Xi Jinping

Xi Jinping's and Li Keqiang's Asean visits to boost regional economies

The visits of President Xi Jinping and Li Keqiang to Southeast Asia will have a major economic impact despite political tensions, say analysts

PUBLISHED : Saturday, 12 October, 2013, 12:00am
UPDATED : Saturday, 12 October, 2013, 3:23am

Recent trips to Southeast Asia by President Xi Jinping and Premier Li Keqiang will have a substantial economic impact on the Association of Southeast Asian Nations, Australia and New Zealand, analysts say.

"Overall, the impact of the visits is highly significant. They signal a new phase in relations between China and Asean, not just Indonesia and Malaysia, one of closer economic and political ties amid unresolved tensions in the region," said Yang Razali Kassim, a senior fellow at the S Rajaratnam School of International Studies in Singapore.

Xi attended an Asia-Pacific Economic Co-operation meeting in Bali, Indonesia. He also visited Indonesian capital Jakarta and Malaysia.

In Jakarta on October 3, Xi said he aimed for China-Asean trade to reach US$1 trillion by 2020, two-and-a-half times the US$400 billion last year.

Woo Yuen Pau, the president of the Asia Pacific Foundation of Canada, an independent think tank, said Xi's visit underscored the enormous expectations surrounding China-Asean trade and investment.

"Even if these targets are not met, there is no question that China's impact on the region will be enormous," Woo said. "The contrast with an absent US president is striking. Asean is China's backyard and Beijing is making sure its influence in the region is based on tangible economic linkages, not just rhetoric.

"The question is whether Asean countries will resist becoming too dependent economically on China, and what alternatives they have."

Xi announced the target of boosting Sino-Indonesian trade to US$80 billion in 2015 from US$66 billion last year and the target of US$160 billion for Sino-Malaysian trade in 2017, up from US$94.8 billion last year.

Yang Razali said that if trade could be raised by as much as Xi hoped for, there would be a positive impact on economic growth in Malaysia, Indonesia and Singapore.

"This will benefit Singapore indirectly, because Singapore has strong economic links with China, Malaysia and Indonesia," he said.

Xi also proposed a regional infrastructure investment bank to finance infrastructure projects in Asean countries.

Raymond McDaniel, the president and chief executive of the Moody's rating agency, said Southeast Asia had infrastructure financing needs.

Funding infrastructure using domestic financial resources might not be an option for Southeast Asian countries, because they saved less than Northeast Asian countries such as China, McDaniel said at the Apec CEO Summit in Bali on Sunday.

During his visit to Malaysia, Xi expressed hopes that Chinese companies would participate in the planned high-speed railway service between Kuala Lumpur and Singapore.

Yesterday, the Bangkok Post quoted Thai Transport Minister Chadchart Sittipunt saying a feasibility study on trade involving Thai agricultural produce and Chinese investment in Thai high-speed railways "must be conducted", but it could involve "a long process".

Xi witnessed the signing of US$28.2 billion of deals between Indonesian and Chinese firms in Jakarta. Yesterday, as Li left Brunei for Thailand, China and the oil-rich kingdom said they would seek closer co-operation on maritime oil and gas resources.

Deals in Southeast Asia were subject to the risks of setbacks if negotiations turned sour, Yang Razali warned.

"But the signing of the deals is meant to send a political message that much potential is in store," he said. "And it is a huge one for all three countries [Indonesia, Malaysia and China]. Whether this potential is realised remains to be seen."

Xi met Australian Prime Minister Tony Abbott in Bali on Sunday, with Abbott saying he would be disappointed if China and Australia did not seal a free-trade agreement within 12 months.

On Thursday in Brunei, Li reaffirmed Beijing's desire to complete negotiations on a Regional Comprehensive Economic Partnership (RCEP) by 2015. The RCEP talks include Asean, Australia, China, India, Japan, New Zealand and South Korea.

"China presently does not have strong soft power, and some Asean countries, encouraged by Western powers, still harbour suspicions about China," said John Wong, a professor at the East Asian Institute of the National University of Singapore. "Thus, the only card China is playing is economics. This will have long-term effects for China and Asean, as they will become economically more integrated."