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The 'M' Strategy

China Makes Its Move on Southeast Asia

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As China’s position in the global economy rises, its power is extending southward. This newfound relationship of mutual support with Southeast Asia holds deep strategic implications.

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China Makes Its Move on Southeast Asia

By Fuyuan Hsiao
From CommonWealth Magazine (vol. 373 )

"Just beyond the fence is another country. On the Vietnam side of the border, one empty truck after another parks in front of the sentry post waiting for the trucks full of Chinese goods coming from the other side. Trucks bearing the five-star Chinese flag make their return trip empty, while those bearing the one-star Vietnamese flag turn around and head back fully loaded.

Once upon a time, when Vietnam was annexed by China, the road through its mountainous Lang Son Province was used by delegations ferrying prized commodities northward as tribute – and at other times, it carried troops and tanks south on punitive raids of suppression. If not for the natural defense presented by these mountains, invading armies from China could have easily crossed the northern Vietnamese plain, which lies just south of Lang Son, and struck straight at Hanoi.

Today, this major military route has become a conduit for friendship, carrying an endless flow of Chinese tourists and cheap Chinese goods all heading south to “pay tribute” in the fertile Southeast Asian market.

China Breaks the Ice with Economics

During the Cold War, the Association of Southeast Asian Nations (ASEAN) was one of China’s major imagined enemies. Conversely, the perception that local ethnic-Chinese who ascribed to communism harbored enmity toward their governments prompted apprehension and fear in nations such as Indonesia, Malaysia and the Philippines. ASEAN was established to contain Chinese-Vietnamese communist expansionism, rather than as a vehicle for mutual economic development.

With all well to the north since the breakup of the Soviet Union, however, China’s diplomatic center of gravity has tipped toward the south. It is making active efforts to put its own “backyard” in order, courting ASEAN member nations by casting itself in terms of the “Three Goods”: good neighbor, good friend and good partner. And economics has been the icebreaker that China has ridden into the south.

Since establishing dialogue 16 years ago, total trade between China and ASEAN has grown 15-fold from US$8 billion to US$130 billion in 2005, making each side the other’s number-four trading partner. Official Chinese projections anticipate total trade between the two sides will swell to US$200 billion by 2010.

At the leader’s summit of the 10 ASEAN member nations in Brunei six years ago, then Chinese premier Zhu Rongji mooted the establishment of a Free Trade Area (FTA) among ASEAN member nations and China, proposing an agreement be completed for an ASEAN-China FTA by 2015. Shortly thereafter, China became a formal signatory of the “Treaty of Southeast Asian Amity and Cooperation,” marking China’s first formal strategic partnership with a regional organization, and making it ASEAN’s first strategic partner.

With a combined GDP less than half that of China, the ASEAN nations described the proposed free trade area as “China plus one,” deferring to China as the locomotive for ASEAN development. Despite economic growth rates double that of ASEAN, China modestly described it as “ASEAN plus one,” with China a guest at the ASEAN table.

Generalizations aside, the scheme will be beneficial to both sides. With a combined market of 1.7 billion people, it will be the world’s biggest free trade area in terms of population and the third biggest in terms of aggregate GDP at US$2 trillion.

Enter the M Strategy

“ASEAN plus one” is China’s general strategic blueprint in Southeast Asia. One of the detailed tactics within this overall scheme is known as the “M” Strategy.

China’s M strategy, so named for the shape formed by the transportation arteries it is developing to connect with Southeast Asia, begins with the cities of Kunming in Yunnan Province and Nanning in Guangxi Province, which serve as the apexes of the “M” (see diagram). From these two points, the M extends south along land and water routes, to comprise what China characterizes as “two corridors and a sphere” – the Kunming and Nanning economic corridors, and the “pan-Beibu Bay economic sphere” (Beibu Bay being the term China uses for the Gulf of Tonkin). The strategy’s operational axis is defined as cooperation on the “Three M’s”: marine, mainland and Mekong [Basin] sub-regional cooperation.

The long-impoverished provinces of Guangxi and Yunnan have suddenly become major players in China’s economic diplomacy to “pacify the south.” To accelerate the opening of transport routes to the south, China has stepped up the pace of work on the Trans-Asia Railway beginning in Kunming. In Guangxi, two new highways have been built linking Nanning to Friendship Pass on the Vietnam border, and just last year 26 new international air routes were opened.

“China understands that cooperative trade development between its poorest regions and the poorest nations of Southeast Asia will be mutually beneficial, a win-win situation,” says Professor Lin Chin-ming, director of the Graduate Institute of Southeast Asian Studies at Tamkang University.

China Makes the Right Moves

In both Guangxi and Yunnan, GDP growth in the first half of this year has exceeded 12 percent, setting record highs for the past decade, while the ASEAN nations have become the number-one trading partner of the two provinces for eight consecutive years.

No other major nation has been courting ASEAN with such determination. Each November, China not only sponsors a Southeast Asia Trade Fair in Nanning, it has also established an ASEAN commercial zone in that city with pavilions built for each of the ten ASEAN member nations.

“China is the power to the north. ASEAN nations combined have just half its area. China’s engagement with Southeast Asia has been more nuanced than the U.S. or Japan and better planned,” comments one Vietnamese Southeast Asia scholar.

China has been aggressively targeting the Southeast Asian infrastructure market, offering preferential loans and aid. And China’s loans are all “smart money,” ordinarily used for construction of new roads, ports, bridges and other basic infrastructure that even if not built by Chinese contractors will in the end be utilized by Chinese interests. For example, part of the US$60 million in Chinese aid to Cambodia last year went toward construction of a fiber optic telecommunications network linking Cambodia, Vietnam, Thailand and China.

Elsewhere, ahead of realization of the free trade area, China has unilaterally scrapped import tariffs on 188 Thai fresh fruit imports and has begun negotiations with Singapore on a bilateral free trade agreement.

As they watch China leap squarely into their turf, the traditional sources of aid for Southeast Asian nations – the World Bank, the Asian Development Bank, Japan, the U.S. – have become increasingly apprehensive, believing that China’s actions in Southeast Asia are recreating the U.S.’s 19th century “Monroe Doctrine” and supplanting Washington as the key player in the region.

According to an analysis in TheNew York Times, China’s aid to Southeast Asia has become more attractive than that offered by traditional donors. That’s because when Southeast Asian nations accept loans from the U.S. or Japan they must pay consulting fees and accept oversight to prevent official corruption. Sometimes they also are required to make improvements in human rights. In contrast, aid from China comes with virtually “no strings attached.”

A Path to the Indian Ocean

A deeper strategic implication is China’s use of a number of ASEAN sub-regional cooperation plans and the extensive trans-national transportation network to break U.S.-Japan containment of China.

For example, the U.S. has long sought to control the Strait of Malacca, through which more than 85 percent of China’s oil imports must pass, making it China’s most important oil shipping route. The Trans-Asia Railway, construction of which has been accelerated, begins in Kunming and ends at the strait. Its completion would free China from potential U.S. constraints.

Additionally, despite Western sanctions on the military dictatorship of Myanmar over its deplorable human rights record, China has continued to up the ante with Yangon. In addition to boosting military and economic aid, in April of this year the Chinese government approved plans to construct a 2,380 km pipeline from Kunming to the port of Sittwe on the Bay of Bengal, which would free China from over-reliance on the Strait of Malacca and make the U.S. and India uneasy indeed.

“That Aung San Suu Kyi has been locked away for years may be a big deal to the West, but it doesn’t mean a thing to China. Within ASEAN, all they do is repeat their mantra, ‘The mighty should treaty the meek with clemency,’” says one Taiwan businessman with years of experience in Cambodia, summing up China’s approach in the region.

In addition to aid and investment, China has also pledged to boost the number of Chinese tourists to Southeast Asia. Visitors from China are already a major source of income in the Southeast Asian tourism market. In 2005, PRC passport-holders made more than three million trips to the region, accounting for one-third of all overseas trips from China.

In politics, economics and cultural exchanges, China and the ASEAN nations have a long history. This August, Guangxi television will air for the first time the politically charged “Da Hai Wan” (“The Great Bay”), to retell the historical tale of the “maritime silk road” once operated by China, and also to set the general tonefor China’s current strategy in the region: mutual trust among neighbors, along with mutual development.

Land routes, sea links, investment, aid, tourism, history – China is leaving no stone unturned in this endeavor, like the massive treasure fleets of old advancing into the South Seas.

Translated from the Chinese by Brian Kennedy

Keywords:

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