THE BATTLE FOR CHINA´S BACKYARD / THE ECONOMIST

The battle for China’s backyard

The rivalry between America and China will hinge on South-East Asia

China’s advantages in the tussle are not as big as they seem

During their 45-year feud, America and the Soviet Union fought proxy battles all across the world. 

But the cold war was at its most intense in Europe, where the Soviets constantly worried about their satellites breaking away, and America always fretted that its allies were going soft. 

The contest between China and America, happily, is different from that. 

For one thing, the two sides armed forces are not glowering at one another across any front lines—although in Taiwan and North Korea each has an ally in a tense, decades-long stand-off with the other. 

Even so, in the rivalry between the two powers, there will be a main zone of contention: South-East Asia. And although the region has drawn up no clear battle-lines, that only makes the competition more complex.

People across South-East Asia already see America and China as two poles, pulling their countries in opposite directions. Those protesting against the recent military coup in Myanmar, for example, hold up angry placards that attack China for backing the generals and pleading ones that beg America to intervene. 

Governments feel under pressure to pick sides. In 2016 Rodrigo Duterte, the president of the Philippines, loudly announced his country’s “separation from America” and pledged allegiance to China instead. 

China’s claim that almost all the South China Sea lies within its territorial waters and America’s rejection of that assertion have sparked blazing rows in the main regional club, the Association of South-East Asian Nations (asean), which China has attempted to win over.

This tug-of-war will only become more fierce, for two reasons. First, South-East Asia is of enormous strategic importance to China. 

It is on China’s doorstep, astride the trade routes along which oil and other raw materials are transported to China and finished goods are shipped out. Whereas China is hemmed in to its east by Japan, South Korea and Taiwan, all firm American allies, South-East Asia is less hostile terrain, providing potential access to both the Indian and Pacific Oceans, for both commercial and military purposes. 

Only by becoming the pre-eminent power in South-East Asia can China relieve its sense of claustrophobia.

But South-East Asia is not just a way-station en route to other places. 

The second reason competition over it will intensify is that it is an ever more important part of the world in its own right. 

It is home to 700m people—more than the European Union, Latin America or the Middle East. 

Its economy, were it a single country, would be the fourth-biggest in the world after adjusting for the cost of living, behind only China itself, America and India. 

And it is growing fast. 

The economies of Indonesia and Malaysia have been expanding by 5-6% for a decade; those of the Philippines and Vietnam by 6-7%. 

Poorer countries in the region, such as Myanmar and Cambodia, are growing even faster. 

For investors hedging against China, South-East Asia has become the manufacturing hub of choice. 

Its consumers are now rich enough to comprise an alluring market. In commercial as well as geopolitical terms, South-East Asia is a prize.

Of the two competitors, China looks the more likely prize-winner. It is the region’s biggest trading partner, and pumps in more investment than America does. 

At least one South-East Asian country, Cambodia, is in effect already a Chinese client state. And none is willing to cross China by openly siding with America in the superpowers’ many rows.

However, as close as South-East Asia’s ties with China appear, they are also fraught. 

Chinese investment, although prodigious, has its drawbacks. Chinese firms are often accused of corruption or environmental depredation. 

Many prefer to employ imported Chinese workers rather than locals, reducing the benefits to the economy. Then there is the insecurity bred by China’s alarming habit of using curbs on trade and investment to punish countries that displease it.

China also dismays its neighbours by throwing its weight around militarily. Its seizure and fortification of shoals and reefs in the South China Sea, and its harassment of South-East Asian vessels trying to fish or drill for oil in nearby waters, is a source of tension with almost all the countries of the region, from Vietnam to Indonesia. 

China also maintains ties with insurgents fighting against the democratic government of Myanmar, and has in the past backed guerrillas all over the region.

This sort of belligerence makes China unpopular in much of South-East Asia—building, alas, on dismaying traditions of prejudice. 

Anti-Chinese riots often erupt in Vietnam. Indonesia, the world’s most populous Muslim country, has seen protests about everything from illegal Chinese immigration to China’s treatment of its Muslim minority. 

Even in tiny Laos, a communist dictatorship where public dissent is almost unheard of, whispered gripes about Chinese domination are commonplace. 

South-East Asian leaders may not dare criticise China openly, for fear of the economic consequences, but they are also wary of being too accommodating, for fear of their own citizens.

China’s bid for hegemony in South-East Asia is thus far from assured. South-East Asian governments have no wish to renounce trade with and investment from their prosperous neighbour. 

But they also want what America wants: peace and stability and a rules-based order in which China does not get its way by dint of sheer heft. 

Like all middling powers, the big countries of South-East Asia have an incentive to hedge their bets, and see what favours they can extract from the Goliaths of the day.

God’s playground

To help South-East Asia avoid slipping into China’s orbit, America should encourage it to keep its options open and build counterweights to Chinese influence. 

One mechanism is more regional integration. 

As it is, trade and investment among the countries of South-East Asia outweigh the business they do with China. 

Another mechanism is to strengthen ties with other Asian countries such as Japan and South Korea—one asean has rightly embraced. 

Above all, America should not fall into the trap of trying to force its members to pick sides. 

That is the one thing South-East Asia is determined to resist.