China’s mercantilist threat to ASEAN is exaggerated – Analysis – Eurasia Review


By Christian Bachheimer *

China’s growing influence on ASEAN affairs is increasingly reflected in international news. The dominant narrative is that China is deploying a mercantilist strategy to get ASEAN to acquiesce in matters of diplomatic importance to China, forcing ASEAN states to choose between China and the United States. But ASEAN’s merchandise trade and investment data from China and other geopolitical alliances from 2015 to 2019 presents a different story.

ASEAN-5 – Singapore, Thailand, Malaysia, Indonesia and Vietnam – collectively made up 84% of ASEAN’s US $ 3.1 trillion GDP in 2019 and accounted for over 90% of its flows. trade and investment. Analysis of merchandise trade data for 2015-2019 reveals that the main geopolitical blocs consisting of the “American alliance”, the “Atlantic alliance” and the “Chinese bloc” have not evolved in proportion to the economies of ASEAN-5. The Chinese bloc – China, Hong Kong and Macao – accounted for 20% of trade with ASEAN-5 in 2015 and 21% in 2019.

The US alliance – Japan, South Korea, Thailand and Australia – leads trade with ASEAN-5, adding US $ 143 billion over five years to reach US $ 741 billion in 2019. The Chinese bloc did not reached only 543 billion US dollars. The Atlantic alliance of the United States and the European Union added US $ 117 billion, rising from 19% to 21% of ASEAN-5 trade.

ASEAN-5 does not depend on trade with China. Merchandise trade as a percentage of GDP reflects economic interdependence. From 2015 to 2019, the US alliance and the Atlantic alliance maintained a level with ASEAN-5 of 29 and 20%, respectively. The ratio of ASEAN-5 with the Chinese bloc has risen from 20 to 18%. Only Vietnam has considerably increased its trade in goods with the Chinese bloc, from 38% to 48%. But Vietnam also increased the same ratio with the US alliance, from 63 to 79 percent.

On the foreign direct investment (FDI) front, China remains a relatively small player. US and Atlantic alliances still dominate the ASEAN-5 investment landscape. From 2015 to 2019, the US and Atlantic alliances invested a total of US $ 346 billion, more than three times the US $ 99 billion funded by the Chinese bloc in ASEAN-5.

The average inflow of FDI into ASEAN-5 amounted to 144 USD per year between 2015 and 2019. The Chinese bloc increased its FDI from 7.9 to 21.9 billion USD, increasing its share of the inflows. 7-12% ASEAN-5 FDI. . Meanwhile, the U.S. alliance increased its FDI from $ 43.9 billion to $ 70.9 billion, lowering its share of ASEAN-5’s FDI inflows from 37 percent to 39 percent.

Regarding the annual size of FDI inflows as a proportion of ASEAN-5’s GDP, China fell from 0.4% in 2015 to 0.8% in 2019. The American alliance fell from 2.1 % in 2015 to 2.7% in 2019, strengthening its position. The share of the Chinese bloc in the stock of FDI increased from 6% in 2015 to 8% in 2019. During the same period, the Atlantic alliance and the American alliance have remained relatively constant at 37% and 31% respectively.

The much-lauded Belt and Road (BRI) initiative is not as important as it is claimed, despite the US $ 739 billion pledged to ASEAN. The BIS accounted for $ 9 billion in annual investment in ASEAN-5’s average annual FDI inflows of $ 144 billion. Over the past five years, the BRI has contributed US $ 4 billion to the average annual FDI inflow to Indonesia of US $ 17 billion, and US $ 1.5 billion to the inflow. average annual FDI in Malaysia of US $ 10 billion. Thailand has not received any BRI investments so far, refuting the country’s inclination towards the Chinese narrative.

While the BRI benefits some countries, it does not alter ASEAN-5 allegiances. The BIS is also facing a setback and is unpopular in its country as its funding problems and completion difficulties continue to mount. Contrary to what the media suggest that China obtains diplomatic leverage through its oversized trade and investment, China’s economic role has remained stable over the past five years.

China’s involvement in Southeast Asia should not cause concern over a market system. The Chinese bloc’s focus on its domestic market and the growing mistrust it faces in ASEAN countries has blocked its trade influence, especially as ASEAN-5 has maintained a trade portfolio. and carefully diversified investment.

Competition may in fact allow ASEAN-5 to extract trade concessions and investment from both sides – Vietnam is a case in point. Although economic data refutes the existence of a threat of dependence on ASEAN, that does not mean that China no longer poses security problems in the region. But the link between China’s economic involvement and a security risk is weak at best. So far, ASEAN-5 has not leaned towards China.

* About the author: Christian Bachheimer is a doctoral researcher at the School of Oriental and African Studies at the University of London.

Source: This article was published by East Asia Forum


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