China and Southeast Asia: Global Changes and Regional Challenges

9. ASEAN-CHINA RELATIONS: Legacies and Future Directions by Reuben Mondejar and Wai Lung Chu

ASEAN-China Relations 211 9 ASEAN-CHINA RELATIONS Legacies and Future Directions Reuben Mondejar and Wai Lung Chu GENERAL CONSIDERATIONS There is no doubt in anyone’s mind that China’s attempts to become globally competitive continues to gather momentum at breakneck speed. This chapter posits the view that in this globalization process, the relationship between China and ASEAN constitutes an important element, ASEAN being right in the heart of China’s own backyard. That being the case however, much still has to be done. There is a lingering impression, gaining its own momentum, that the rise of China means that it has taken over the former role of Japan, as the region’s prime growth engine. It is in this light that ASEAN and China have to get their relations right in order for both entities to derive profit from this shifting axis in the region. ASEAN for its part has much home work to do if it is to enter profitably into a positive relationship with China. For one, it needs to demonstrate that it is advancing in its cohesiveness, that all the ten member countries are at the same level of organizational confidence. In the least, such unity will be a boost to ASEAN’s bargaining power in its dealings with China. There are several considerations which serve as background for ChinaASEAN integration. First, there is the significance of a combined 1.8 billion market, large enough by any standard, with all the economic implications that such size commands. Indeed, there is the accepted notion that China has 09 China & SEA Pt III/Ch 9 20/1/05, 12:23 PM 211 212 Reuben Mondejar and Wai Lung Chu now become the biggest factory in the world, a kind of a seedbed of another Industrial Revolution of sorts. It is a huge factory for the production of other people’s goods and a global provider of numerous commodities. ASEAN on the other hand can claim to a market of about 560 million people with a US$330 billion consumer market, equal to China’s coastal region. For ASEAN and China, this means first and foremost that their competing exports don’t lead to mutual disaster and disadvantage, rather, that they become more complementary, or put more simply, whatever competition they have should end up enriching both entities. Complementation will mean that both ASEAN and China can ride on each other as both entities endeavour towards economic progress. It has to be noted that between the two entities, there has been a remarkable surge in intra-trade. China’s trade with ASEAN countries have already hovered around US$100 billion in 2004, surging by over 35 per cent from the year before. Imports jumped 51.7 per cent to $47.33 billion, while exports correspondingly leapt 31.1 per cent, logging US$30.93 billion. China is definitely on course to comfortably surpass the target set by Premier Wen Jiabao of US$100 billion in annual trade with the 10 members of the ASEAN by 2005. Current combined gross domestic product of China and the ASEAN countries is estimated at about US$2 trillion. Second, there is the perceptible changing Asian model of political governance, whereby authoritarianism is regarded as outmoded and the acceptance of the notion that economic growth and political legitimacy go together, even inseparable as lips to teeth. Third, not only is China being swept by the winds of globalization, but the ASEAN member nations themselves are also grappling with the same forces. One consequence of these forces is the shift in FDI interests in the region. A McKinsey report in March 2004 found that investment in Southeast Asia shrunk 66 per cent since the 1997 Asian economic and financial crises, and its collective economic growth has dropped 50 per cent, underscoring the need for even further regional economic integration. EARLY ASEAN-CHINA RELATIONSHIP China’s relationship with Southeast Asia, and in particular with present-day ASEAN states dates back several centuries. It is well known that the Chinese have historically thought of themselves as the centre of world order, in other words, that the world was Sino-centric. China was at the centre of civilization and everybody else outside its concentric hierarchy was seen as contending for the blessing of a suzerain relationship with the Celestial Empire. The 09 China & SEA Pt III/Ch 9 20/1/05, 12:23 PM 212 ASEAN-China...