The logic of China’s economic strategies in Southeast Asia

In so many ways, China’s strategies for its involvement in Southeast Asia are much more pragmatic, more predictable, and considerably less nefarious than any other rising global power that previous laid sight on region.  Moreover, those strategies, born in the 1990s, make even more economic sense now than at the time of their inception due to the current needs of its development trajectory.

Energy consumption and the speed of urbanization in China are rising at ever-increasing rates.  To keep pace, the central government must secure energy resources and safe, low-cost agricultural goods. Southeast Asian states, in a complementary fashion, have robust food export markets, as in the case of Thailand or Malaysia, or as in Laos and Myanmar, have abundant endowments of energy resources.  Chinese state owned enterprises and private business interests seek to access and integrate into these markets and new infrastructure linkages such as highways and high-speed railways are indicators of deeper market integration abroad.

As an economy attempting to avoid the middle income trap, China needs to create new channels for RMB investment outside its borders and the sale of home-grown products in the developing world. Strong consumer markets in Malaysia, Thailand, and Singapore demand higher value goods like electronics and machinery which China is eager to export.  New Chinese markets located on the outskirts of towns and cities in Laos and Burma sell cheap, plastic everyday use items and provide employment opportunities for migrant Chinese merchants, especially those who cannot find jobs at home in provinces like Zhejiang and Hunan.

From a geographic perspective, as a large state with only one coast line, China can cut thousands of kilometers off of Indian Ocean shipping routes headed for its deep water ports in Guangzhou and Shanghai by building “west coast” ports in Myanmar and the Andaman Sea (a strategy that Thailand is taking up as well) and avoid passing through the strategic chokepoint of the Straits of Malacca.  This advantage will considerably drop the transportation cost of oil and other key energy resources coming from the Middle East, and with these ports, in the event of potential regional security crisis, China can still maintain its resource base should the US Navy or other potential regional rival block the Malacca straits. An important caveat to this strategy is that it works only as long as Myanmar maintains good relations with China. These strategic ports are both commercial and naval in orientation should also help facilitate trade with India’s east coast while countering India’s naval control of the Indian Ocean.

China seeks to court regional states like Laos, Cambodia, and Myanmar which are strapped for income and need development assistance, and bring its poorer neighbors into its sphere of influence with aid, investment, and institutional support.  China uses its influence in these states to shape policy at the regional and multilateral level and aide in the mediation of regional disputes and conflicts such as sovereingty scuffles in the South China Sea.  Lastly, by delegating regional policymaking to the cities of Kunming and Nanning, the central government is giving its frontier regions a new economic raison d’etre that fits into its own strategy to bring economic growth to its western regions.

But even the most pragmatic strategies need to maintain adaptive flexibility, and strategists need to assure that the people, institutions, and products that represent those strategies fit the bill.

As late as five or six years ago, few could predict the gravity of the current Chinese economy and the needs of China’s current push to rapidly urbanize.  To illustrate, China has had a moratorium on private lumber exploitation since 1999, but the 2000+ tall apartment buildings that are now being built in each of the 300+ metropolises you have never heard of each require rooms full of furniture. Hence a good portion of the wood for that furniture will come from it’s closest neighbors, Laos and Burma.

This sudden change in the demand for resource endowments across borders will bring forward new economic and political stakeholders in Laos and Myanmar, not all of whom will be aligned with China’s current policies.  At the same time, changes in domestic politics next door like Myanmar’s path to democratization or new global trends like climate change or water resource management will force China to rethink its strategies abroad.  Clearly, China’s strategies were drawn to adapt to or counter against a strong US presence in the region, but the Southeast Asia’s new embrace of the US’s strategic pivot in the Pacific and a renewed love affairs with the US in Vietnam, Thailand, and Myanmar, may be a cause for alarm in China.

Much of the legwork required for carrying out a successful global strategy can be done vis-à-vis a state’s soft power capacities.  A state’s soft power “brand” is formed of cultural norms and mainstream social values and can go a long way to influence behavior and preferences of peoples abroad.  China’s regional track record in soft power expansion over the past five years is checkered at best and I feel the effect of the successful early 2000s “charm offensive” documented by Joshua Kurlantzick in a book of the same name is on the wane.  Most Chinese citizens would agree that Chinese music and film from the 80s and 90s outshines that of which is now coming out from China, and the PRC has never come close to producing a hit with global or regional stickiness like South Korea’s “Gangnam Style.”  Chinese TV is hardly exportable when the programs with the highest viewer ratings are imported soap operas from Korea and remakes of Western hits like “Dancing with the Stars” or the Idol series.  A few days ago the ChinaFile blog posted a a discussion of why China’s soft power is such a hard sell. 

Like the rest of the world, the “Made in China” brand in Southeast Asia has carried a poor reputation that stood for low quality shoddy products.  Lao consumers prefer to buy more expensive Thai made Toyota pick-up trucks and refurbished used cars from Korea under the Kolao brand to China’s cheaper automobiles. Just like his loud and entitled ugly American counterpart, the actions of one ill-mannered Chinese citizen abroad will do much to ruin the reputation of the savvier Chinese businesspeople and tourists who conduct their business abroad while respecting their positions as guests while abroad.  The negative press and gossip that accompanies the actions of the ill-mannered Chinese will do little to change the hearts and minds of those abroad.  This is best demonstrated by the widely told story of a Chinese tour group who while on Chinese New Year vacation in Laos tried to drive their SUV convoy through the crowded Luang Prabang night market while loudly blasting their car horns.  To successfully carry out the wise and pragmatic strategies above, it seems that China’s ambassador of those strategies will have to learn to drive in the region before it can thrive.

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Filed under China, Current Events, Economic development, Energy, Foreign policy, Governance, Laos, Malaysia, Myanmar/Burma, Singapore, Thailand, Uncategorized, Vietnam

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