Wednesday, April 27, 2011

Limits of Chinese Power in Southeast Asia

China's tough line on territorial disputes worries the region

That China is one of the most powerful states in the world is no longer a contested claim, but cataloging China's increasing material resources does not in itself demonstrate that China is powerful.

A more telling question is how effectively does China convert its growing resources into influence over other states' strategic choices and the outcomes of events?

Southeast Asia presents an apparently "easy" case for investigating China's rising power. Given the significant asymmetry of power, if China's power has indeed grown, we would expect to see altered preferences and behavior of these weaker neighbors in response to coercion, persuasion or inducement from China.

Results so far are mixed. While China has been able to harness much of the region's economic energy in a favorable direction, it does get its way in territorial and resource conflicts.

China's burgeoning economic rise has restructured economic networks in East Asia, fueling regional production for China as the final assembly and export point to the rest of the world. The Chinese government has also tried to consolidate its economic leadership position by driving broader economic regionalism.

In less-developed mainland Southeast Asia, China's participation has made feasible region-wide economic development plans for the Greater Mekong Subregion initiative of the Asian Development Bank, drawing international investment for infrastructural projects.

These connect the poorer states – Cambodia, Laos and Vietnam – to the markets of China and Thailand, while improving China's access to raw material supplies and ports in the Indian Ocean and East China Sea. These schemes have also spurred Japanese and American interest and investment in Mekong regionalism.

More prominently, China's initiative for a free trade agreement with ASEAN overcame the nagging problem of galvanizing an economic integration project. When it came into effect in 2010, the China-ASEAN Free Trade Agreement formed the world's largest free trade area, comprising 1.9 billion consumers and US$4.3 trillion in trade.

Southeast Asian states were unable to achieve effective regional economic integration because of the Cold War and competitive economic profiles in low-cost manufacturing. China has lent weight and momentum to translating their shared developmental imperative into regional economic integration. It exercises power via a multiplier effect: The size of its manufacturing sector produces economies of scale, and its political clout lends significance, even legitimacy, to the enterprise.

While such a multiplier role is crucial to China's political successes in Southeast Asia, it paradoxically does not provide the best evidence for China's influence, because Beijing is mobilizing pre-existing shared preferences and does not have to get others to do what they did not want to do.

In contrast, situations in which the pre-existing preferences of other states are unclear or undecided – such as the prominent debate in the 1990s about whether rising China was a threat – present opportunities for China to influence its neighbors by persuading them that its own narrative of the so-called peaceful rise is more accurate and certainly more profitable. Against the gathering discourse about a China threat, an official Chinese campaign took off from the mid-1990s to shape world perceptions of China instead as a benign, responsible great power.

This campaign involved an alternative narrative about China's cooperative New Security Concept, and its "peaceful rise" or "peaceful development" as it strives for a "harmonious world." The message was intended to reassure neighbors that China's resurgence would not threaten their economic or security interests because of its peaceful intentions, limited national capabilities, mutually beneficial development trajectory and pluralist international mindset.

Rhetoric was accompanied by policy action. In Southeast Asia, China negotiated land, though not maritime, border disputes with Vietnam; fully participated in ASEAN institutions; and undertook highly publicized restraint and aid during the 1997 and 2009 financial crises. China's persuasive power encompassed economic inducement. Its CAFTA Early Harvest Programmes with some ASEAN countries – the partial lifting of trade barriers on selected goods – have been portrayed by Chinese analysts as China "giving more and taking less," working towards harmony and enrichment of its neighbors.

Yet, there are limits to how much policymakers in Southeast Asian states have been reassured regarding the China threat. China's power to persuade is rooted in its ability to sustain benign policy action. Apart from efforts to offset some of the adverse effects of Chinese economic competition, China's neighbors are also watching its behavior in more serious conflicts of interest.

The best way to gauge the conversion of power into influence is in cases where the powerful actor causes another actor to change policy on a significant issue on which they have clashed. In the case of China and Southeast Asia, such issues include policies on Taiwan, defense relations with the US and policies on territorial disputes. On these potential hard cases, it's difficult to find significant changes in Southeast Asian states' policies in response to Chinese actions to date.

Of these, China has expended most effort in the disputes over atolls in the South China Sea. China and ASEAN agreed a Declaration of Conduct in 2002, committing to peaceful negotiations. Yet, the Chinese navy continued maneuvers to assert its claims, leading to skirmishes with Vietnam and the Philippines. Two months into a Vietnamese concession to develop gas fields off the Vietnamese coast in 2007, BP suspended operations, reportedly as a result of Chinese threats to exclude it from future energy deals in China. In March this year, Chinese naval vessels tried to interrupt oil exploration by the Philippines in waters that Manila considers its own.

At a regional defense ministers' meeting in June 2010, statements suggesting that China now regards the South China Sea as part of its "core national sovereignty interests" led US Secretary of Defense Robert Gates to warn that the US "oppose[s] the use of force and action that hinder freedom of navigation." One month later, Secretary of State Hillary Clinton reiterated US "national interest" in the peaceful resolution of these multilateral disputes. In October 2010, after the Japanese Coast Guard detained a Chinese fishing trawler for allegedly intruding into Japanese waters, a Sino-Japanese standoff ensued. One direct result was the further strengthening of US interest in China's behavior in maritime disputes. The Obama administration publicly affirmed that the US-Japan treaty umbrella extends to the Senkaku/Diaoyu Islands and reiterated the importance of peaceful dispute resolution, freedom of navigation and respect for international maritime laws in the South China Sea.

China's behavior in these disputes constitutes a critical test of its intentions, and its hard line backfired seriously in that it led to a closing of ranks across Southeast Asia, Japan and the US. Beijing's actions lend weight to regional pessimists who are not persuaded of its peaceful rise, and sustained coercive action may prompt its neighbors towards the very containment policies that it wishes to avoid.

Having said this, it is worth noting that, so far, there are few good cases of China managing to make Southeast Asian states to do what they otherwise did not want to do. Alongside Beijing's successful record of persuasion and inducement, it has shown caution in exerting pressure on its neighbors with the most challenging issues. The recent backlash in the South China Sea is likely to make Beijing more cautious. China's still limited military capacity provides an important explanation, since, particularly in the maritime access and security arena, the presence of the United States still serves as a significant deterrent.

By Dr. Evelyn Goh reader in international relations and ESRC mid-career development fellow (2011-13) at Royal Holloway, University of London. This is reprinted with permission from YaleGlobal, the magazine of the the Yale Center for the Study of Globalization, Asia Sentinel

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