This op-ed from the Asia Times poses the question: How should ASEAN react to China's growing clout? As with a lot of matters nowadays, it's more of economics shaping how ASEAN reacts to China. China has been both friend and foe to ASEAN. On the positive side:
- ASEAN agreed in principle to establish a free-trade agreement with China, which by 2010 should represent the world's largest free-trade area, eclipsing both the European Union and the North American Free Trade Area.
- China's total investment in ASEAN last year reached US$1.3 billion, including $200 million in new capital outlays in 2006, according to Chinese Ministry of Commerce official statistics.
- Sino-ASEAN trade hit a record high of $160.8 billion last year, up 23% year on year, and is projected to rise to about $170 billion this year. China is now on pace to become the region's largest trade partner, surpassing the United States, by year's end.
- Beijing's proven track record of luring away big foreign investments once destined for Southeast Asia is slowly but surely pushing the region down the value-added ladder as a mere raw-materials and commodity-providing link in China's emerging global manufacturing supply chain.
- China's huge unified market has provided multinational manufacturers the economies-of-scale benefits with which ASEAN's still-fragmented markets cannot compete.
- Another point I'd raise is China's quarrel with various ASEAN members over who has territorial jurisdiction over the strategically located and resource-rich Spratly Islands.
China may see an opening for enhancing its regional influence while the US is busy dealing with the Middle East. Whether ASEAN can obtain tangible benefits in exchange for greater cooperation with China is yet to be decided. Don't leave more established Japan out of the picture, either. Also, the election of a less hawkish American president in 2008 may return the American focus to Asia again.