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How trade links between Southeast Asia and China have thrived for more than 1,000 years

After 1,000 years, SE Asia-China trade is only getting stronger

PUBLISHED : Wednesday, 08 August, 2018, 10:23am
UPDATED : Wednesday, 03 October, 2018, 10:49am

[Brought to you by SCMP Events and Conferences]

Trade links between Southeast Asia and China have existed for centuries, with archaeological findings pointing to a relationship that spans as far back as the 1100s.

In the 1980s, excavations in Singapore’s old town found hundreds of Chinese artefacts and coins dating back to the Yuan dynasty in the 14th century, when Mongolians ruled China.

Researchers drew one clear conclusion: there was a thriving barter trade economy between China and Southeast Asian merchants at the port of Singapore. While the Chinese wanted spices, tin, gold and so-called forest products such as benzoin and camphor to make medicine, Southeast Asia desired Chinese ceramics.

Except for brief periods of war and disruption, this trade relationship has largely remained steady over the past 1,000 years. And in the just the last few decades, it has risen to lucrative heights unseen throughout history.

The boost began soon after the Asian Financial Crisis in 1997. In 1999, China initiated its “Going Out” policy, which pushed its companies to invest heavily in Asia.

Three years later, China became the first dialogue partner of Asean to sign a free-trade agreement with the regional grouping.

Then in 2003, Beijing became the first to country sign the Treaty of Amity and Cooperation in Southeast Asia and the first to establish a strategic partnership with the bloc.

Such commitment strengthened China’s bond with the Southeast Asian region immensely. As a result, China has been the bloc’s largest trading partner for the past seven years, and Asean has been China’s third-largest trading partner for the past four.

In 2017, Asean’s bilateral trade with China stood at US$514.8 billion, more than 13 times what it was in 2000 – US$39.5 billion.

Trade volumes are expected to climb as Southeast Asia remains a key focus of Beijing’s “Belt and Road Initiative”, with signature projects like the high-speed railway between China and Laos, hydropower plants in Cambodia and Myanmar’s US$10 billion oil pipeline to China.

Chinese tourists are also contributing to the uptick, flooding Asean cities, spending in shopping malls, theme parks and hotels.

As a result of Beijing’s trade ties and economic backing, Asean economies have experienced tremendous growth. The Philippines is now the second-fastest growing economy in Asia, and Malaysia and Thailand have seen their best growth numbers over the past two years and four years respectively.

But the region is by no means immune to the consequences of worsening trade tensions between the United States and China. While stocks on Singaporean and Malaysian markets are expected to take a hit, the escalating tariff battle between the US and China could enhance Southeast Asia’s attractiveness as an alternative trading destination.

Cheap labour in Southeast Asia has attracted investment from both the US and China for parts and products. Chinese carmakers like Zhejiang Geely Holding Group, which last year acquired nearly 50 per cent stake in Malaysia’s Proton Holdings, could turn their attention south instead of across the Pacific.

[This article has been expressly commissioned for SCMP events and conferences. This is not an SCMP editorial product.]