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Asean’s growing importance to China as a trading partner comes amid a protracted trade war with the United States. Photo: AP

Asean leaders ‘wary of putting all eggs into Chinese basket’ as they try to revive economies

  • Southeast Asian nations are now China’s biggest trading partner but it’s a balancing act, according to analysts
  • Some are looking at ways to diversify buyers and suppliers and reduce reliance on Chinese tourists as they deal with pandemic fallout
Southeast Asian nations have overtaken the EU and the US to become China’s biggest trading partner, but analysts say it is a balancing act for Asean leaders as they try to get their pandemic-hit economies going again without becoming too dependent on Chinese trade.
Beijing has sought closer ties with the bloc, as well as East Asian countries, to take advantage of the region’s earlier start to recovery from the coronavirus crisis, and at a time when its rift with Washington is deepening.

The pandemic has been less severe in Southeast Asia than some other parts of the world. The 10 Association of Southeast Asian Nations member states – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – have reported more than 136,000 cases in total since the crisis began, according to the World Health Organisation.

On Thursday, there were 1,785 new cases across all of the Asean countries. That compares with over 34,000 new infections in the United States and about 19,000 across Europe the same day.

Meanwhile in China, where the virus was first detected in December, the pandemic is now apparently under control. And those relatively better situations have allowed China, Asean and East Asian countries to move faster in restarting their economies.

03:03

China’s first-quarter GDP shrinks for the first time since 1976 as coronavirus cripples economy

China’s first-quarter GDP shrinks for the first time since 1976 as coronavirus cripples economy

Although China’s overall external trade plunged by 8 per cent in the first five months of this year, its trade with Asean members grew, if only by 0.9 per cent, according to Chinese customs data. The bloc became China’s biggest trading partner in the first quarter, dislodging the European Union from the top spot it had occupied for years.

Asean’s growing importance to China as a trading partner also comes amid a protracted and bitter trade war with the US. That saw Asean surpass the US as China’s second-biggest trading partner last year. Japan and South Korea are ranked fourth and fifth.

In contrast, China has been the largest trading partner of Asean for years, while the US overtook Japan in 2015 for the No 2 position.

At a summit of Asean leaders on Friday, concerns over the South China Sea – where Beijing and several member states have rival territorial claims – were prominent. But the agenda was also dominated by the economic fallout from the pandemic, and how economies facing their most severe recessions in decades can get back on track.

Carl Thayer, a Southeast Asia specialist and emeritus professor of politics at the University of New South Wales in Australia, said a regional recovery plan was a priority for the Asean leaders.

“They will seek to insulate what they see as the bigger picture – economic recovery – from current tensions in the South China Sea,” Thayer said.

Trade was key to recovery, and the Asean leaders would not let political issues get in the way of that bigger picture, according to Collin Koh, a research fellow with the S Rajaratnam School of International Studies at Singapore’s Nanyang Technological University.

“Asean governments – also lobbied by the corporate sector – will still put a premium on trade with China, especially given how closely these economies have been integrated for a while, and despite the recognition that one shouldn’t place all eggs into the Chinese basket,” Koh said.

05:02

Coronavirus backlash further fraying China’s ties to global economy

Coronavirus backlash further fraying China’s ties to global economy

China has been pushing for even closer ties. Its ambassador to Asean Deng Xijun said last month that their stronger economic relations were key to efforts to counter the impact of the pandemic and had “stabilised the economy and protected the industrial and supply chains of the region”.

He listed areas for growth including a proposed free-trade agreement, the Regional Comprehensive Economic Partnership (RCEP), and developing e-commerce, smart manufacturing and 5G telecoms.

China is also expected to contribute, along with Japan and South Korea, to an Asean coronavirus response fund for medical supplies and protective suits, Associated Press reported.

Chinese, US officials cross swords over activities in Southeast Asia

According to Thayer, Asean leaders were keen to get the Beijing-led RCEP signed by the end of the year as a way to deal with their economic issues.

But in the long term, Koh said Asean nations would also need to take lessons from the pandemic, like the impact of supply chain disruption and the need to diversify.

He said some countries were looking at ways to reduce reliance on Chinese tourists, as well as finding new overseas buyers while retaining China as their major market, and diversifying suppliers.

“Having seen or experienced for themselves how China often uses its economic levers as a coercion tool, we will see Asean member states seeking to promote their economic resilience by attracting investments other than from China,” Koh said. “The pandemic, and growing uncertainty over China’s long-term intentions, will catalyse further traction along these lines.”

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