US ‘neglect’ drives Asean towards China in superpower economic rivalry, analysts say

Karen Yeung
·6-min read

US foreign policy “neglect” of Southeast Asia could drive Asean nations further into the economic orbit of China, analysts say, even as Beijing’s economic clout continues to be a source of anxiety for many in the region.

Southeast Asia has emerged as a key battleground for influence between the United States and China amid an increasingly heated rivalry that extends across geopolitics, commerce and technology.

Despite China’s assertiveness in the region, seven of the 10 Association of Southeast Asian Nations (Asean) appear to be leaning towards Beijing over the US, said David Shambaugh, professor of Asian Studies and director of the China Policy Programme at George Washington University. Only Vietnam, Singapore and the Philippines seem closer to Washington.

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“There is a sense of fait accompli, that China is here, it’s so big and we have to get on the bandwagon to some extent, but we are not really happy about it,” Shambaugh said of Southeast Asian attitudes towards China.

Southeast Asians would really like the US to be much more present

David Shambaugh

“Southeast Asians would really like the US to be much more present. But the US has a lot of baggage in the region. So there is a kind of ambivalence about the US, [which] arises from a feeling of neglect.”

Shambaugh, speaking at a webinar organised by the Hinrich Foundation early this month, said the Biden administration does not have a set of defined policies for Southeast Asia because it prefers to be more reactive in its approach.

However, a recent article by Kurt Campbell, President Joe Biden’s assistant Secretary of State for East Asian and Pacific Affairs, titled “How America Can Shore Up Asian Order – A Strategy for Restoring Balance and Legitimacy”, could provide insight into US engagement with China in the region.

Writing in Foreign Affairs magazine last month, he said Asian nations did not want to be forced to “choose” between the two superpowers.

“Although Indo-Pacific states seek US help to preserve their autonomy in the face of China’s rise, they realise it is neither practical nor profitable to exclude Beijing from Asia’s vibrant future,” said Campbell, who is widely known for his central role in former president Barack Obama’s “pivot to Asia” strategy.

“A better solution would be for the United States and its partners to persuade China that there are benefits to a competitive but peaceful region organised around a few essential requirements: a place for Beijing in the regional order; Chinese membership in the order’s primary institutions; a predictable commercial environment if the country plays by the rules.”

Still, promoting multilateralism does not appear to be the immediate focus of the new administration. Echoing populist sentiment on international trade that was a hallmark of last year’s presidential election, US National Security Adviser Jake Sullivan said last week that creating American jobs was the priority.

“We’re not about trying to make the world safe for multinational investment. Our priority is not to get access for Goldman Sachs in China,” Sullivan said at a White House press briefing earlier this month.

China’s Asean influence sets stage for new superpower battleground with US, as the ball shifts to Biden’s court

“It’s about thinking about national security as national competitiveness, making investments in our own industrial and innovation base so that the good-paying jobs and industries of the future are here in the United States. So ‘Build Back Better’ isn’t just about economics; it’s about national security as well.”

Annual trade between the US and Asean is worth about US$600 billion, roughly half the value of the bloc’s trade with China. But the US does have a long-standing commercial footprint and deep investment linkages in the region.

More than 4,200 American companies are operating in Asean, including nearly 70 per cent of the 124 US multinational enterprises listed in the Global Fortune 500, a list of the biggest 500 companies by revenue in the world.

The wider Asian region is home to nearly US$1 trillion of American investment, while Asia invests about US$850 billion in the US, according to the Asian Infrastructure Investment Bank (AIIB).

Total US investment in Southeast Asia is greater than that of China, Japan and South Korea combined at US$329 billion, Shambaugh said China’s total investment in the region is US$138 billion.

Lennard Yong, CEO of Asia business expansion specialist Tricor Group, sees a wide range of Chinese investments in the region in the future, despite the pandemic and spurred on by the Regional Comprehensive Economic Partnership (RCEP), which was signed by 15 Asia-Pacific countries in November last year.

“Previously Chinese were simply engaged in exports and trade,” Yong said. “[But] in recent years, we do see more sophistication.

“They’re making real dollar investments setting up factories and building infrastructure for the Belt and Road Initiative and also for natural commerce in Asean.”

Even so, Beijing’s economic influence is still a cause of anxiety in the region. Last week a poll of 1,032 academics, government officials and business elites by the Asean Studies Centre at Singapore’s ISEAS-Yusof Ishak Institute found more than 88 per cent of the respondents were worried about China’s growing “regional and political influence”, compared to just over 85 per cent who were asked the same question a year ago.

A US presence is notably absent from the two most important multilateral trade agreements in the fast-growing region: RCEP and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade agreement signed by 11 nations that was signed in 2018.

Former US president Donald Trump withdrew from the Trans-Pacific Partnership, the predecessor to the CPTPP and a key plank in Obama’s Asia pivot, on his first day in office in January 2017. The rest of the signatories agreed to a revised version of the deal that became the CPTPP

The Biden administration has promised it will take a close look at joining the trade pact, but there remains deep suspicion among many Americans who associate multilateral agreements with the hollowing out of US industries, said Shambaugh, who wrote the book Where Great Powers Meet: America and China in Southeast Asia.

Jin Liqun, president of the AIIB, said that China’s economic development models were dynamic and enhanced multilateral cooperation was coming at an especially critical moment, with stagnating participation in global value chains posing a risk to future growth.

RCEP could create opportunities through cross-border foreign direct investment and infrastructure development. Even investors from non-RCEP countries might benefit from streamlined rules of origin, simplified customs procedures and easier cross-border production requirements, Jin said.

Wang Gungwu, professor at the National University of Singapore and an expert on Sino-Southeast Asian history, said China deserved the good economic relations it had with the Asean plus three bloc, a framework created to promote trade that includes Japan, South Korea and China.

Despite anxiety from some small Asian nations about China’s influence, there is recognition that tackling regional interests together provided more security than dealing with these issues individually, said Wang, who is also professor Emeritus at the Australian National University.

“But the US [is] not actively utilising this set of relationships that Asean has become, which can actually open up a lot of avenues for American interests and which can expand and extend your network,” he said.

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