China-Southeast Asia relations: trends, issues, and implications for the United States.(CRS Report for Congress: Received through the CRS Web)

Updated April 4, 2006

Summary

Southeast Asia has been considered by some to be a region of relatively low priority in U.S. foreign and security policy. The war against terror has changed that and brought renewed U.S. attention to Southeast Asia, especially to countries afflicted by Islamic radicalism. To some, this renewed focus, driven by the war against terror, has come at the expense of attention to other key regional issues such as China's rapidly expanding engagement with the region. Some fear that rising Chinese influence in Southeast Asia has come at the expense of U.S. ties with the region, while others view Beijing's increasing regional influence as largely a natural consequence of China's economic dynamism.

China's developing relationship with Southeast Asia is undergoing a significant shift. This will likely have implications for United States' interests in the region. While the United States has been focused on Iraq and Afghanistan, China has been evolving its external engagement with its neighbors, particularly in Southeast Asia. In the 1990s, China was perceived as a threat to its Southeast Asian neighbors in part due to its conflicting territorial claims over the South China Sea and past support of communist insurgency. This perception began to change in the wake of the Asian financial crisis of 1997/98 when China resisted pressure to devalue its currency while the currencies of its neighbors were in free fall. Today, China's "charm offensive" has downplayed territorial disputes while focusing on trade relations with Southeast Asia which are viewed by some as the catalyst for expanding political and security linkages. In November 2004, China and the Association of Southeast Asian Nations (ASEAN includes Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, and Vietnam) agreed to gradually remove tariffs and create the world's largest free trade area by 2010. China is also beginning to develop bilateral and multilateral security relationships with Southeast Asian states.

This report explores what is behind this shift in China-ASEAN relations and how it may affect American interests in the region. The key policy issue for Congress is to assess how the United States should view China's expanding posture in Southeast Asia and decide what is the best way to react to this phenomenon.

 
Contents 
 
  America's Interests in the Region 
  Chinese Interaction with Southeast Asia 
  China's Regional Objectives 
  China-ASEAN Trade and Economic Relations 
  Overview of Trade Trends 
  Possible Implications for the United States of an ACFTA 
  Major Sea-Lanes Transiting Southeast Asia 
  South China Sea Dispute 
  China's Relations with Key Regional States 
    Burma 
    Thailand 
    The Philippines 
    Indonesia 
    Vietnam 
    Singapore 
    Australia 
  China's Integration with the Greater Mekong Sub-Region 
  Regional Security Architectures 
  Implications for American Interests 
  Policy Implications 
 
List of Figures 
 
Figure 1. Map of Strategic Straits of Southeast Asia 
 
List of Tables 
 
Table 1. China's Exports to ASEAN: Selected Years 
Table 2. China's Imports From ASEAN: 
Table 3. U.S. Exports to ASEAN, Selected Years 
Table 4. U.S. Imports from ASEAN, Selected Years 
Table 5. Comparisons of U.S. and Chinese Trade With ASEAN, 2005 
Table 6. Top 5 U.S. Exports to ASEAN, Selected Years 
Table 7. Top 5 U.S. Imports From ASEAN, Selected Years 
Table 8. ASEAN Trade with Selected Major Partners for 1995, 2000, and 
  2005 as a Percent of Total Trade 
Table 9. ASEAN Estimates of the Trade Effects of an ACFTA on Various 
  Countries and Regions 
Table 10. Actual Real GDP Growth and Projections for ASEAN Countries, 
  China, the United States, and the World, Various Years 

America's global and regional interests are linked in Southeast Asia. Decisionmakers have observed that "the most important bilateral relationship of the 21st century is likely to be that between China and the United States" and that "the likelihood of conflict and economic trauma will be great" if it is poorly managed, but that "the benefits in terms of economic prosperity and world peace," will be great if it is handled well. (1) Moving from the global to the regional level of analysis, others have observed the following with regard to Southeast Asia.

 
   China's ultimate strategic purpose remains a subject of debate and 
   speculation among interested observers. Southeast Asia, however, is 
   the sole region adjacent to China in which Chinese influence can 
   most easily expand. A benign interpretation would see China as 
   simply cultivating the sort of stable, peaceful, and prosperous 
   regional environment that China requires for its own successful 
   modernization. A more skeptical view sees China playing a long-term 
   game designed to curtail American influence and weave a close-knit 
   economic and security community with China at the center. (2) 

China's economic growth is dramatically changing its economic and political relations with the world, including Southeast Asia, an area where the United States has strong economic, political, and strategic interests. This report will discuss issues related to China's rapidly expanding ties with Southeast Asia.

Few major international relationships have changed as much or as quickly in recent years as has the relationship between China and the Association of Southeast Asian Nations (ASEAN). (3) Many observers see that relationship as having been transformed from one of suspicion and fear, driven at first by ideology and then largely by ongoing territorial disputes, to one of increasing cooperation and collaboration, particularly in the area of trade. (4) This shift in the geopolitical orientation of Southeast Asia is part of what some see as a larger shift in the international balance of power which puts the rise of Asia in general, and China in particular, on a scale equivalent to the rise of Western Europe in the 17th century or the rise of the United States at the beginning of the 20th century. (5) Some view the United States as unprepared to deal with this restructuring of the global balance of power. Others have observed in the Southeast Asian context that there has not been a time "when the U.S. has been so distracted and China so focused." (6) This distraction is largely due to the U.S. focus on the war in Iraq. Such fundamental change has the potential to affect American interests.

Many analysts expect that China's history and culture will play a key role in shaping China's external relations. In this view, China is engaged in a drive to regain its "rightful place." This drive has two key components. The first is the drive for unity, which involves the control of Taiwan, Tibet, and Xinjiang, which are outside the scope of this report. The second drive is to restore China's traditional influence among its neighbors. China appears to view Southeast Asia as "potentially the most fruitful and receptive region for the projection of Chinese influence." (7) This drive could potentially, but not necessarily, bring American and Chinese interests into competition and/or conflict in Southeast Asia. China's relations with Southeast Asia have been described by some analysts as either part of a traditional "Confucian tribute system" or, more recently, as part of a more Western concept of a "sphere of influence." (8)

The United States has both sought to engage China and viewed China as a strategic competitor. The George W. Bush Administration moderated its initial view which emphasized China as a strategic competitor. This shift has been explained by the need for China's cooperation in the war against terror and on other issues. While the war against terror has changed the dynamics of the relationship, it has not changed the underlying factors that led many in the United States to view China as a strategic competitor. Also, while the United States has adopted a more cooperative policy towards China in recent years, Japan, the principal U.S. ally in Asia, appears to be increasingly wary of China's power, with some in Japan viewing it as a potential military threat. (9)

China's embrace of market-led economic development may mitigate against past assertive postures in the region and lead to more multilateral and cooperative approaches. China's increasingly active diplomacy towards Southeast Asia can be viewed as a benign outgrowth of its efforts to achieve economic development for the betterment of its people or as part of an assertive foreign policy. China's embrace of multilateral initiatives, such as the 2003 Treaty of Amity and Cooperation with ASEAN, the East Asia Summit, and efforts to forge a China-ASEAN Free Trade Area, which was advanced in November 2004, are variously viewed as evidence of a non-threatening trade-focused China or as part of an evolving grand strategy that will rely on "formal and informal mechanisms (strengthened multilateral institutions and strong economic ties, respectively) of interdependence as a de facto strategy for restraining the United States." (10) (For further information see CRS Report RL33242 East Asia Summit: Issues for Congress, by Bruce Vaughn.)

China's rise also creates concern about how Beijing will use its growing economic and military power. Militarily, China is the dominant regional power in Asia and one of the world's emerging great powers. Some analysts view the emergence of a new great power onto the world stage as causing likely disruption to the existing balance of power which could lead to conflict. Others see the potential to manage such a shift in the balance of power in a peaceful manner. How China engages Southeast Asia may tell us much about the nature of China's rise. In the view of one analyst, "... with regard to Asia, China seeks to promote an image of being able to handle its greater economic and strategic clout responsibly ... China wants to play a constructive role in regional economic and political affairs, perhaps with a view to building a stable foundation for greater influence in the future." (11) For others, there is concern that as China's power grows, so too will China's ambition and assertiveness. (12) There are some recent signs that China may seek to expand its economic and political influence in Southeast Asia into the security realm as well. While Chinese efforts to expand its economic and political influence are regarded as benign by many, views of China's overall posture in the region may change if it seeks to develop new military-to-military relations with Southeast Asian states. Some analysts feel that such an expansion of influence would likely raise broader concerns in defense policy circles and could be viewed as a challenge to America's posture in the region.

America's Interests in the Region

How China's growing assertiveness may impact American regional interests in Southeast Asia depends on how U.S. interests are defined. The following are traditionally considered to be America's key regional interests. (13)

* Promotion of stability and balance of power: with the strategic objective of keeping Southeast Asia from being dominated by any hegemon

* Prevent being excluded from the region by another power or group of powers

* Freedom of navigation and protection of sea lanes

* Trade and investment interests

* Support of treaty allies and friends

* Promotion of democracy, rule of law, human rights, and religious freedom

Another more recent addition to the list is preventing the region from becoming a base of support for terrorists.

The U.S. National Security Strategy Statement calls on China to "act as a responsible stakeholder that fulfills its obligations and works with the United States and others to advance the international system...." It goes on to state that if China pursues a "transformative path of peaceful development" the United States will "welcome the emergence of a China that is peaceful and prosperous and that cooperates with us to address common challenges and mutual interests." (14) To promote its interests relative to China in Southeast Asia, the United States has generally followed a strategy that maintains a "balance of power in the region through our alliances and military presence" while also engaging China to "encourage simultaneously its responsible integration into international affairs ..." (15)

Assistant Secretary of State for East Asian and Pacific Affairs James Kelly, in testimony before the House International Relations Committee in June 2004, stated that "this is a time of transition" in the region and emphasized that "at the top of our list of policy priorities is waging the war against terror" before he identified the Philippines and Thailand (as well as Japan, South Korea and Australia) as "traditional allies [and] strategic partners in and beyond the region." Singapore was also identified as an effective partner for building regional security. He also discussed the ASEAN Cooperation Plan and the Enterprise for ASEAN Initiative (EAI) which seeks to strengthen America's relations with ASEAN. Under EAI the United States is seeking to develop free trade agreements with Southeast Asian states. Singapore was the first to sign an agreement with the United States. (16) Discussions with Thailand have followed.

Despite these initiatives and statements of U.S. goals, some analysts perceive the United States as distracted by Iraq and Afghanistan and, as a result, not sufficiently focused on Southeast Asia beyond its status as the second front in the war against terror. This has led some to view U.S. policy as unnecessarily narrow in focus. (17) In the view of one observer, "China is seen by some to be slowly filling the vacuum left behind by the United States in the political, economic and security spheres in the region." (18) These perspectives differ with official U.S. pronouncements. U.S. officials have stated "our relationships in the region, including five treaty allies and numerous friendships, are as strong as ever."19

Chinese Interaction with Southeast Asia

China's historical involvement in Southeast Asia, as well as cultural affinity for China in many Southeast Asian states, will likely influence how China is viewed by regional states. (20) Historically, China has exerted much influence in Southeast Asia. This can be seen in China's past cultural influence in, and past dominance of, Vietnam as well as today through its increasing presence in Burma. While Chinese influence has extended through its contiguous borders with continental Southeast Asia, there was a brief period from 1405 to 1433 when China sent vast fleets under the command of Zheng He through Southeast Asia and into the Indian Ocean littoral to exact tribute for the Ming Dynasty. (21) The Chinese diaspora has also led to significant ethnic Chinese minority populations in Burma, Thailand, Malaysia, the Philippines, and Indonesia. Vietnam's relationship with China differs from other ASEAN states. Unlike other Southeast Asian states, Vietnam was ruled by China for a lengthy period of its history. During the Cold War, China supported communist parties or insurgencies in every Southeast Asian State with the exception of Singapore and Brunei. China ended such support over time with the last support being given in Burma. This was ended in the 1980s. (22)

Currently, between 30 and 40 million ethnic Chinese reside in Southeast Asia. (23) The degree to which ethnic Chinese have been integrated into Southeast Asian societies has varied greatly across the region with Chinese being relatively better integrated in non-Muslim states than Muslim majority states. While ethnic Chinese have been subject to past abuses and discrimination, the trend line for earlier waves of Chinese immigration has been towards greater levels of integration into their respective new homelands. Most of the Chinese of Southeast Asia come from Guangdong and Fujian Province. The over two million ethnic Chinese in Singapore make up approximately eighty percent of Singapore's population and make it the only country in Southeast Asia with an ethnic Chinese majority. Ethnic Chinese are largely assimilated in Thailand, a …