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Monday, February 28, 2011

China's growth is changing Southeast Asia

BANGKOK -- What has China got to do with recent bloody clashes over a 900-year-old temple in Southeast Asia?

Beijing is not a party to the conflict, nor has it any stake in the territorial dispute between Cambodia and Thailand.

And yet China, with its growing presence and influence in Indochina, is changing the power dynamics in the region.

One key result has been the weakening of Thailand's traditional economic domination in the neighborhood as China steps up trade and investment in countries of the Greater Mekong Subregion, which besides Thailand includes Laos, Myanmar, Vietnam and Cambodia.

With Cambodia less reliant on the Thai growth engine, its Prime Minister, Hun Sen, has become emboldened to put up a tough fight against Thailand in its border dispute, some analysts say. The border clashes early this month left at least three Thais and eight Cambodians dead.

Given its proximity and long-standing ties, Thailand no doubt still plays a big role in Cambodia's economy. Two-way trade last year was valued at about 81 billion baht (US$2.63 billion), up 20 percent from the previous year. Thai businessmen have over 80 projects worth over US$363 million in the country.

But the Chinese presence in Cambodia has grown rapidly in recent years. In a paper last December, Australian academic Geoff Wade, currently with Singapore's Institute of Southeast Asian Studies (ISEAS), noted that there were 360 Chinese investment projects in Cambodia totaling US$80 billion by the middle of last year.

China recently waived US$400 million worth of Cambodian debt. One of the largest Chinese-language schools in Southeast Asia is located in Phnom Penh. China also provides much of the Cambodian army's equipment, say observers who have seen Cambodia's military deployments at the disputed Preah Vihear temple site.

In turn, Cambodia has cooperated with Beijing politically, sending 20 ethnic Uighur asylum seekers back to China in 2009, for instance.

Thai historian Thongchai Winichakul, in a recent talk in Bangkok, noted China's neutrality on the Thai-Cambodia conflict, but acknowledged that “Cambodia is less dependent on Thailand than the Thais think.”

At one time during the booming 1980s, Bangkok was the “logical center” of the region, says Professor Michael Montesano of ISEAS.

Now, “Cambodia certainly, and Laos to a degree, have other options. Cambodia is more sophisticated now; they can pick and choose. In addition to China, with its huge demand and ability to penetrate markets, Singapore also comes into play.”
Cambodia also has strong economic ties with Vietnam as well as other countries like South Korea and Japan as it forges ahead with its growing network of international linkages.

China's rising profile in Indochina is not restricted to Cambodia. It is the same in Laos, where it has stepped up investments in agriculture and infrastructure.

Its investment in infrastructure in Myanmar includes laying strategic gas and oil pipelines and port development. The Myanmar-language Weekly Eleven reported recently that China poured more than US$3 billion into the country from last November through January this year, bringing its cumulative investment since 1988 to US$9.6 billion, above Thailand's US$9.56 billion.

As for Thailand, its officials have described their country's relationship with China as one between siblings. Bangkok is also positioning itself as a partner to China in the hopes of mutually benefiting from its growth. One example is the 45 billion baht China City trading complex on the outskirts of Bangkok.

When completed in two years, thousands of Chinese traders will operate from there, re-exporting Chinese-made goods from Thailand to avoid costly tariffs. The trading center is expected to create an estimated 70,000 new jobs.

“The economic might of China imposes a compelling calculation,” said an Asian diplomat of its burgeoning ties in mainland Southeast Asia. “With all these countries, because of proximity and land links, it is very difficult to ignore China.”

But that is not to say there are no limits to China's influence.

In Thailand, the Chinese community has for generations been seamlessly integrated into the rest of Thai society. But in Myanmar, distrust of China among the older intellectual and military elites remains, and Myanmar nationalism will be a brake on Chinese influence.

And there is competition too. American officials have been open about the fact that the recent re-engagement of the United States, in the shape of a development initiative for lower Mekong countries, is an attempt to balance China's surging economic influence.

Vietnam too has its own ambitions in the neighborhood, along with historical baggage, having fought a ferocious border war with China in 1979.

“They can't ignore China. But because of their status as a new tiger and with a more self-confident and outward-oriented approach, Vietnamese officials often speak against China on issues,” said the Asian diplomat.

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