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Vietnamese dealers selling goods at the China/Vietnam border.
Vietnamese dealers selling goods at the China/Vietnam border.
Zhou Dongxu

BEIJING — What is holding back trade expansion with Southeast Asian countries? And why are they always turning to the U.S. whenever something happens?

These two questions capture Chinese central concerns as voiced at the recent "China-ASEAN-East Asia: Cooperations and Challenges" forum, an event held by the think tank on China's public policy Anbound Consulting.

Home to the largest Chinese diaspora — some 40 million people — Southeast Asia is China's third largest trade partner after the United States and the European Union.

"Their closeness is unmatched since China and Southeast Asian nations started a dialogue in the 1990s," said a Chinese foreign officer who attended the forum. "Yet now is not the best moment."

The reason? While becoming increasingly dependent economically, China and countries from ASEAN (Association of Southeast Asian Nations) like Vietnam and Thailand find their political relations growing more and more divergent.

Several crises lie behind this paradox. The foreign officer points out the fact that China conceded "a lot of our interests during the free trade area talks, but after all these years, many of the ASEAN countries think they're in a weaker position."

The May 2014 24th ASEAN Summit in Myanmar — Photo: Official website

Fan Zuojun, vice-dean of Guangxi University's China-ASEAN Research Institute, understands Southeast Asian countries' complaints. "It's a basic economic principle that a major power will gain more benefits from cooperation," Fan said.

"Of China's outbound investments, 85% of businesses are operating at a loss. The most profitable projects are based in Africa and Southeast Asia," he added. "People are criticizing China for being neocolonialist abroad. We should reflect on this too."

Surveys show that Japan is much more influential — and gets many more positive comments — than China in the ASEAN region, Jiang Gongyin, a senior fellow at Anbound Consulting, said. At the same time, the U.S. accounts for $200 billion worth of investments in the area.

Not only distributed in diverse sectors, these businesses largely contribute to local public welfare projects, Xu Ningning, the executive director of the China-ASEAN Business Council, noted.

Countries like Japan also offer more competitive advantages when it comes to financing and investments. Chinese companies, on the other hand, are mostly concerned about mines and other natural resources. This difference in terms of investment models affects confidence and trust among local residents.

"It's not that investing in mining resources is in itself bad," said Li Yao, president of the China-ASEAN Investment Cooperation Fund. "But it's about doing it correctly." Li is convinced that Chinese businesses need to earn local people's trust first, through social responsibility and environmental actions.

Political tensions

Recent disputes in the South China Sea, along with rising nationalist sentiments within Southeast Asia, have become another obstacle to cooperation with China. Several countries in the region are still wary of China, the foreign officer said, despite its willingness to sign "good-neighbor" treaties with them.

On the Vietnam/China border — Photo: Zhou Hua/Xinhua/ZUMA

"It's unlikely that Southeast Asian countries won't feel anxious facing such a behemoth," the foreign officer said. "Gaps between these countries and China will grow even bigger given its might."

The South China Sea disputes aren't a new issue — some were already taking place in the 1980s and 1990s. Yet these tensions are rising with Vietnam and the Philippines' constant provocations. Factors like the U.S. influence also play a role in worsening the situation.

As a result, these disputes are starting to have an impact on economic and trade developments between China and its neighbors. Zhu Hao, director of the Indochina Research Office at the China Institute of Contemporary International Relations, said that trade at the Sino-Vietnamese border has plummeted sharply because of recent conflicts between the two countries.

This doesn't mean China and Southeast Asian countries are moving toward full confrontation. The two parties have a natural geographic interest in working together.

Moreover, the reality is that views about China among ASEAN countries vary. Because of very different interests — Vietnam, for instance, claims sovereignty over the Xisha and Nansha Islands, while the Philippines only reclaims part of Nansha — it remains difficult for them to work together.

Zhu considers that the international balance is tilting towards China. At the same time, the U.S. is constantly developing its efforts in Southeast Asia. Ultimately, the long-term goal for these smaller Asian nations is striking the right balance between bigger powers. When America's presence oversteps its bounds, these nations will likely use China as a counterbalance.

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