Speaking of Asia

How China is losing South-east Asia

The region may depend on China for growth - but that dependence is mutual, which is something China seems to forget.

Mr Rafael Alunan, Interior Minister of the Philippines in the Fidel Ramos presidency, remembers the day the Chinese walked into Mischief Reef in the Spratlys, an area of the South China Sea his countrymen had long considered theirs. Three years earlier, in 1992, the Americans had vacated Subic Bay and Clark Air Base. Without that reassuring cover there was little that Mr Ramos, himself a retired general, could do.

"We woke up one morning to this stab in the back," says Mr Alunan. "When we approached China they told us they were there to build temporary structures for fishermen. Our fears have proved correct. Today, it is a full-fledged military installation."

"Raffy", as he is known in his nation, recently uploaded a short video on YouTube. In that clip he describes China as a "rogue" and "failing state" marked by massive corruption, indebtedness, economic contraction, capital flight and social discontent. "At the rate China is making enemies and wrecking the global commons, one wishes that it implodes before it damages further the planet's well-being and the region's relative stability," he concludes.

In late May, along with other Jefferson Fellows from Hawaii's East-West Centre, I met Mr Alunan in Manila. When I asked why his language was so baleful, he affected surprise. "It was just an outpouring of what we Filipinos feel," he told me. "I am surprised you consider it vitriolic."


ST ILLUSTRATION: MIEL

The Philippines had once defined its nationalism in anti-American terms. Today, the target is China. The sentiments in the archipelago underscore how South-east Asia, which had begun to shed its old fears of the mainland, is feeling fresh unease about it. This is forcing government leaders to review defence budgets, seek new security alliances and ponder the future of a region that had not seen major conflict since the Indochina War ended nearly three decades ago. What now?

Among maritime Asean states, the Philippines had one of the tighter relationships with China. It had been early to recognise the People's Republic: It established diplomatic ties in June 1975 , following in the footsteps of the Malaysians, who were first off the mark. True, the year before, China had grabbed the Paracels after killing some 70 Vietnamese servicemen. But Vietnam was not in Asean then, so it was viewed as somebody else's problem, a fraternal dispute between two communist nations. Even the taking of Mischief Reef was seen as an aberration.

THE NEW DIMENSION

But just as that event began fading from South-east Asian minds came the Scarborough Shoal confrontation in 2012, when the Philippine Navy sought to catch eight Chinese fishing vessels and was blocked by Chinese maritime surveillance ships. Suddenly, the issue took on a new dimension. The US intervened, getting both sides to agree to withdraw.

China should be aware of the reputational damage it has done itself, particularly by its steadfast refusal to have its claims tested against law. The pity's that on issues like trade, for instance, it had learnt to use the WTO system to its advantage, especially that body's dispute-settlement mechanism. Somehow, it has failed to do that on the sea disputes.

Manila kept its word but the Chinese reneged, then used swarm tactics to prevent Filipino boats from re-entering the area. The following January the Philippines launched arbitral proceedings against China, taking the world by surprise with its action and the cultural affront it implied.

Asean members privately used to look askance at Manila for its audacity. But attitudes are changing in some of the most unlikely places. Malaysia, for instance, is stitching up new security options and increasingly going public with its worries after years of soft-soaping the Chinese. It was only in early 2013 that, as Prime Minister Najib Razak prepared for re-election against a backdrop of voter disaffection towards his coalition partner, the Malaysian Chinese Association, he had made a special point of launching the Malaysia-China Kuantan Industrial Park in his home state. Standing next to him that day was no less than Mr Jia Qinglin, the fourth-highest-ranking member of the Chinese Communist Party's Politburo.

But this April, delivering the Asean chairman's statement, Datuk Seri Najib expressed "serious concern" at the land reclamation going on in the South China Sea. Tellingly, he flew to Tokyo a few weeks later to elevate his nation's ties with Japan to "strategic partnership".

Indonesia, Asean's largest nation, is wary too. It is not a party to the dispute - yet. But China's nine- dash line claim loops down towards its Natuna Islands. While Beijing has never clarified the precise contours of this line, senior Chinese military officials privately say that Jakarta is "sitting on 50,000 sq km of our waters". Meanwhile, Vietnam, which has the closest historical and political links with China among Asean states, is rapidly cosying up to India and the United States, signing defence agreements whose details have not yet been made public.

This week, when representatives of 57 nations gathered in Beijing to sign the articles of association for the new Asian Infrastructure Investment Bank (AIIB), three of the seven holdouts were from Asean - the Philippines, Malaysia and, most surprisingly, Thailand. The official explanation is that they were awaiting domestic clearances before signing on.

'INSECURITY' POLICIES

It helps sometimes to put oneself in the other's shoes and I did precisely that a few weeks ago while visiting China's National Institute for South China Sea Studies in Haikou, Hainan. How does one explain China's security or, should I say, insecurity policies, I asked Dr Wu Shicun, the institute's urbane director. Dr Wu listed out the issues: The security dimension was that the US and Japan were making it harder for China to enter the Western Pacific through the Yellow Sea and the East China Sea. The South China Sea, therefore, provided a natural shield against their possible intervention.

The insecurity part, he said, was that Beijing felt the US rebalance was all about containing China and the South China Sea was merely a convenient vehicle. "The US has already adjusted its position on the dispute," he told me. "From limited intervention, it has moved to active intervention and it is taking sides."

But why not move swiftly then to conclude a binding Code of Conduct (COC) with Asean, if nothing else to prevent external meddling? Well, said Dr Wu, a COC is much more complex than the Declaration of Conduct of Parties concluded in 2002. What's more, Asean members themselves are not united on what they want in it: Malaysia says the COC ought to apply only to the Spratlys, while the Vietnamese say it should cover the Paracels as well. "So, it is not easy for China and Asean to reach consensus on the issue."

WHAT LIES BENEATH IT ALL

Some analysts think the issue is really about ballistic-missile submarines, or SSBNs, the ultimate nuclear deterrent. The Soviets, for instance, used to hide their SSBNs under the Arctic icecap to avoid detection. But, as those who followed the Malaysia Airlines MH370 saga know well, the South China Sea is a shallow swimming pool compared with the massive ponds of the Indian Ocean and the Pacific. This makes Chinese submarines, which tend to be noisy, particularly vulnerable. Thus, some see a Chinese "bastion" policy at work - an attempt to turn the South China Sea into a private lake so as to give its subs enough room to filter out into the bigger oceans. Dr Tong Zhao, an associate at Beijing's Carnegie-Tsinghua Centre for Global Policy, notes the incident involving the USNS Impeccable - when it was repeatedly harassed by Chinese vessels over a four-day period in March 2009 - happened because the Impeccable was trying to map the undersea navigation channels from Sanya on Hainan island, where China has a massive submarine base.

The upshot of all this has been the rise of a new Cold War on Asean's doorstep. Because of this, just as China is launching regional growth-boosting initiatives like the AIIB, governments are having to up defence spending, often dipping into funds kept for education and health. That's the tragic part.

The frightening aspect is that unlike in the days of the Soviet Union-Nato face-off , there are no mechanisms in place to prevent incidents, or for de-escalation in the event of an incident.

China should be aware of the reputational damage it has done itself, particularly by its steadfast refusal to have its claims tested against law. The pity's that on issues like trade, for instance, it had learnt to use the World Trade Organisation system to its advantage, especially that body's dispute-settlement mechanism. Somehow, it has failed to do that on the sea disputes. Surely, it must be embarrassing too that when foreign militaries brief journalists on prospective exercises with China they explain it in terms of a need to "socialise" it, as though China is an unpredictable ogre that needs to be taught to eat with its mouth closed.

Beijing also must know that while it has controlled the narrative on its salience as a growth driver for the world, this dependence is by no means one-sided. As its economy slows, China is poised to lose some of its swagger. Already, according to China watchers, some two percentage points of its economic expansion comes from adding deflation to the nominal growth rate, which has fallen to a little over 4 per cent. The American Chamber of Commerce in Beijing says the percentage of its member- companies recording profits in China is steadily slipping. Likewise, Indonesia and Thailand - South- east Asia's biggest economies - may have China as their top trading partner. But they buy more from it than send the other way. Singapore has been the largest foreign direct investor in China in the past two years, a fact not to be forgotten, given that much of the Chinese slowdown comes from the steep drop in investments since 2009.

Stand to attention, Beijing. This region is as important to you as you are to it.

•Ravi Velloor writes fortnightly in this new column.

A version of this article appeared in the print edition of The Straits Times on July 03, 2015, with the headline 'How China is losing South-east Asia'. Print Edition | Subscribe