Cautious welcome for IPEF across the region, where China looms large

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WASHINGTON - Some wariness remains of the United States' agenda, even as the Washington-led Indo-Pacific Economic Framework (IPEF) has been welcomed in much of the region.

China is deeply embedded in the economies of the region, and supply chain decoupling and "friend shoring" - reducing dependence on China by relocating supply chains to US-friendly countries - may not suit every country that has signed up to the new grouping.

Thus far, 13 countries - plus the United States - have signed up to the much-awaited US initiative, which had its first high level in-person meeting in Los Angeles on Sept 8-9.

Thailand - South-east Asia's second largest economy and a major non-Nato ally of the United States - is a case in point. It is on board the initiative, but there remains concern that the US means to wean it from China and, more generally, counter the role of China in the economies of the Asia-Pacific, Pavida Pananond, professor of international business at Thammasat University Business School in Bangkok, told Asian Insider.

Some of the main concerns across the region would be over trade, and supply chain resilience, Professor Pavida said.

Given that China is such a large and important economic partner for the region, its absence from the IPEF would somewhat undermine the arrangement, she said.

Countries may also view resilience differently, she said.

"I think for the US, the idea of resilience emerged after Covid because they are concerned about where their suppliers are located," Prof Pavida said. "And they do not want everything to be concentrated in China."

But "friend shoring" for the US, a security-driven strategy of resilience, may not be in the interests of every country in the region, she said.

Prof Pavida said resilience, for instance for corporations, could also mean being nimble enough to adjust to different kinds of risk.

Ms Tan Dawn Wei, The Straits Times' China Bureau Chief, speaking alongside Prof Pavida, said "China sees the IPEF as of course, yet another political tool in the American toolkit to try and contain it and to counter its dominance in the region - and whatever Washington might say about how the IPEF is not about being a choice between the US and China, Beijing naturally doesn't see it quite that way."

The framework does not include China nor countries in South-east Asia that are economically beholden to China, namely Laos and Cambodia, and also Myanmar, she noted.

"China is the largest trading partner (of) nearly all of the countries that are part of the IPEF... and it is firmly entrenched in the economies of the region and has so much to offer all these countries that the US can't or won't," Ms Tan said. "So there is this sense of confidence that the IPEF won't hold too much sway with these countries."

She added: "But at least it also doesn't include Taiwan or that would draw a much stronger response from China than it has." 

Nonetheless, China, while being dismissive of the IPEF as a geopolitical tool, is also cognisant of the need to both compete with the United States to court countries in the region, as well as reduce its own dependence on others, she said.

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