic partnership has promising prospects.

Only if China and ASEAN further strengthen strategic partnership can peace and prosperity be ensured in the region and their respective goals can be realized. Therefore cooperation in all areas should be promoted to make it more fruitful. As a fast developing big country, China will continue to implement the foreign policy of “building a harmonious, tranquil and prosperous neighbourhood”.China should show more sincerity to ASEAN on political issues, carry out more economic assistance and cooperation programs, so that ASEAN will gain more opportunities and benefits from China’s development.

Looking into the future, with the establishment of the China-ASEAN FTA, the bilateral economic and trade relations will become closer. The Chinese and ASEAN economies will be stronger, and the bilateral cooperation in other areas will be deepened. The bilateral strategic partnership will be consolidated. This relationship will certainly promote stability and prosperity in Asia Pacific and peace in the world.

DGJ02.indd 135 2008-2-13 16:40:58

7

Dealing with a Rising China in the New Millennium: a View from ASEAN

Lee Lai To A

For the Association of Southeast Asian Nations (ASEAN), the People’s Republic of China (PRC) looms large in its security calculations. China’s sheer size and geographical proximity, its huge population and ethnic outreach, its rapidly growing economic and military might, and its emergent soft power would demand ASEAN to pay a lot more attention to its formidable neighbor in the north. What has been ASEAN’s strategies in dealing with the China factor? By the turn of the century, ASEAN had already established a “strategic partnership for peace and prosperity” with China. What sort of strategic partnership is it? What are the problems and prospects of such a strategic partnership? The paper will attempt to answer these questions. While economics is part and parcel of this strategic partnership, the focus of analysis in this paper is on the security, and to a certain extent, political dimensions in the post Cold War era.

Ⅰ. The Setting

As noted later on, present ASEAN-China relations are probably at their best since World War II. However, it would be useful to recall that such a

A Lee Lai To, Professor, President of Political Science Association of Singapore.

DGJ02.indd 136 2008-2-13 16:40:58

7 Dealing with a Rising China in the New Millennium: a View from ASEAN / 137

relationship is quite recent and started basically in the 1990s. More importantly, such a relationship was preceded by a very long period of uneasiness, suspicion and even animosity in the Cold War period. ASEAN-China relations were plagued not only by the overall ideological difference, but also more specifically by the so-called overseas Chinese problem and China’s support for the local communist insurgents in Southeast Asia. The latter two specific issues were touchy and critical issues especially for the newly independent Southeast Asian states in their processes of nation-building. The emotional ties between some of the ethnic Chinese in Southeast Asia and China were seen to be an obstacle to the building of a separate identity. There were doubts on the loyalty and commitment of these Chinese to their host countries in Southeast Asia. Support given by China to the local communists was a major threat to the security of Indonesia, Singapore, Malaysia, Thailand, the Philippines, and for that matter, non-socialist Southeast Asia as a whole. These touchy issues had cautioned members of ASEAN to distance themselves from China. It was not until the 1970s that selected ASEAN states began to move cautiously to have more interactions with China. International and regional developments in the early 1970s, notably the Sino-American detent, US planned withdrawal from Vietnam and Japan’s move to establish formal ties with China in 1972 had prompted ASEAN to reassess the security environment in the region. Apparently, some ASEAN states had decided that it was about time to have more interactions with China at the official level. That was demonstrated by the decision to establish diplomatic ties with the PRC by Malaysia in 1974 and Thailand and the Philippines in 1975. It must be added that progress in ASEAN-China relations was slow and such diplomatic ties did not really pick up the momentum in furthering the relationship. Thus, even with the economic reforms and the opening of China in the post-Mao era under Deng Xiaoping, the biggest member of ASEAN, Indonesia, remained skeptical of whether it should resume its diplomatic relations with the PRC. It was not until 1990 that Jakarta took the plunge to resume formal ties with Beijing. This was followed by Singapore and later Brunei. The feeling was that it was unrealistic to deal with security in the region without interacting with China. This was particularly true in handling critical security issues related to Southeast Asia, namely, the

DGJ02.indd 137 2008-2-13 16:40:58


Cambodian conflict and the South China Sea territorial disputes. By then, China had already cut off ties with the local communists. ASEAN states also seemed to have more confidence in the identity and loyalty of their ethnic Chinese citizens. More importantly perhaps, as the PRC opens up its economy and scores rapid economic growth, ASEAN, just like many other parts of the world, would like to bank on China’s four modernizations and hitch a ride from the Chinese economic engine.

Ⅱ. Three Cheers to Multilateralism

For the small and medium states of ASEAN, they cannot expect to wield or exert too much influence on international relations individually. While fiercely defending their own national sovereignty and territorial integrity, they are fully aware of the fact that a collective entity like ASEAN would be helpful to them individually and collectively. After a number of false starts in forming sub-regional organizations, they have finally come together to work for ASEAN based on enlightened self-interests and the desire to promote peace and prosperity in Southeast Asia, or for that matter, the Asia Pacific. To promote peace and security, they could not help but notice that the major powers are the critical actors that they would have to deal with. After all, they are the ones dominating the international relations of the Asia Pacific and the world. In the case of China, its importance for ASEAN’s security is quite obvious as noted earlier. At the time when China was scoring double digit growth year after year and becoming more and more influential in economics and politics, the major challenge for ASEAN would be how to deal with the awakened dragon. As revealed and emphasized in the 1992 Singapore ASEAN summit, the decision was that it was not enough to promote discussions on political and security issues among themselves and that it would be most pertinent to engage major powers like China in such dialogue processes. In interacting with major powers, ASEAN would have to be careful that it could have some control over such processes. Thus, a multilateral process with ASEAN in control was worked out. As it turned out, this was the ASEAN Regional Forum (ARF) starting from 1994. The launch of the ARF, the only multilateral forum for security

DGJ02.indd 138 2008-2-13 16:40:58


issues in the Asia Pacific, reveals, among other things, that ASEAN has chosen a foreign policy approach “that seeks durable solutions to major international security problems through cooperation based on mutual interests as prescribed by dialogue” A. It is no secret that one of the major reasons for the creation of the ARF was to engage China in security dialogues. While the individual states of ASEAN have bilateral discussions with China by the early 1990s, they felt that it would be more meaningful and strategically wiser for them to interact with China as a group. By then, ASEAN was more confident in the conduct of international relations. This was contributed firstly by the prolonged period of respectable economic good in the ASEAN region. Secondly, it had already developed an operational code in the conduct of dialogues, notably the ASEAN Way which emphasized decisions by consensus and non-interference into each other’s internal affairs. More importantly, and as far as security was concerned, ASEAN had amassed experiences in handling an important regional or international security issue, namely, the Cambodian conflict. While ASEAN was given due recognition in pulling off the agreement and plan to restore peace and stability in Cambodia, it must be added that it was obvious that ASEAN could not do it without the support and coordination of the major powers, notably China. China’s importance was also clear in search for the resolution of the South China Sea conflicts, probably the most critical security issue for ASEAN-China relations after Cambodia. Finally, the end of the Cold War also provided a more relaxed environment for ASEAN to engage China in multilateral dialogues and consultations.

As it turned out, ASEAN’s strategies in dealing with China included not only engaging it in the ARF, but also in a wide range of ASEAN-initiated multilateral processes. These included the ASEAN Post Ministerial Conference after China was elevated from a consultative partner to a dialogue partner, the Asia Europe Meeting and the like, the ASEAN Plus Three Meeting and various ASEAN-China processes in that connection, and last but not least, the East Asia Summit and the proposed East Asian Community. For ASEAN, the hope is that China would feel not only welcomed to such multilateral processes, but also willing to

A Clifford Singer, James Walsh and Dean Wikening in Reinventing Multilateralism in http://www.acdis.uiuc.edu/reinventing/reinventing.pdf. retrieved on June 26, 2007.

DGJ02.indd 139 2008-2-13 16:40:59


follow and contribute norms, values and proposals for mutual benefits.As an ardent promoter of multilateralism, ASEAN has made full use of such

processes to boost its standing in international and regional affairs. The security uncertainties in the post cold war era also gave ASEAN the opportunity to launch new initiatives so that the small and medium states of ASEAN would have some say in the structuring of the regional and international order in the future. No doubt cynics and critics, particularly those from the West, may regard these processes as talk shops. Nonetheless, it seems that China has been supportive of not only ASEAN’s community building in Southeast Asia but also multilateral initiatives in the Asia Pacific. In fact, for the latter initiatives, it is comfortable with ASEAN taking the “driver’s seat” in the multilateral processes, notably the ARF and ASEAN Plus Three Meeting.

Apparently, China, while still emphasizing bilateralism, would give ASEAN-led multilateralism a try. After all, ASEAN is not a threat to anyone. It is not really competing with China for influence and the ASEAN way seems to suit China well. In addition, China probably found its relations with ASEAN more manageable, particularly when compared with its prickly relations with the United States and Japan. Just like many other new ventures taken by China, its foray into ASEAN-style multilateralism was cautious at the very beginning, following the approach of “feeling the stones to cross the river”. While it is not the purpose of this paper to analyze China’s policy towards ASEAN, Suffice it to note here that China was more of an observer of ASEAN multilateralism initially. Knowing very well the constraints of multilateralism and the possibilities of outside interference into its domestic developments in the name of multilateralism, China was oftentimes reacting to discussions and probably learning how to deal with some of the issues in ASEAN’s multilateral processes. This was especially true in the early 1990s. However, starting from the late 1990s, if not earlier, China had changed its strategy from reactive multilateralism to pro-multilateralism. A Since then, it has been taking part

A For details of China’s reactive multilateralism to pro-multilateralism in dealing with ASEAN, see Du Ding Ding, Foreign Economic Policy Formulation and Implementation in China: China-ASEAN Free Trade Agreement, Ph.D. thesis (forthcoming), East Asian Institute, National University of Singapore, 2007, pp.119-140.

DGJ02.indd 140 2008-2-13 16:40:59


actively in regional multilateral processes and even creating new initiatives at times. Apparently, China had by then become more confident and believed that regional multilateralism could be useful in promoting neighborliness with states in the region. Such an environment would be critical for China’s own national development. In addition, regional multilateralism could also be used to dilute the dominance of the other major powers, particularly the US, and to wean off ASEAN’s reliance on the US and the West as a whole.

Thus, it could be seen that while ASEAN and China may have different reasons or motives in engaging each other, they would like to give multilateralism a chance. China’s conversion to multilateralism and support for the ASEAN way is critical not only for mutual benefits but also for the creation of a regional community in East Asia and the Asia Pacific.

Ⅲ. The Balancing Act

To the “realists” in ASEAN and elsewhere in the Asia Pacific, they are fully aware of the fact that international politics in the region will be dominated by the major powers, particularly the US and a rising China. Thus, while engaging China in multilateral forums, ASEAN also tried to engage the US and the other major players in the region in the hope that no one power could dominate the dialogue processes. In the case of the US, it was especially important to the region not only in terms of economics but also in terms of security. As revealed time and again by leaders in Singapore, Thailand, the Philippines, Australia, Japan, South Korea and elsewhere, the US is regarded as the balancer in Asia Pacific security. Many in the region also consider the US as the only power that could counteract the influence of China. Thus, one other reason for the creation of the ARF, the only forum on security matters in the region, was to engage the US. This was considered to be critical in the 1990s when US forces had left the Philippines and that it was possible that the US may decrease, if not withdraw, its security commitments in Southeast Asia and the Asia Pacific. Knowing very well American reservations about ASEAN multilateralism, or for that matter, multilateralism as a whole, some of the individual members of ASEAN tried their part to encourage a continuous US presence in the

DGJ02.indd 141 2008-2-13 16:40:59


region in their own way. Perhaps, the most notable new move in this regard was Singapore’s 1990 Memorandum of Understanding with the US, allowing the latter to have access to the Republic’s military facilities. This “access model” would allow US military presence in the region without establishing a military base, It was also hoped that such an arrangement would make US presence in the region more cost-effective from an American perspective and more agreeable to the states in the Asia Pacific. Thus, in spite of the initial reservations by others, similar arrangements, albeit more on a commercial basis, were established by Singapore’s neighbors, notably Malaysia and Indonesia, with the US.

ASEAN’s balancing act in dealing with China could also be demonstrated in the dialogue on the move to form an East Asian Community (EAC). Although the origins of the EAC could be traced to the proposal of having an East Asian Economic Group by the then Prime Minister Mahathir of Malaysia in the early 1990s, the real impetus for the formation of such a community was the Asian Financial Crisis when ASEAN and Northeast Asia came together to launch the ASEAN Plus Three (APT) dialogue process in 1997 so that Asian states could play a part in helping themselves to deal with similar problems in the future. While ASEAN was still the “driving force” and its role in such a process was duly supported by the other members of the APT, namely, China, Japan and Korea, it was possible that the Northeast Asian states, particularly China, may play a more dominant role in such a dialogue. As a result, when the APT took up the task of promoting East Asia cooperation starting from 1999 and inaugurated the East Asian Summit (EAS) and the EAC at the suggestion of the Report of the East Asia Vision Group of 2001 and the report of the East Asia Study Group of 2002, ASEAN was open to the idea of including more members in both the EAS and EAC while China had its reservations, thinking that EAC and EAS should be for East Asians. As it turned out, the inaugural EAS held in Malaysia in 2005 and subsequent second EAS in the Philippines in 2007 included not only APT members, but also India, Australia and New Zealand. Summit statements also seem to endorse the inclusion of these new members as it was stated that the dialogue process “should remain outward looking, with ASEAN as the driving force working in close

DGJ02.indd 142 2008-2-13 16:40:59


partnership with other participants of the EAS” A. In addition, it was agreed that the APT should be the main vehicle working towards achieving an EAC. B This multilateral and open approach adopted by ASEAN in balancing the influence of the EAS members, including that of China and in expanding the membership of the Community, seemed to have been not only welcomed by new members, namely, India, Australia and New Zealand, but also endorsed by others, notably Japan and was not blocked by China despite its reservations. Although it is difficult to regard these new members as traditional East Asian states, ASEAN justified this by emphasizing its outward outlook and the principle of inclusivity for EAS membership. More importantly perhaps, it laid down three requirements for a state to be a member of EAS, namely, its accession to the Treaty of Amity and Cooperation in Southeast Asia, a dialogue partner of ASEAN and substantial economic relations with the ASEAN region. These ASEAN-centric criteria no doubt reflected the assertion of the small and medium states of the regional body to continue taking a leading role in the formation of the EAC.

Ⅳ. Building a Closer Security Relationship

While ASEAN does not really want any major powers to dominate the developments in Southeast Asia, it has welcomed all of them to play a constructive role in promoting peace and stability in the region. In this regard, it has paid its due respect to China by engaging it in various ways as noted earlier. After all, China plays a very important role in all major security issues in the Asia Pacific, namely, tensions in the Korean Peninsula, Taiwan Straits and much closer to home, the South China Sea. The need and desire of ASEAN to work with China to promote cooperative security is quite obvious. In this regard, ASEAN has signed a wide range of agreements with China over the last decade

A See Chairman’s Statement of the Second East Asian Summit, Cebu, Philippines, January 15, 2007, in http://www.aseansec.org/19302.htm retrieved on July 9, 2007.

B See Chairperson’s Statement of the 12th ASEAN Summit H.E. the President Gloria Macapagal-Arroyo, “One Caring and Sharing Community”, Cebu, Philippines, January 13, 2007, in http://www.aseansec.org/19280.htm retrieved on July 9, 2007.

DGJ02.indd 143 2008-2-13 16:40:59


or so. In more general terms, and more related to the political and security arena, the most notably and gratifying from the ASEAN perspective was the accession to the Treaty of Amity and Cooperation (TAC) in Southeast Asia in 2003 in Bali by China, the first dialogue partner to do so. In addition, ASEAN-China cooperative agreements included the Joint Statement of the Heads of State/Government of the Member Countries of ASEAN and the President of the People’s Republic of China in 1997, the Joint Declaration on the ASEAN-China Strategic Partnership for Peace and Prosperity in 2003, the ASEAN-China Plan of Action to implement Joint Declaration on the ASEAN-China Strategic Partnership for Peace and Prosperity in 2004 and the Joint Statement of ASEAN-China Commemorative Summit, “Towards an Enhanced ASEAN-China Strategic Partnership” in 2006. In the area of non-traditional security, ASEAN and China had also inked the Joint Declaration of ASEAN and China on Cooperation in the Field of Non-traditional Security Issues in 2002 and Memorandum of Understanding between the Governments of the member Countries of the ASEAN and the Government of the People’s Republic of China on Cooperation in the Field of Non-traditional Security Issues in 2004. Specifically, in the case of the South China Sea issue, ASEAN and China had signed the Declaration on the Conduct of Parties in the South China Sea in 2002 and senior officials from both sides had already adopted the terms of reference and plans to implement the Declaration. Last but not least, China supports the establishment of a Southeast Asia Nuclear Weapon Free Zone and is working out the details on how and when to accede to the Protocol to the Treaty on the Southeast Asia Nuclear Weapon Free Zone.

On top of the above, there were quite a number of Memoranda of Understanding, agreements, Plans of Action and the like in the economic, socio-cultural and other areas signed by ASEAN and China. Of these, the most important and relevant to the strategic partnership was the Framework Agreement on Comprehensive Economic Cooperation Between ASEAN and the People’s Republic of China in 2002 and other subsequent agreements to put the Framework into practice. The eventual goal was to establish the ASEAN-China Free Trade Area (ACFTA) by 2010.While ASEAN is eager to bank on China’s rapid economic growth by increasing two-way trade and investments,

DGJ02.indd 144 2008-2-13 16:40:59


it was also apparent that the leaders in Beijing, notably then Premier Zhu Rongji, made a deliberate political and strategic move to expedite the signing of the Framework Agreement in order to build up a closer relationship with ASEAN. A This made China the first major power to sign such an agreement to work with ASEAN at a time when the latter was trying hard to make a comeback in international and regional affairs after the Asian Financial Crisis.

Ⅴ. ASEAN-China Strategic Partnership: an Assessment

It is easy for the critics to point out that the ASEAN-China strategic partnership is one of the many such partnerships that China has forged with other countries or regional bodies over the years. Cynics may add that the joint statements or declarations are just statements of intent and that the proof of the pudding is in the eating. However, it is important to underscore firstly that for ASEAN, China’s accession to the Treaty of Amity and Cooperation in Southeast Asia was highly appreciated and commended. No doubt the Treaty was already the code of conduct among the ASEAN members. However, it took a long time to persuade other extra-regional powers to accept this as it was seen to be applicable primarily to the Southeast Asian region. As such, the endorsement by China, the first major power to do so, was most significant as it has a very vivid demonstration effect on others in the Asia Pacific, or for that mater, in the world. Other countries would feel necessary or appropriate to follow suit. Likewise, the signing of the ASEAN-China Framework Agreement on Comprehensive Economic Cooperation and the goal of establishing the ACFTA was highly appreciated on the part of ASEAN as China was fast in signing it, being again the first major dialogue partner to do so. Once more, the demonstration effect was significant as others may feel the need to establish such Free Trade Areas (FTAs) with ASEAN. This is especially true at a time when it was more practicable to have such FTAs and that the Doha rounds of discussions are facing difficulties. Last but not least, China’s support for the

A For the reasons and internal politics leading to China’s decision to sign the ASEAN-China Framework Agreement on Comprehensive Economic Cooperation in 2002, see, Du Ding Ding, op. cit., pp. 141-261.

DGJ02.indd 145 2008-2-13 16:40:59


establishment of a Southeast Asia Nuclear Weapon Free Zone and its intention to accede to the Protocol to the Treaty is a great encouragement to ASEAN. If China accedes to the Protocol eventually, it will be the first major power to do so and it will surely demonstrate that such denuclearization effort in Southeast Asia is worth endorsing by other extra-regional powers. After all, all major powers are working towards the denuclearization of the Korean peninsula. All these endorsements will bring not only intrinsic benefits to both sides, but perhaps equally important, if not more important, exert added demonstration effect for others to follow suit and thus boost the statue of ASEAN and China in playing a constructive role in Asia Pacific security.

Secondly, such a partnership was preceded by a much longer period of difficult and even hostile relations in the Cold War period as noted earlier. As such, ASEAN-China security cooperation is of a recent vintage in their newly founded relationship. In this regard, it is natural that the cooperation would emphasize a lot on regular high-level contacts, visits and interactions to warm up the ties. Dialogues, consultations, information sharing, exchanges and the like will be necessary to promote confidence building measures and trust. In fact, mutual trust, which could not be built up overnight, is of utmost importance in order to have any meaningful security relationship or cooperation.

Thirdly, it is interesting to note that the ASEAN-China strategic partnership “is non-aligned, non-military and non-exclusive, and does not prevent the participants from developing their all-directional ties of friendship and cooperation with others” A. Quite obviously, the partnership wants to emphasize that it is not against anybody, be it the US or other states, signaling that it is non-aligned in nature. It is certainly not a military alliance and it does not preclude participants from making strategic arrangements with other partners. From ASEAN’s perspective, it certainly suits it well as some of them are members of the non-aligned movement. More importantly, some of them have military agreements with the US. In fact, Thailand and the Philippines are

A See Joint Declaration of the Heads of State/Government of the Association of Southeast Asian Nations and the People’s Republic of China on Strategic Partnership for Peace and Prosperity, Bali, Indonesia, October 8, 2003, in http://www.aseansec.org/15265.htm retrieved on May 25, 2007.

DGJ02.indd 146 2008-2-13 16:40:59


US allies. However, this does not really matter as participants, as implied by the Joint Declaration of ASEAN and China on their strategic partnership, are free to make their own strategic and security arrangements and that ASEAN states, just like China, could have other strategic partners.

Fourthly, in the light of the criticisms that all these dialogues, consultations and the like are just talk shops, ASEAN and China have worked out some details for action. In this regard, the Plan of Action to implement the strategic partnership, the Memorandum of Understanding between ASEAN and China on cooperation in non-traditional security issues and the current discussions and proposals on how to put the Declaration on the Conduct of Parties in the South China Sea into practice are particularly important. Thus the Plan of Action detailed, among other things, fairly concrete programs for the political and security cooperation. These included (1) regular high-level contacts, visits and interactions, mechanisms for dialogue and cooperation, (2) promotion of the Treaty of Amity and Cooperation in Southeast Asia for inter-state relations, (3) encouraging all nuclear weapons states to sign the Protocol to the Treaty on the Southeast Asia Nuclear Weapons Free Zone, (4) implementation of the Declaration on the Conduct of Parties in the South China Sea, (5) cooperation in the field of non-traditional security and (6) military exchanges and cooperation. A While the significance and implications of the first three items have been dealt with, it remains to be noted that in the case of item (4) on the South China Sea, a ASEAN-China Joint Working Group has been tasked to work out plans and proposals for concrete cooperative activities according to the terms of reference worked out by the ASEAN-China Senior Officials’ Meeting held in Kuala Lumpur in December 2004. Specific cooperative activities in the South China Sea included marine environmental protection, marine scientific research, safety of navigation and communication at sea, search and rescue operation and combating transnational crime. B Eventually, ASEAN and China would like to set up a code of conduct

A For details of the Plan of Action, see Plan of Action to Implement the Joint Declaration on ASEAN-China Strategic Partnership for Peace and Prosperity, Bali, Indonesia, October 8, 2003, in http://www.aseansec.org/16805.htm retrieved on May 25, 2007.

B See Terms of Reference of the ASEAN-China Joint Working Group on the Implementation of the Declaration on the Conduct of Parties in the South China Sea, Kuala Lumpur, December 7, 2004, in http://www.aseansec.org/16885.htm retrieved on July 14, 2007.

DGJ02.indd 147 2008-2-13 16:40:59


in the South China Sea. For item (5), the Memorandum of Understanding on cooperation in the field of non-traditional security issues in 2004 detailed the more specific objectives in dealing with problems such as trafficking of illegal drugs, people smuggling, sea piracy, terrorism, arms smuggling, money laundering, international economic crime and cyber crime. It also identified mid and long-term cooperation in information exchange, personnel exchange and training, law enforcement cooperation and joint research. Both sides have also agreed to meet annually at working level and adopt annual work plans to implement the Memorandum of Understanding. A Finally, for item (6), it is interesting to note that other than promoting mutual confidence and trust by having dialogues, consultations and seminars on security, defense and military affairs, both sides are willing to consider cooperation in military personnel training, “observing each other’s military exercises and explore the possibility of conducting bilateral or multilateral joint military exercises ” and cooperation in peacekeeping. B

It remains to be noted that one of the most concrete results in ASEAN-China strategic cooperation is in the field of economics. ASEAN was particularly appreciative of China’s deliberate move not to devalue the Yuan after the Asian Financial Crisis so as to lessen the economic and financial challenges to some of the ASEAN states hit by the turmoil. This was seen to be helpful, especially when they realized that western-dominated financial institutions like the International Monetary Fund were not particularly forthcoming in coming up with measures useful to them. More importantly, China made a deliberate effort to enhance closer trade and investment relations with ASEAN which was not really a major economic partner of China, at least before the Asian Financial Crisis.In this regard, it should be highlighted that there was a four-fold increase in total ASEAN-China trade between 1997 and 2004. Such trade has also been in favor of the ASEAN-6 since 1997. The positive effects of the ASEAN-

A See Memorandum of Understanding between the Governments of the member Countries of the Association of Southeast Asian Nations (ASEAN) and the Government of the People’s Republic of China on Cooperation in the Field of Non-traditional Security Issues, Bangkok, January 10, 2004, in http://www.aseansec.org/15647.htm retrieved on July 12, 2007.

B See Plan of Action, in op. cit.

DGJ02.indd 148 2008-2-13 16:41:00


China Framework Agreement on Comprehensive Economic Cooperation as witnessed by the Early Harvest Program, the agreement on trade in goods, agreement on trade in services and others boosted ASEAN-China trade to $130.37 billion in 2005, surpassing the target of $100 billion set by the ASEAN-China Summit in 2003. A ASEAN’s actual investment also increased and reached $3.1 billion in 2005. While China’s investment in the ASEAN region was not substantial, totaling $158 million in 2005, it promised to increase its investment in the Southeast Asian region. The convening of such meetings like the ASEAN-China EXPO and ASEAN-China Business and Investment Summit in Nanning would probably facilitate investment and trade between ASEAN and China. B

It should be pointed out that there are still some residual problems in promoting security and strategic cooperation between ASEAN and China. Unlike economic cooperation, it is much more sensitive and difficult to have security cooperation. As such, ASEAN’s attempt to have security cooperation, especially that in the defense and military arena, is still in the exploratory stage. Proposals of having joint military exercises or cooperation in peacekeeping will require not only the coordination and understanding of different weapon systems and security and strategic doctrines but perhaps more importantly, overcoming the psychological barrier because of historical baggage and other factors. After all, and as far as ASEAN is concerned, while it has some experiences in working with the West, notably the US, it is a new venture for it to work with China, a communist or socialist state. The level of trust and confidence has to be raised or built up by more dialogues and interactions so that both sides are comfortable to work with each other. Specifically, a lot more effort has to be made to search for peace and stability in the South China Sea, which remains to have the potential to be disruptive to ASEAN-China relations. In spite of years of informal and formal discussions about the issues, it is clear that it is not easy to have joint developmental projects. Even if some joint

A See Joint Statement of ASEAN-China Commemorative Summit, Towards An Enhanced ASEAN-China Strategic Partnership, Nanning, China, October 30, 2006, in http://www.aseansec.org/China-Com-Summit.Doc retrieved on July 9, 2007.

B See Joint Statement of ASEAN-China Commemorative Summit, Towards An Enhanced ASEAN-China Strategic Partnership, Nanning, China, October 30, 2006, in http://www.aseansec.org/China-Com-Summit.Doc retrieved on July 9, 2007.

DGJ02.indd 149 2008-2-13 16:41:00


projects manage to take off and that a code of conduct is adopted eventually, the disputants are no where near the resolution of the overlapping sovereignty claims. As such, the territorial disputes in the South China Sea will continue to haunt Sino-ASEAN relations. Unless there is a strong political will to resolve the issues, the South China Sea quagmire is likely to drag on for a long time. Fortunately, both China and ASEAN are pragmatic enough to understand that while the South China Sea dispute is a problem, it should not hijack the agenda for both sides to work on other cooperative and probably more productive areas. Finally, another security issue that may disturb ASEAN’s relations with China could be the Taiwan issue. This is basically the residual links that some of the ASEAN states may have with Taiwan in spite of their observation of the “one China” principle. While ASEAN had turned down Taiwan’s request to join the ARF, the APT meeting and other ASEAN-initiated multilateral processes, it has substantial economic links, track two interactions and occasional mutual visits with Taiwan. A For mutual visits between ASEAN and Taiwan, Taipei has been using unconventional measures like “holiday diplomacy”, “private visits”, “stopover visits” or some other ways to broaden its links with the region. Officials from ASEAN are also known to have visited Taiwan. Such ASEAN visits have been looked upon with great concern and even displeasure by China, especially when they are seen to be elevated to the political level. As officials from Taiwan and ASEAN may have to meet for economic, historical and some other reasons, it is appropriate for ASEAN members, collectively or individually, to talk to China on the modalities that could be used for such interactions. No doubt care must be taken so as not to give the impression that ASEAN is conducting a “one China, one Taiwan or two-China”policy. Certainly, ASEAN will not behave like some of the small states in Latin America or Africa in switching diplomatic relations from Beijing to Taipei because of the dollar diplomacy conducted by the latter. ASEAN knows too well that China is much more important and will continue to follow the “one China” principle. In

A For details, see Lee Lai To, “Some Thoughts on the Taiwan Factor in Sino-ASEAN Relations”, talking points presented at the international conference on “Taiwan in Sino-ASEAN Relations” hosted by the Shanghai Institute for International Studies in Shanghai, December 12-13, 2005.

DGJ02.indd 150 2008-2-13 16:41:00


addition, it will not support the “independence of Taiwan”. In fact, ASEAN reaffirmed its “one China” policy in the Joint Statement of ASEAN-China Commemorative Summit issued in Nanning in October 2006 to commemorate the fifteenth anniversary of the ASEAN-China dialogue relations. A

Ⅵ. Concluding Observations

For ASEAN, its multilateral approach in dealing with China and other states in the Asia Pacific should give it more room for maneuver in order to play a leadership role in the dialogue processes. This strategy is omni-directional and balanced and attempts to treat all equally, at least on paper.Nonetheless, the reality is that some powers, namely, the US and China, are more equal than others. As such, ASEAN adopts what is called a hedging strategy in dealing with a rising China. B The hedging attempts to ask the US to stay on to balance China in the region. However, the US seems to be a lot more occupied with the war in Iraq, the Middle East and terrorism, especially after the September 11 incident, so that it is seen to be neglecting Southeast Asia, as reflected notably by the absence of US Secretary of State Condoleezza Rice in the ARF in 2005 and 2007. C In the meantime, China is seen to be moving fast in befriending ASEAN as analyzed in this paper. It is using its new-found wealth to engage ASEAN and work on more practical developmental and economic issues. While member states of ASEAN are concerned about terrorism, the war in Iraq and the Middle East, they have many other equally urgent, if not more urgent, developmental and economic priorities to deal with. Because of this, China’s approach may strike a responsive chord in ASEAN. Given more time, it is possible that China would be able to tip the US-China balance in the sub-region in its favor when ASEAN, or selected members of ASEAN, find it appropriate to tilt more towards China because of their reservations or doubts about US

A See Joint Statement of ASEAN-China Commemorative Summit, . in op.cit. B See, for example, the arguments presented in Denny Roy, “Southeast Asia and China:

Balancing or Bandwagoning?”, Contemporary Southeast Asia, 27, No. 2 (2005), pp.305-322, cited in Lee Lai To, op.cit., p. 12.

C The Straits Times, July 19, 2007.

DGJ02.indd 151 2008-2-13 16:41:00


strategy or commitments to Southeast Asia or the wider Asia Pacific.However, while ASEAN and China have struck some initial successes in

working together, notably in the economic front, more work and time will have to be put in to promote the strategic, especially security cooperation. No doubt, there is not really a market for the “China threat” theory in the ASEAN region. Nonetheless, China still has an image problem because of history, ideology, the psychological insecurity of smaller ASEAN states in dealing with a gigantic China and some other factors. Thus it is necessary for China to show its softer and the more benign side of its policy towards ASEAN. At the same time, all the non-security or non-military moves to promote socio-cultural cooperation between ASEAN and China regarding education, public health, entrepreneurship, civil service, people-to-people interactions and the like remain relevant and important. The bottom line is that there is still a lot of room for improvement in understanding each other, be it in language, culture, history, religion or other subjects. These socio-economic measures, together with the fast growing economic interactions between the two sides will spill over to help promote closer security cooperation which involves much more delicate and prickly issues. In all likelihood, security cooperation between ASEAN and China will take a gradualist and incremental approach.

DGJ02.indd 152 2008-2-13 16:41:00

8

ASEAN and China Relations: Seeking for Economic Cooperation

Bui Truong Giang A

The fast improving ASEAN-China economic relations during the last decade has served mutual and shared interests of both sides, contributing to regional economic development and integration. This paper will present the general observations on five dimensions of such progress in terms of:(1) Overview of ASEAN-China economic relations; (2) Dealing with a rising Chinese economy; (3) Roles of ASEAN-China Free Trade Area (ACFTA); (4) ASEAN and China in the regional cooperation; and (5) The future of ASEAN-China economic relations. Given closer economic linkages and constructive bilateral relations, ASEAN and China with the ACFTA project can play as a main pillar for the East Asian economic integration arrangements. The ASEAN-China relations in general and economic partnership in particular should become one of the key drivers in shaping the regional cooperative framework.

Ⅰ. Overview of ASEAN-China Economic Relations

Relations between China and ASEAN have undergone significant changes

A Bui Truong Giang, Senior Fellow, Deputy Director, Institute of World Economics and Politics (IWEP), Vietnam.

DGJ02.indd 153 2008-2-13 16:41:00


over the past 15 years. A Today, China and ASEAN have formed a strategic partnership for peace and prosperity. From the mid-1990s onward was also the period that saw increasing economic ties between the two.

Table 8-1 China’s merchandise trade with ASEAN between 1990 and 2002(US$ mil.)

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Exports to ASEAN

4150 4455 4666 5343 7166 10475 10318 12703 11034 12275 17339 18384 24345

Annual growth (%)

29.4 7.3 4.7 14.5 34.1 46.2 -1.5 23.1 -13.1 11.2 41.3 6.0 32.4

% in total exports

6.7 6.2 5.5 5.9 5.9 7.0 6.8 6.9 6.0 6.3 7.0 6.9 6.3

Imports from

ASEAN3131 3943 4414 6284 7168 9897 10869 12357 12638 14927 24180 23229 26191

Annualgrowth

16.5 25.9 11.9 42.4 14.1 38.1 9.8 13.7 2.3 18.1 62.0 -4.0 12.8

% in total imports

5.9 6.2 5.5 6.1 6.2 7.7 7.8 8.7 9.0 9.0 11.7 9.5 9.1

Trade balance

1018 512 252 -941 -2 587 -551 246 -1604 -2652 -6841 -4845 -1846

Source: Claude Barfield (2004), Table 2, p.7.

A Beijing’s official contact with ASEAN as a group began in July 1991, when Chinese Foreign Minister Qian Qichen was invited to attend the opening ceremony of the 24th ASEAN Foreign Ministers’ Meeting (AMM). Since then China has attended each ASEAN Foreign Ministers’ Meeting consecutively. In 1994, China participated in the ASEAN Regional Forum (ARF) and became a consultative dialogue partner of ASEAN. This status was elevated in 1996, when China became a full dialogue partner with ASEAN. By early 1997, there were already five parallel dialogue frameworks between China and ASEAN. In December 1997, Chinese President Jiang Zemin and ASEAN leaders held their first ever“ASEAN+1”Summit in Malaysia and issued a joint statement announcing their decision to establish a partnership of good neighborliness and mutual trust between China and ASEAN oriented toward the 21st century. In 2003, China signed the key ASEAN’s security protocol——The Treaty of Amity and Cooperation (TAC), and in October China and ASEAN signed the “Joint Declaration of the PRC and ASEAN State Leaders——A Strategic Partnership for Peace and Prosperity”.

DGJ02.indd 154 2008-2-13 16:41:00

8 ASEAN and China Relations: Seeking for Economic Cooperation / 155

In terms of trade relation, we have witnessed tremendous increase in the ASEAN-China two-way trade since the early 1990s (Table 8-2), at an annual rate of 20.8% during 1990-2003 period (ISEAS, 2005, p.3), a four-fold increase in total trade between 1997 and 2004 (Glosny, 2006). According to Vaughn and Morrison (2006), China’s combined exports to ASEAN countries rose by 220.0% from 2000 to 2005 and by 29.3% from 2004 to 2005, very close to China’s overall export percentage increases during these periods. Overall, the percentage of China’s exports going to the ASEAN countries rose from 7.0% in 2000 to 7.2% in 2005. The trend in Chinese imports is somewhat different. China’s combined imports from ASEAN countries rose by 239.5% from 2000 to 2005, faster compared to 193.3% from the world as whole; and by 19.2%from 2004 to 2005, also faster than 17.7% from the world. China’s imports from ASEAN as a percent of its total imports rose from 9.8% in 2000 to 11.4% in 2005. ASEAN-China Trade turnover reached the record $130.476 billion in 2005, making China the ASEAN’s third largest trading partner (after Japan and the EU) in 2005 and ASEAN China’s fifth largest (behind the US, the EU, Japan and Hong Kong Special Administrative Region). For individual trading partners, Singapore accounts for one-third of ASEAN’s exports to China. Malaysia ranks second with a 22.3% share, followed by Thailand (18.7%), Indonesia (12.5%) and the Philippines (7.0%).

Table 8-2 Recent growth in Sino-ASEAN total trade

1997 1998 1999 2000 2001 2002 2003 2004 2005*

Total trade (US$ bn.)

25.1 23.6 27.2 39.4 41.8 54.8 78.2 105.9 130.5

(% change) -5.9 15.3 44.9 6.1 31.1 42.7 35.4 23.2

China’s total trade with

ASEAN (%)7.7 7.3 7.5 8.3 8.2 8.8 9.2 9.2 7.7

Source: Glosny (2006), Table 1, p.30 and 2005* data complied from Vaughn & Morrison (2006), Table 1 & 2, p.13.

The trade structure has improved towards better complementary in both sides’ comparative advantages. The two-way trade is now dominated by

DGJ02.indd 155 2008-2-13 16:41:01


HS84-85 electrical and electronic equipment, machinery, parts and components (Chia & Sussangkarn, 2006). Strongest growth in bilateral trade has been in manufactured products, particularly in office machine, electrical appliances, telecommunication equipment, petroleum and general industrial machinery.

In terms of trade balance, China has recorded high trade deficit with the ASEAN-6, but enjoyed increasing trade surpluses with the CLMV(Cambodia, Laos, Myanmar, Vietnam) particular since 2001 (Glosny, 2006 and Table 8-3). Such trade implies that the CLMV might face deteriorating terms of trade in implementing the ACFTA roadmap due to their similarities in low value-added and cost-based comparative advantages with China, whereas the ASEAN-6 is in better position thanks to higher levels in the regional manufacturing value chain compared with the CLMV and China. But according to Thitipha Wattanapruttipaisan (2006), the overall deficit in ASEAN trade with China totaled $3.8 billion in 2000 and $9.6 billion in 2005. During 2004-2005, Malaysia accounted for almost one-half of the regional deficit, followed by Thailand and Vietnam (around a quarter each). The trade deficits among the less developed ASEAN members are small in absolute terms but are nevertheless significant relative to their exports to China.

Table 8-3 Trade Balance of China with ASEAN (1990-2004，US$ bn.)

China’s trade deficit with the ASEAN-6

1990 1994 1997 1998 1999 2000 2001 2002 2003 2004

Net bilateral trade

1.02 .300 -.930 -2.95 -3.63 -5.50 -6.04 -9.51 -19.2 -23.1

China’s trade surplus with the CLMV

1990 1994 1997 1998 1999 2000 2001 2002 2003 2004

Net bilateral trade

.200 .400 1.2 1.4 1.03 .700 1.4 1.9 2.8 3.0

Source: Modified from Glosny (2006), Table 2 & 3, p.31.

For services trade, surging two-way tourism is noteworthy. As major services export of ASEAN, inward tourism partly compensates for the merchandise trade deficit. In 2005, ASEAN hosted 3 million tourists from China, or just

DGJ02.indd 156 2008-2-13 16:41:01


6% of the total of 51.3 million arrivals. According to the World Tourism Organization, out-bound tourists from China would reach 100 million by 2020 (Wattanapruttipaisan, 2006). ASEAN’s well-developed and diversified tourism sector should be able to cater to a much larger slice of this huge market. Singapore, Thailand and Vietnam shared almost equally 80% of Chinese tourists in ASEAN in 2005. Malaysia received another 12%. Again, the less developed countries with more difficulty in attracting more Chinese visitors, which made up just 3%-4% of all the tourists in Cambodia, Laos and Burma in 2005.

Regarding ASEAN-China bilateral FDI flows, the two-way FDI flows had made steady expansion at annual rate of 28% during the 1990-2000 period. On the one hand, ASEAN investments in China has reached $34 billion by mid-2004 from just $90 million in 1991, accounting for over 7$ of China’s total utilized FDI inflows. Among ASEAN, Singapore is the leading ASEAN investor in China. On the other hand, China’s FDI into ASEAN, though increasing, is quite small relative to China’s total outward FDI and ASEAN’s total inward FDI, reaching $1.1 billion by 2001 A(ISEAS, 2005). Between 2000-2002, China had only sent 10%-20% of its FDI to Southeast Asia, or just roughly $100 million to $200 million annually (WIR, 2004). But China’s FDI in some natural resource and energy sectors have been skyrocketed, reaching $1.2 billion in Indonesia, given its record FDI outflow surge up to $11.3 billion in 2005 (WIR, 2006, Figure II.9, p. 54).

According to Glosny (2006), China’s FDI, however, would be not much help for more developed ASEAN countries, and it might take many years for ASEAN to attract a large share of China’s FDI outflows as expected, after the ACFTA’s full implementation. Even worse, statically observation has shown the investment diversion trend away from ASEAN, though the FDI inflow stocks of ASEAN is still higher than that of China in 2005 ($375 billion vs. $318 billion) (Table 8-4). For example, in 1990 the ASEAN-5 accounted for 31.2 % of the total FDI inflow into developing Asia-Pacific, compared with China by

A According to Chia and Sussangkarn (2006, p.118), the cumulative ASEAN’s FDI to China in 1995-2003 amounted to only $631.4 million, with nearly half in the Philippines, followed by Malaysia and Vietnam.

DGJ02.indd 157 2008-2-13 16:41:01


15.6%. In 1997, the comparison was 25.2 % for ASEAN-5 vs. 41.8 % for China, and in 2003 such ratio was just 14.4 % for ASEAN-5 compared with 49.9 % for China (Glosny, 2006, Table 4, p.32). According to Chia and Sussangkarn (2006), ASEAN’s share of world FDI flows to the developing world fell from 24.5% in 1985-1990 to under 10% in 2000-2002. Thus, the surge in FDI inflows to China, which is coincident with the plummeting FDI inflows to ASEAN in the post-crisis years, has given rise to the “diversion” perception.

Table 8-4 Foreign Direct Investment Inflow Stocks as a Percentage of GDP in ASEAN Member Economies

CountryFDI inward stocks (US$ mil.) As a percentage of GDP (%)

1990 2000 2004 2005 1990 2000 2004 2005Brunei 33 3868 9017 9292 0.9 89.6 170.6 145.2Cambodia 38 1580 2090 2471 2.2 43.8 48.0 45.6Indonesia 8855 24780 15858 21118 7.7 16.5 7.0 7.7Laos 13 556 641 669 1.6 32.1 26.4 24.5Malaysia 10318 52747 43804 47771 23.4 58.4 37.2 36.5Myanmar 281 3865 4791 4862 5.4 54.8 43.8 43.6Philippines 3268 12810 12896 14028 7.4 16.9 14.9 14.4Singapore 30468 112633 166844 186926 82.6 121.7 156.2 158.6Thailand 8242 29915 52855 56542 9.7 24.4 32.9 33.5Vietnam 1650 20596 29115 31135 25.5 66.1 63.5 61.2ASEAN 63165 263421 338074 374981 18.4 45.4 44.2 43.2for comparison

China 20691 193348 245467 317873 5.4 17.9 14.9 14.3India 1657 17517 38676 45274 0.5 3.8 5.7 5.8World 1789303 5802933 9544887 10129739 8.5 18.3 23.3 22.7

Source: Author’s compilation from UNCTAD (2006), World Investment Report series.

For development cooperation, the fields for functional cooperation and assistance have started with five priorities of agriculture, information technology, human resource development, mutual investment and Mekong cooperation, and now being expanded and intensified to science and technology, tourism, public health, youth, culture, non-traditional security issues, and transportation soon. The ASEAN-China Cooperation Fund has

DGJ02.indd 158 2008-2-13 16:41:01


been established and provided funding for over 40 projects since 1999.In fact, since the 1997 Asian financial crisis, Beijing has expanded its

influence as a major political force in the region and a locomotive for economic recovery and future opportunity. ASEAN member states have benefited from China’s spectacular economic growth as the Asian giant’s growing demands also generate economic benefits for the region as a whole.

Ⅱ. Dealing with a Rising Chinese Economy

The rise of China has become the headline topic of media and buzzword of politicians, policy-makers and experts so far. For economic rise, Chinese economy is now second in the world after the U.S., in terms of purchasing power GDP. China has also accumulated the largest foreign reserves in the world, with over $1 trillion. A China is now of top trading partners of both the U.S., Japan and South Korea, and being the key driver of Asia’s trade flows (Figure 8-1). Analyses and speeches on the rise of Chinese economy often pick up the “threat or opportunity” approach, whereas there emerges recently the win-win observation for the case.

Figure 8-1 Geographic Composition of Asia’s TradeNote: Each nation/region’s global trade, excluding intra-Asia trade as a percentage

of Asia’s global trade, excluding intra-Asia trade in 1993-2004.Source: Rosen (2005), p.5.

A For detailed description on the rise of China in economic terms, see Wong, John (2005).

DGJ02.indd 159 2008-2-13 16:41:02


For ASEAN, it is perceived that a big change in ASEAN’s attitude towards China after the 1997 financial and economic crisis can be recognized, from being perceived as mainly a potential economic threat to a potential benefactor. The increasing interdependence between ASEAN and China is also indicated by the changing proportions of ASEAN’s trade with its such major partners as the U.S., Japan and China. The research by Vaughn and Morrison (2006) shows that the share of ASEAN’s imports from China rose from 2.2% in 1995 to 9.4% in 2004, while the share of ASEAN exports going to China rose from 2.1% to 7.4%. The U.S. share of ASEAN’s imports fell from 14.6% to 11.9% while the share of ASEAN’s exports to the United States fell from 18.5% to 14.3%. The importance of Japan to ASEAN’s trade (relative to total) also fell, especially in terms of ASEAN imports, which as a share of total imports fell from 24.7% to 15.8%. A

China’s Shifting PolicySince the mid-1990s, China has recognized the significance of a peaceful

regional and neighbouring environment for her economic development and modernization. A good neighbourly policy of establishing and restoring diplomatic ties with key ASEAN member states has been proactively undertaken since 1997 and formalized since 2001 with China’s proposal for establishment of an ASEAN-China Free Trade Area (ACFTA) within 10 years. According to Claude Barfield (2004), a few studies have analyzed the evolving perspective of Chinese political leaders regarding closer economic ties with other East Asian nations, explaining China’s shifting policy towards regional cooperation and integration: First, China was convinced by the1997 financial crisis that new institutional arrangements were needed to avoid potential contagion and regional crises in the year to come. Second, China felt the need to counter other discriminatory bilateral and regional agreements created by the EU and the U.S.. Third, with better positioning by full WTO membership, China have a freer hand to agree to bilateral, sub-regional and regional trade agreements. Forth, Beijing increasingly has viewed ASEAN as an important power center in Asia.

ASEAN’s Views of ChinaHowever, ASEAN’s views are not monolithic. ASEAN countries continue

A Vaughn and Morrison (2006), Table 8, page 18.

DGJ02.indd 160 2008-2-13 16:41:02


to harbor a mixed reaction toward the rise of China, viewing this as both a challenge and opportunities. From economic dimension, China’s booming and more opening economy is an unprecedented and untapped opportunity for the neighbouring ASEAN member economies. But both China and ASEAN are dependent on the third exporting markets such as the U.S., EU or Japan, and their export structures are more competing than complementing. China exporters may soon replace ASEAN counterparts in the third markets, particularly the above-mentioned ones. China’s rise has posed a unique challenge because of the combination of the inexhaustible supply of low-cost and hardworking laborers and an abundant supply of highly educated engineers and researchers (Naoko Munakata, 2003).

How to Cope with ChinaASEAN countries have adopted the dual-strategies of engagement and

hedging to protect their interests in the face of a rising China (Robert S. Sutter, 2005): (1) Emphasizes external balancing: ASEAN might seek balancing of power by developing and strengthening relations with extra-regional powers such as the United States, Japan, India, and the EU. ASEAN is consistent in both keeping the United States engaged in the region’s security arrangements and socializing the rising China with the concepts of cooperative security, dialogue processes, or Track-II initiatives, etc.(2) Fostering constructive engagement by utilizing confidence building measures (CBM): ASEAN’s active engagement of China played a critical role in removing ASEAN suspicions and encouraged the group’s positive stance towards Beijing’s formal participation in the regional multilateral arrangement and cooperative mechanisms, such as the ASEAN plus Three. For that reason, ASEAN should take advantage of the rise of China rather than managing to escape from reality or to join others’ efforts for “containment” (Rosen, 2005). Imbedding China together with other regional middle powers such as Japan, Korea, then India or Australia into multilateral cooperative and dialogue summitry of ASEAN may be an effective way of ameliorating their rivalries and preventing potential conflicts. To meet with the interest of the United States as well, ASEAN’s regional cooperation agenda can both prioritize fostering closer regional economic ties and facilitating mutual efforts for anti-terrorism, good governance and emerging “trade” issues.(3) Synergy for deeper and

DGJ02.indd 161 2008-2-13 16:41:02


substantive intra-ASEAN integration: ASEAN should accelerate her intra-regional economic integration and comprehensive cooperation initiatives in order to first and foremost realize the ASEAN Economic Community (AEC) vision by 2015, and to make bona fide commitments to and sound implementations of the bilateral FTA initiatives with China, Japan, India and other potential partners, since all these mentioned processes are the feasible way to upgrade the political position, economic competitiveness and the balance of power capacity of ASEAN in relations with large powers and developed countries. According to Sally (2005), to fully exploit the niches of future East Asian division of labor, the older ASEAN countries should enhance their infrastructure, education, skills and governance to trade off the eroded advantage in cheap labour as well as liberalizing highly protected markets in agriculture and services. The newer and poorer CLMV can exploit comparative advantage in cheap labour relatively to the rising wages in China.

Ⅲ. Roles of ASEAN-China FTA A

1. BackgroundAt the eighth ASEAN summit in Phnom Penh, Cambodia, in November

2002, China and ASEAN signed the Framework Agreement on Comprehensive Economic Cooperation, which provides an ASEAN-China Free Trade Area (ACFTA) by the year 2010 for Brunei Darussalam, China, Indonesia, Malaysia, the Philippines, Singapore and Thailand, and by 2015 for Cambodia, Lao PDR, Myanmar and Vietnam (CLMV) (Table 8-5). B Once fully implemented, the

A This part mainly draws from NGUYEN Xuan Thang & BUI Truong Giang (2004): “The ASEAN-China Free Trade Area and the ASEAN-China Cooperation Prospects” (in Vietnamese), Chinese Studies Review (in Vietnamese), No.6 (58), December 2004, Vietnam Institute of Chinese Studies (VICS), Hanoi.

B The Protocol to Amend the Framework Agreement on Comprehensive Economic Cooperation was signed between ASEAN and China in October 2003 to further regulate the acceleration of tariff reduction and elimination for products under the Early Harvest Programme (EHP) and finalize the Rules of Origin. The EHP has been implemented since January 1, 2004 (Sheng, 2005).

DGJ02.indd 162 2008-2-13 16:41:02


ACFTA would be emerging as the third major free trading center after EU and NAFTA. The future ACFTA would be the largest free trade area in terms of total population of 1.7 billion people, with total GDP of $3000 billion and total trading values of $1500 billion (Long Yongtu, 2002).

Table 8-5 Tariff Reduction Schedule in ACFTA

Year Tariff rates Tariff Schedule Binding countries

2003 (Jul.1) WTO-based MFN rates All items China & ASEAN-10

2003 (Oct.1) Zero Tariffs for fruit and vegetable items made in China and Thailand.

All fruit and vegetable items made in China and Thailand.

China & Thailand.

2004 Starting tariff reductions for agricultural products

Agricultural products China & ASEAN-10

2005 (Jan.1) Starting tariff reductions by all members

All items China & ASEAN-10

2006 Tariffs for Agricultural products at 0%

Agricultural products China & ASEAN-10

2010 Tariffs at 0% All excluding those on sensitive list

China & ASEAN-6

2015 Tariffs at 0% All excluding those on sensitive list

CLMV

Source: Website of ASEAN Secretariat (2003).

The ACFTA, in fact, is the expansion of AFTA commitments with the participation of China, aiming at the following goals: (1) Increasing trade flows between the two markets, China and ASEAN, and moving towards common categories for a future single ASEAN-China market; (2) Improving the investment climate to make both ASEAN and China attractive to each other and to third parties; (3) Enhancing the roles and influence of each other, an importantly mutual complementary in handling the WTO’s adjustments towards the two; (4) Making both Chinese and ASEAN economies adaptable to the changing global and regional contexts.

DGJ02.indd 163 2008-2-13 16:41:03


Box 8-1 Key contents of the future ACFTA

1. Reducing tariffs from July 1,2003 for both parties accordingly with the AFTA/CEPT schemes and the WTO-based MFN commitments, achieving zero tariffs by 2010 for China and ASEAN-6 and 2015 for the CLMV(Table 1).

2. Promoting services trade liberalization in two dimensions: expanding the scopes of liberalization accordingly with GATS and strengthening cooperation in specific fields of services (i.e. the seven committed services sectors under AFAS).

3. Concluding framework agreement on investment for investment facilitation and liberalization, enhancing transparency of investment principles, regulations and protection measures.

4. The Early Harvest Program (EHP):both parties have proposed a fast track for tariff reduction in certain prioritized items and sectors: a) Eliminating tariffs for a large group of agricultural items under HS.1-HS.8. If one country excludes any items from the EHP, it will not benefit from preferential treatment for the same items by the others; b) Each ASEAN member can achieve bilateral arrangements on fast tariff reducing schedule for non-HS.1-HS.8 items with China; c) Tariff eliminating negotiations between ASEAN-6 and China began on January 1,2004 and being completed by January 1,2006, whereas the new ASEAN member countries (CLMV) will benefit from special and preferential treatments with longer tariff phasing-out period, specifically by 2008 for Vietnam, 2009 for Laos and Myanmar, and 2010 for Cambodia.

5.The Framework Agreement’s provisions also cover other fields of economic cooperation with specific plans of actions such as industrial and IT cooperation, human resource development and Mekong Sub-region cooperation initiative promotion. Both parties have agreed to have preference for the new ASEAN members.

Source: NGUYEN & BUI (2004).

DGJ02.indd 164 2008-2-13 16:41:03


2. Potential Impacts of ACFTAWith the above-mentioned contents, the ACFTA would bring about quite

a few positive opportunities for both China and ASEAN in capitalizing their own development targets, particularly in responding to the multi-level trade liberalization process in the globe.

First, there would be some kind of mixed complementary effect, as China and ASEAN are trading both competing and complementing products and services. The two economies are also highly open and dependent on external economic interactions for internal development. Moreover, the geographic proximity helps minimizing transaction costs while mutual understandings facilitate fast and efficient market access.

Second, the would-be ACFTA is not only about trade but also on investment. Such a FDI-driven economy as China really needs an open-up regional market to attract foreign investors, while ASEAN wishes to reap benefits and “positive” externalities from the FDI inflows to the post-WTO accession China.

Third, the ACFTA seems to have quantitatively positive effects on the economic growth prospects of member countries (Table 8-6). According to the ASEAN-China Expert Group’s simulations (Table 8-2), it should increase ASEAN’s exports to China by 48% and increase China’s exports to ASEAN by 55%, leading to an increase in ASEAN’s GDP of 0.9% and an increase in China’s GDP by 0.3%. Furthermore, the ACFTA would benefit ASEAN consumers once “Made in China” goods would displace other sources of imports in ASEAN markets with more competitive prices.

Table 8-6 Impacts on Real GDP of ACFTA

Countries Real GDP (US$ mil.) Increase(US$ mil.) Increase(% GDP)

Indonesia 204031.4 2267.8 1.12Malaysia 98032.3 1133.5 1.17

Philippines 71167.1 229.1 0.32Thailand 165516.0 673.6 0.41Vietnam 16110.9 339.1 2.15

Singapore 72734.9 753.3 1.05China 815163.0 2214.9 0.27

Source: ASEAN-China Expert Group (2001).

DGJ02.indd 165 2008-2-13 16:41:03


Regarding terms of trade effects, China’s demand for natural and energy resources will contribute to higher world commodity prices, while China “flooding” the world with labor-intensive manufactures have pushed down their prices. Therefore, ASEAN economies as net exporters of natural resource products will benefit, but those who are net exporters of labor-intensive manufactures would suffer (Chia and Sussangkarn, 2006).

In terms of FDI flows, according to Urata’s analyses, if and when ASEAN-China FTA becomes effective and free trade between them is achieved, Japanese firms may consolidate their operations in the most appropriate location. With high economic growth and WTO membership, and if ASEAN cannot achieve sustainable economic growth, and trade and FDI liberalization, it appears quite certain that China would attract large amount of FDI at the cost of ASEAN (Urata, 2002). However, since the worsen Sino-Japan relations in 2005, for now many Japanese firms have adopted the“China + 1”investment strategy abroad for diversifying risks, having operations both in China and some ASEAN countries.

3. From ASEAN’s PerspectivesASEAN has, however, concerns about losing export markets to China

due to the relative low-wage competitive advantage of China, though both China and ASEAN members are developing economies. Such concerns derive from: (1) China’s import tariff reduction means future export competitiveness improvement; (2) China and ASEAN have competing trading structures, with similar exports; (3) ASEAN exports will have to “fair” compete with the Chinese ones, as they will no longer benefit from existing special or preferential treatments; (4) The issue of mistrust in bilateral relations still exists, as China’s wage competitiveness is only relative to ASEAN-6.

Despite those concerns, ASEAN has determined to prioritize concluding bilateral FTA with China as a “moving ahead” reward against other big competitors. Such move is not purely economic interests but political cooperation for building a region of peace, cooperation and sustainable development among neighbours. In the global and regional contexts of uncertainty, the ACFTA initiative can be seen as a political commitment for the development interest of both parties. More specifically, the implications of ACFTA for ASEAN are as follows:

DGJ02.indd 166 2008-2-13 16:41:03


(1)The ACFTA has shown the political will of ASEAN in deepening regional economic cooperation and integration, seeking out new cooperative approaches and mechanisms to consolidate the post-crisis ASEAN integration process.

(2)The ACFTA clearly generates fresh momentum for the broadening and deepening ASEAN integration process. Such commitments for an ACFTA by 2010 has stimulated ASEAN members to move steady towards an ASEAN Economic Community (AEC). With the visionary AEC, the ASEAN members will gather into a single production entity with free mobility of goods, services, skilled labors and freer flows of capital. Accordingly, the ASEAN-6 and China will reach zero tariffs by 2010 and the CLMV by 2015 A.

(3)The ACFTA will lessen the dependence of ASEAN on the external market once China becomes part of the would-be ACFTA. The ACFTA would facilitate ASEAN’s penetration into the huge Chinese market of 1.2 billion consumers, opening new trading and investment opportunities for ASEAN in the post-WTO accession China.

(4)The ACFTA will bring about peaceful environment for comprehensive cooperation and materializing potentials in all fields of trade, investment and tourism.

(5)The ACFTA lays foundation for the future pan-East Asian Free Trade Area (EAFTA), not only helping ASEAN in balancing relations with China and Japan but also “hedging” her dependence on the U.S. while maintaining the U.S.’s interest in ASEAN.

Regarding cooperative mechanisms for ASEAN integration, the practice and precedents of ACFTA building process such as the EHP approach imply new evolution in cooperative mechanism of ASEAN. Some observe that the EHP approach endorsed in relations with China and recently with India by ASEAN will encourage bilateral arrangements between outside partners and each ASEAN member, and thus resulting in fragmentation of the ASEAN coherence and hindering the intra-ASEAN deeper integration. Others, however,

A According to recent agreements by ASEAN members, the AFTA building process is to be rescheduled three years ahead, i.e., ASEAN-6 would have zero tariffs by 2007 and the CLMV by 2012, rather than the previous commitments of 2010 and 2015 respectively.

DGJ02.indd 167 2008-2-13 16:41:03


see from the EHP practice that the “2+X ” mechanism A is a promising development and suitable for the evolution of ASEAN cooperative mechanism. In the new global and regional contexts, the conventional ASEAN principles of “consensus” and “non-interference” have been strengthened by the “10-X” mechanism, whereas the “majority vote” and “2+X” alternatives are being considered. This is a critical and disputable question with significant impacts on the ASEAN integration process as well as on the East Asia’s regional integration, requiring further studies and better observations from reality.

4. From China’s PerspectivesThe ACFTA is a new dimension in China’s international political and

economic policy adjustments. As a dynamic developing economy, China has increased her roles in international economic system. This is a natural development when China has gained full membership of the WTO and the trend of bilateral, sub-regional and regional FTA formation is increasingly prevailing. Besides possible effect of market size when viewing the Chinese economy as “the world’s workshop” and positive image of China in international community, China itself considers the ACFTA as the first signal for an official role in a regional institution.

China, therefore, is even more determined with the ACFTA venture due to: (1) The internal requirements of sustaining high economic growth and domestic stability; (2) Increasing the bargaining leverage with other groups of nations and in international and regional fora; (3) For balancing influence in relations with the U.S., China needs a regional environment of peace, stability and minimized role of the U.S.; (4) Proving China’s leading role in regional economic cooperation and signaling an emerging regional leader.

The ACFTA will assist China in materializing the West Development Strategy, particularly for increasing cross-border trade of the four land-locked provinces of Yunnan, Guangxi, Sichuan and Guizhou with Laos, Myanmar and Vietnam (Zha, 2002). With the two economic development corridor programs (i.e., the Kungmin-Lao Cai-Hanoi-Hai Phong corridor and the Nannin-Lang Son-Hanoi-Ha Phong corridor) and the Tokin Gulf economic belt, the border

A Singapore and Thailand have proposed this “2+X” mechanism at the Bali Summit in October 2003.

DGJ02.indd 168 2008-2-13 16:41:03


provinces of China and the Indochina can become “bridging factors” to facilitate the ACFTA building process.

In terms of geo-strategic and geo-economic dimensions, the ACFTA is not purely about trade liberalization between China and ASEAN. According to Professor Wing Thye Woo, University of California at Davis, the ACFTA project will ensure China with strategic energy inputs for the future production of the Chinese economy, a guarantee of China’s economic security A. The ACFTA will not only provide China with free rights of buying and selling goods and services, but more importantly with freer investment in natural resource exploration ventures in the Southeast Asia, for example, the ACFTA will become the strategic supplier on energy and resources as well as a place for diversification of China’s national income. B

5. The Role of ACFTA in ASEAN-China Cooperative RelationsBoth China and ASEAN are dependent on the third exporting markets such

as the US, EU or Japan and their export structures are more competing than complementing. ACFTA will bring in economies of scale and broader market size for increasing bilateral economic interactions and reducing the persistent dependence on the third markets.

The three key concerns for ASEAN in realizing the ACFTA process are: (1) the increasing influence of China; (2) in the post-WTO accession, China’s competitiveness vis-à-vis ASEAN in ASEAN markets; and (3) the ACFTA possible impacts on the CLMV (Ba, 2003).

With China, the ACFTA proposal is the very first FTA initiative committed by China with other countries, not to mention the CEPA with Hong Kong. Such development is a historic corner-stone in the ASEAN-China politico-economic relations, becoming a practical move in confidence building process by China towards ASEAN member countries.

A From Speech by Professor Wing Thye Woo, University of California at Davis, at Vietnamese Academy for Social Sciences (VASS), Hanoi, September 27, 2004.

B Taking crude oil for example, on the one hand, China will invest in the South China Sea and the region to secure the crude oil supply and gain from oil price hike. On the other hand, such profits from increased oil price will compensate the losses of the domestic industrial sectors, which have to pay higher imported oil price.

DGJ02.indd 169 2008-2-13 16:41:03


6. General Observations

China’s proactive engagement with ASEAN in general and formulating ACFTA in particular since the 1990s are founded in the following strategic rationales: (1) Such an arrangement could facilitate a more peaceful regional security environment critical to China’s continued economic rise. (2) It helps reducing the risks from the globalization after accession to the WTO. (3) It is as part of China’s peaceful rise paradigm, addressing the concerns in the region over China’s growing power, changing perceived “China as threat” into “China as opportunity”. (4) It is a practical step to implementing the western region development strategy by developing and strengthening economic ties with the ASEAN countries. (5) By taking the lead in forming an FTA, China also hopes to play a more prominent role as the region’s center of economic growth.

For ASEAN, the future ACFTA helps better tapping into the dynamic economic growth of China. It generates the “domino effect” by energizing other external powers to seek similar arrangements, making ASEAN as geo-strategic FTA hub. A The ACFTA is a decisive move to realize the “ASEAN as FTA hub” strategy: ASEAN’s position is to become the “Hub” of the Hub-and-Spoke pattern in East Asia and ACFTA would be among the key“ASEAN+1”FTA spokes. The ACFTA project helps softening the serious concerns that China may compete and crowd out ASEAN in terms of foreign direct investment, replace ASEAN-6 as a manufacturing base and might cause severe economic imbalance in the less capable and less competitive CLMV. Thus, the ACFTA is an important mean in fostering closer ASEAN-China economic linkages, facilitating intra-regional trade and investment, including flows of services and labors.

The ACFTA helps renewing third-party attentions and interests in ASEAN. The ACFTA building process is quite relevant to the future ASEAN Economic

A In fact, The ACFTA has generated much interest in other extra-regional powers that seek FTAs with ASEAN. The United States proposed the Enterprise for ASEAN Initiative (EAI). Japan also issued the Joint Declaration of the Leaders of ASEAN and Japan on the Comprehensive Economic Partnership on November 5, 2002, in Phnom Penh. India has accelerated her “Look East” Strategy by promoting the ASEAN-India FTA in the subsequent year.

DGJ02.indd 170 2008-2-13 16:41:04


Community (AEC), producing some kind of “coordinating effects” between the two processes, then fostering deeper integration among ASEAN members. However, the prudential observation by Chia and Sussangkarn (2006) on the downside risks that the full negative impacts on ASEAN economies from the integration of China into the world market may not have been fully felt at the current time, and therefore the potential impacts may be somewhat underestimated at present, is worth taking for consideration.

Ⅳ. ASEAN and China in the Regional Cooperation

The roles of ASEAN and China in regional cooperation are multi-dimensional, including political and security cooperation, economic integration, social and cultural and development cooperation. This part will focus on the economic dimension of regional cooperation that ASEAN and China have made significant contributions or will play a potential role.

1. Being Responsible to Regional Economic AffairsChina’s lessening impacts of the 1997 regional economic crisis by providing

short-term assistance during the financial crisis and active involvement in long-term financial monitoring and assistance programs have showed that she could play a constructive role in helping Southeast Asia to weather the storm and her devotion to preventing the recurrence of such a crisis in the future. China together with ASEAN’s substantive participation into the regional and sub-regional economic cooperative schemes and frameworks such as the ASEAN Plus Three’s CMI, the ADB’s Asian Bond markets or the Greater Mekong Sub-regional (GMS) cooperation, etc., has also proved the ASEAN-China partnership a responsible agent of regional economic cooperation and integration process.

2. Shaping the Regional Cooperation FrameworksFrom the very beginning, ASEAN and China, together with Korea and Japan

jointly established a new discussion mechanism, the ASEAN Plus Three (APT, “ASEAN+3”), to develop regional solutions to future problems. The first APT summit took place in December 1997, in Kuala Lumpur, and the recent annual meetings have led to the creation of the APT Surveillance Process and the APT Early Warning System for improving regional monitoring and information

DGJ02.indd 171 2008-2-13 16:41:04


sharing to reduce the risks of a future crisis. The East Asian Summitry, also first held in Kuala Lumpur in 2005, has received decisive moves from ASEAN and China to be launched. China also shown her willingness to host the second EAS in 2006, though finally agreed to be held only by ASEAN members on rotation.

3. Driving the Regional Economic Integration ProcessThe feasibility of a region-wide East Asian Free Trade Area (EAFTA) has

been studied and confirmed by the regional joint expert group. A The ACFTA has provided political momentum for the EAFTA process by stimulating other “ASEAN+1”FTA initiatives, making logical steps towards a region-wide East Asian FTA with“ASEAN+3”countries as founding members. The earlier enforcement of ACFTA would not only create more intra-regional trade but also attract new investment from Japan, Korea and other ASEAN’s dialogue partners, who could not resist huge business opportunities brought about by the ACFTA.

With the “domino effects” from the ACFTA building process, such ASEAN’sbilateral FTA ventures with Japan (AJFTA), South Korea (AKFTA) and India (AIFTA) are likely to speed up. Moreover, the possibility of a pan-East Asian Free Trade Area (EAFTA) with the ACFTA as inception or foundation has been frequently discussed, resulting in an EAFTA with the sequencing participations of Japan and South Korea into the ACFTA. In the long term, the future EAFTA will be the corner-stone for a visionary East Asian Economic Community (EAEC). On the other hand, with pressure from a potential acceleration of the“ASEAN+3”process (including Japan and South Korea), the ACFTA building process might have to keep up with the pace or both ASEAN and China will be secondary in the on-going East Asian cooperative and integrating process.Now, China is clearly the leader of the race for repositioning in an increasingly dynamic and integrated East Asian region, with her commitments to attain the ACFTA by 2010. Thus, it is safe to say that ACFTA is the very first and logical step towards a wider and deeper economic integration in East Asia, and the ASEAN-China cooperative relations will further and better develop towards a visionary East Asian Economic

A See The East Asia FTA: Rationales and Modality by Joint Expert Group on the Feasibility Study on the East Asia Free Trade Area (JEG-EAFTA, 2006).

DGJ02.indd 172 2008-2-13 16:41:04


Community (EAC).4. Engaging into Regional Issues of Mutual Concerns Trans-regional issues, particularly non-traditional security ones, such as

epidemics (AIDS, SARS, bird flu), natural disasters (Tsunami), international terrorism and transnational crimes (drug and human trafficking), or maritime security, energy security, etc., are areas that increasingly require regional and collective efforts, and where ASEAN and China have played a key role in addressing the regional concerns, together with other neighbours.

Thus, during the last decade, China has been active in fostering closer economic linkages with ASEAN and within East Asian nations. Given closer economic linkages and constructive bilateral relations, ASEAN and China with the ACFTA project can play as a main pillar for the East Asian economic integration arrangements. The ASEAN-China relations in general and economic partnership in particular should become one of the key drivers in shaping the regional cooperative framework.

Ⅴ. Future of ASEAN-China Economic Relations

Since the mid-1990s, China and the Association of Southeast Asian Nations (ASEAN) have developed a growing partnership in security cooperation, economic and trade interdependence on the basis of “constructive engagement”. China-ASEAN relations have evolved from enmity and suspicion to amity and greater cooperation on a broad range of issues. Having established a strategic partnership for peace and prosperity, the two sides are working toward building a stable, long-term relationship for the future (PUB 735). The major developments took place over the past 5 years when the political, economic, and strategic elements of China-ASEAN have become even more pronounced in the forms of the China-ASEAN Free Trade Area, the“ASEAN+3”process, the EAS, and China’s accession to the ASEAN Treaty of Amity and Cooperation and the signing of the 2002 Declaration on the Conduct of Parties in the South China Sea earlier.

The ACFTA venture is a natural evolution in ASEAN-China relations to adopt to the new developments of the international political economy. The

DGJ02.indd 173 2008-2-13 16:41:04


ACFTA building process will be in the right direction, since it well fits into China’s top priority of economic development and ASEAN’s “balance of power” approach towards world super-powers and “constructive engagement” by China.

In the future, the ASEAN-China economic relations should act as a core pillar for future East Asia economic architecture. The others would be Japan and Korea, as the three Northeast Asian economies are the economic “core” of the East Asian economic space, accounting for over 20% of world GDP, compared to just under 2% for ASEAN and under 1.5% for Australia (Scollay, 2004). An East Asian Free Trade Area could not become a reality without the support and participation of the Northeast Asian economies, and the closer ASEAN-China economic relations should facilitate others to join the process of deeper regional economic integration in East Asia.

China with Southeast Asia neighbouring in harmony and with common endeavour will not only turn into a win-win partnership but also contribute to regional and global peace, stability, prosperity, and minimize the potential conflicts over existing disputes.

Bibliography

ASEAN Secretariat (2005):Statistical Yearbook 2004, Jakarta. ASEAN-China Expert Group on Economic Cooperation (2001): Forging Closer

ASEAN-China Economic Relations in the Twenty-first Century, report presented to the ASEAN-China Senior Official Meeting, November 3, 2001. The full text is online at www.aseansec.org/newdata/asean_chi.pdf.

ASEAN Secretariat (2003):Protocol to Amend the Framework Agreement on Comprehensive Economic Cooperation between the Association of Southeast Asian Nations and the People’s Republic of China, October 2003.

ASEAN Secretariat (2002):Framework Agreement on Comprehensive Economic Cooperation between the Association of Southeast Asian Nations and the People’s Republic of China, November 4, 2002.

Ba, Alice D.(2003): “China and ASEAN: Renavigating Relations for A 21st century Asia”, Asian Survey, Vol.43, No.4, pp. 622-647.

Barfield, Claude (2004):The United States, China and the Rise of Asian Regionalism,

DGJ02.indd 174 2008-2-13 16:41:04


Paper Delivered at the Western Economics Association Annual Conference, Vancouver, British Columbia, Canada.

BUI Truong Giang & VO Tri Thanh (2007): Approach to Development Gaps in ASEAN: A Vietnamese Perspective, ASEAN Economic Bulletin, Special Issues, April 2007, ISEAS, Singapore.

Chia, Siow Yue & Sussangkarn, Chalongphob (2006): “The Economics Rise of China: Challenges of Opportunities for ASEAN”, Asian Economic Policy Review, No.1, pp.102-128, Japan Center for Economic Growth.

Chia S.Y. (2005): “ASEAN-China Economic Competition and Free Trade Area”, Asian Economic Papers, No.4, pp. 109-147.

Chirathivat, Suthiphand (2002): “ASEAN-China Free Trade Area: Background, Implications and Future Development”, Journal of Asian Economics, Vol.13 (2002), pp.671-688.

Glosny, Michael A. (2006): “Heading toward a Win-Win Future? Recent Developments in China’s Policy toward Southeast Asia”, Asia Security, Vol.2, No.1, pp.24-57.

HLTF (2003): Reports by the HLTF during March-August 2003. ISEAS (2005):ASEAN-China Relations: Realities and Prospects, edited by Saw Swee-

Hock, Sheng Lijun and Chi Kin Wah, Institute for Southeast Asian Studies, Singapore. JEG-EAFTA (2006):The East Asia FTA: Rationales and Modality by Joint Expert

Group on the Feasibility Study on the East Asia Free Trade Area (EAFTA), ASEAN Secretariat.

Munakata, Naoko (2003):The Impacts of Rise of China and Regional Economic Integration in Asia——A Japanese Perspective, Statement before U.S.-China Economic and Security Review Commission Hearing on “China’s Growth as a Regional Economic Power: Impacts and Implications”, Thursday, December 4, 2003, Washington D.C..

NGUYEN Xuan Thang & BUI Truong Giang (2004): “The ASEAN-China Free Trade Area and the ASEAN-China Cooperation Prospects” (in Vietnamese), Chinese Studies Review (in Vietnamese), No.6 (58), December 2004, Vietnam Institute of Chinese Studies (VICS), Hanoi.

Scollay, Robert (2004): Regional Trade Liberalization in East Asia and the Asia-Pacific: The Role of China, Working Paper No.35 (December), presented at the 2004 LAEBA Annual Conference, Beijing, China.

Robert S. Sutter (2005): China’s Rise in Asia: Promises and Perils, in Lanham: Rowman & Littlefield Publishers, Inc., Chapter 7 “China-Southeast Asian Relations”, pp.177-208.

Rosen, Daniel (2005):China in Changing Geography of Asia, NDU/AEI Seminar, July 21, 2005.

Sally, Razzen (2005):China’s Trade Policy in Wider Asian Perspective, Paper prepared for the LSE/CCER conference, Beijing, August 22/23, 2005.

DGJ02.indd 175 2008-2-13 16:41:04


Sheng, Jilun (2003): China-ASEAN Free Trade Area: Origins, Development and Strategic Motivations, ISEAS Working Paper/International Politics and Security Series, No.1/2003, ISEAS, Singapore.

Sussangkarn, Chalongphob (2004): The Emergence of China and ASEAN Revitalization, Thailand Development Research Institute; Presented at the ABCDE-Europe, Brussels, Belgium, May 10, 2004. Updated from a paper for the AT-10 project on “The Emergence of China and the Evolution of Regional Economic Integration in East Asia”, supported by the Tokyo Club Foundation for Global Studies.

Vaughn, Bruce & Morrison, Wayner M. (2006): China-ASEAN Relations: Trends, Issues and Implication for the United States, CRS Report for Congress, April 4, 2006, Congressional Research Services, The Library of Congress, USA.

Wattanapruttipaisan, Thitipha (2006): “Blossoming relationship”, Bangkok Post, posted at http://www.bilaterals.org/article.php3?id_article=6142 on October 5, 2006.

Wong, John (2005): China’s Economic Rise: What it Means to ASEAN, paper presented at China Policy Institute and Institute of Asia-Pacific Studies, University of Nottingham, UK, November 3, 2005.

Yongtu, Long (2002): Speech by Chinese Deputy Foreign Trade Minister Long Yongtu to 2002 China-ASEAN Free Trade Conference, Beijing, May 15, 2002, reported by the CCTV.

Yuan, Jing-dong (2006): China-ASEAN Relations: Perspectives, Prospects and Implications for U.S. Interests, Strategic Studies Institute, U.S. Army War College.

Zha, Daojiong (2002): “The Politics of China-ASEAN Economic Relations: Assessing the Move Towards a Free Trade Area”, Asian Perspective, Vol. 26, No.4, 2002, pp.53-82.

DGJ02.indd 176 2008-2-13 16:41:05

Cataloguing in Publication Data Making New Partnership Edited by Zhang Yunling —March 2008

ISBN 978-7-5097-0041-9/D·0018

Published by Social Sciences Academic Press (China) 13F, 15F, A/B Tower of Hua Long Plaza, Bldg 3, Jia No.29, Beisanhuan Zhonglu, Xicheng District, Beijing, China Postcode: 100029

ISBN 978-1-84464-051-5

Distributed by Paths International Ltd. (UK) PO Box 4083 Reading RG8 8ZN UK

©2008 by Social Sciences Academic Press (China)

Editor: Hu Yali Cover designer: Cui Zhenjiang Printed in Beijing, China All rights reserved. No part of this book may be reproduced by any means without written permission from the publisher.

China-ASEAN : making new partnership

Documents

Transcript of China-ASEAN : making new partnership