Why China’s Southeast Asia belt and road push could give it edge in critical battleground

Southeast Asia is playing an ever-growing part in China’s investment and diplomatic decisions, particularly as Beijing’s rivalry with Washington heats up. In the third of a four-part series on China’s ties with Asean, Orange Wang looks at how Beijing is using infrastructure to forge stronger links with the region.

When Vietnam’s new top leader To Lam visited Beijing in mid-August, infrastructure was very much top of mind.

During the trip, China agreed to support a feasibility study for two standard-gauge railway projects and help in the planning of another one in the Southeast Asian country, taking it forward in updating its colonial-era railways so they can link with Chinese train lines .

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Two weeks before that, Cambodia broke ground on the China-sponsored Funan Techo canal, which will connect the Mekong River with the Gulf of Thailand.

The developments point to a Chinese infrastructure drive in Southeast Asia in high gear, and that analysts say is likely to give Beijing a geopolitical edge over Washington in a “critical battleground.”

There are signs of movement elsewhere in the region, too. Bangkok launched passenger train services to Vientiane, Laos, three months after the approval of the second phase of a project in Thailand to connect high-speed railways in the three countries. The Laotian capital was first integrated into the Chinese high-speed railway network in December 2021, when a rail link to China’s Yunnan province opened.

Meanwhile, Jakarta and Beijing have started discussions about extending a China-backed high-speed rail line in Indonesia, and a Chinese consortium has reportedly bid for contracts to build a high-speed rail project linking Kuala Lumpur and Singapore.

Nian Peng, director of the Research Center for Asian Studies (RCAS) in Hong Kong, said there was an “accelerating trend” in infrastructure-based connectivity between China and Southeast Asia.

Citing the developments on the routes to Vietnam and Thailand, he said China’s rail links with Southeast Asian countries had moved from nearly nothing before the China-Laos high-speed railway opened three years ago to “blossoming in multiple spots.”

Peng predicted that this could help Beijing fend off the risk of the United States coaxing Southeast Asian countries into its orbit and pressing them to decouple from the Chinese economy.

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“If we can achieve seamless docking of our infrastructure on land, including for highways, railways and aviation, we can put Southeast Asia firmly in a China-centered supply chain,” he said.

“With the infrastructure connectivity between China and Southeast Asia advancing so rapidly, I think the US should be the most anxious one.”

He added that the US and its allies Japan were unlikely to fully satisfy the region’s huge appetite for infrastructure due to limitations in funding and decision-making mechanisms, leaving a lot of space for China.

However, Li Mingjiang, an associate professor at the S. Rajaratnam School of International Studies at Nanyang Technological University in Singapore, said the recent moves in China-Southeast Asia infrastructure cooperation were a “continuation” rather than an acceleration or a “new phase” .

I have noted that there had been no quantitative or qualitative leap compared to previous projects over the past decade.

Still, he described Southeast Asia as a “priority” for China’s infrastructure engagement, adding that economic cooperation during the past three decades had helped put Beijing in a “leading position” over Washington in the region when it came to overall clout.

“We can expect such effects may continue to be seen in the future,” Li said.

He added that growing infrastructure investment would benefit China’s relations with members of the Association of Southeast Asian Nations (ASEAN) and help China compete for influence with other major powers in the region.

“Southeast Asian countries will also gain many benefits, such as for their long-term economic development,” Li said, noting that they might leverage China’s offers to bargain with other powers for more attention and support.

Building closer ties with Southeast Asian nations has become crucial for China in light of its fierce rivalry with Washington, a trade war that began under former US president Donald Trump and disruptions to global supply chains by the Covid-19 pandemic and Russia’s invasion of Ukraine.

Four years ago, the 10-member ASEAN bloc became Beijing’s biggest trading partner, while China has been the grouping’s top trading partner for 15 years straight.

In US dollar terms, China’s exports to Asean grew by 10.6 per cent from a year earlier in the first eight months of 2024, and its imports from the bloc were up 3.5 per cent, according to the latest Chinese customs data on September 10.

Figures from the Chinese Ministry of Commerce showed that China’s non-financial outbound direct investment to ASEAN jumped nearly 37 per cent in the first quarter of the year.

Many Chinese companies have begun channeling their shipments to the rest of the world through Southeast Asian countries or relocating parts of their production lines to the region to bypass trade restrictions, such as tariffs, imposed by the US and its allies.

The ASEAN countries have a population of nearly 700 million, representing a huge potential labor pool and a large consumer market for China to tap into.

In an article published by Foreign Affairs earlier this month, Lynn Kuok, the Lee Kuan Yew chair in Southeast Asian Studies at the Brookings Institution, said projects under China’s Belt and Road Initiative were “generally welcomed” in the region.

Citing a survey by the Singapore-based ISEAS-Yusof Ishak Institute released in April, she warned that the drop in support for the US in the region should sound alarm bells in Washington, which “sees China as its main competitor and the Indo-Pacific as a critical battleground”.

“Southeast Asia lies at the geographic heart of this vast and dynamic region,” she added.

Several Washington-led plans cover Southeast Asian infrastructure development. They include the Indo-Pacific Economic Framework for Prosperity, the Partnership for Global Infrastructure and Investment, the Build Back Better World initiative and the Blue Dot Network.

In an article published earlier this year, Yan Shaojun, a research fellow at the government-backed think tank China Center for International Economic Exchanges, said that infrastructure had become a key element in great power competition.

Yan warned that the US and other Western countries were likely to continue their “interference” in the belt and road – Beijing’s plan for building global trade and infrastructure links – and “neighbouring regions” including Southeast Asia would be a “top priority” for China in stabilizing the strategy’s foundation.

“(We) should further leverage the unique advantages of border provinces like Guangxi and Yunnan in opening up to Asean to promote cooperation between China and Asean in areas such as infrastructure,” she wrote.

The Tegalluar Station in Bandung, Indonesia, is part of the Jakarta-Bandung high-speed railway, a landmark project under China’s Belt and Road Initiative. Photo: Xinhua alt=The Tegalluar Station in Bandung, Indonesia, is part of the Jakarta-Bandung high-speed railway, a landmark project under China’s Belt and Road Initiative. Photo: Xinhua>

The idea of ​​bridging Southeast Asia and China through infrastructure is not new.

Eight years ago, Asean members adopted a master plan aimed at greater connectivity within the bloc by 2025. In 2019, Asean and Beijing agreed to align this plan with the belt and road strategy.

In 1995, Mahathir Mohamad, then prime minister of Malaysia, proposed building a pan-Asian railway network that runs from Singapore to southwest China’s Kunming, passing through Malaysia, Thailand, Myanmar, Cambodia, Vietnam and Laos.

Three later, the idea remains far from becoming a reality. But the proposed China-Vietnam rail lines, the completed China-Laos high-speed rail as well as the Thailand-China railway project and Malaysia’s East Coast Rail Link – both backed by Beijing and under construction – are all viewed as steps towards that vision .

While China has become Southeast Asia’s biggest infrastructure financing partner, an estimated US$50 billion pledged by Beijing for funding in the region has gone unfulfilled, according to a study by the Lowy Institute, an Australian think tank.

Wang Qin, a professor at the school of international relations at Xiamen University, said many Chinese-invested infrastructure projects in Southeast Asia were “not going so smoothly”, partly due to issues such as political instability and land acquisition problems in recipient countries.

He added that as the Chinese economy was still recovering, the country was likely to be more cautious about investing in expensive projects across the region in the future.

He expected China would work on completing existing projects first, adding that the US$1.7 billion canal project in Cambodia was “not a huge investment” and was within China’s engineering abilities.

“We may focus more on such smaller projects that contribute to the development and livelihood of a country,” he said.

Li in Singapore also noted that Beijing had started to focus on “small but beautiful” projects and might not be as fixed on megaprojects as before.

He said Southeast Asian nations were keen to diversify their trade partners, inbound investment and industrial cooperation to reduce their economic dependence on China.

He added that although the supply chain connection between China and ASEAN countries would benefit from better transport links, it would also be influenced by other factors, notably trade wars.

Li said China and Southeast Asian nations should better manage South China Sea disputes while improving connectivity.

“If security issues continue to arise in the South China Sea, they could to some extent offset the positive impact of economic and infrastructure connectivity cooperation on China’s relations with Asean countries,” he said.

Peng of RCAS expected China’s role in the region’s infrastructure push to become increasingly important, with more breakthroughs in cooperative projects.

He said Southeast Asian demand for infrastructure investment from China would grow as they put greater emphasis on economic development in the aftermath of the pandemic.

China’s Belt and Road Initiative appeared to be shifting from casting a wide net to focusing on places with strategic significance like Southeast Asia, he added, expecting the country to spend more resources to firm up its neighborhood amid Washington’s increasing presence there.

“The willingness on both sides is very high. The connectivity between China and Southeast Asia will certainly continue to grow in the future,” he said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2024. South China Morning Post Publishers Ltd. All rights reserved.