Xi’s visit highlights dilemma for South-east Asia in US-China trade war

As China faces off with the United States over a punishing trade war, it is under pressure to shore up its friendships around the world, starting with its neighbours in South-east Asia. But its relations there are complicated.

Chinese President Xi Jinping will be testing these ties this week as he visits Vietnam, Malaysia and Cambodia in the hope of blunting the effect of

huge tariffs imposed by President Donald Trump on Chinese exports

to the US.

Mr Xi is likely to cast China as a reliable global partner in contrast to the unpredictable US of Mr Trump, whose on-again, off-again tariffs have upended financial markets and confounded governments.

While in Vietnam, for instance, Mr Xi is expected to oversee the signing of about 40 agreements, including deals that would advance plans for Vietnam to accept Chinese loans for part of a US$8.3 billion (S$11 billion) railway connecting northern Vietnam with China.

But his visit also points to a diplomatic tightrope that countries such as Vietnam and Malaysia must walk as the South-east Asian nations try to negotiate with the Trump administration for a reprieve from the tariffs.

Mr Xi’s tour will start in Vietnam on April 14, followed by a three-day visit to Malaysia, ending the week in Cambodia.

Trade at the forefront

For the past decade, Beijing has engaged in a huge push to extend its economic and political influence across South-east Asia. China is now the region’s most important trading partner. Senior officials, including Mr Xi, regularly travel there.

China is a major market for Vietnam’s agricultural products, while Vietnam imports raw materials from China for many factories driving exports. Between 60 per cent and 90 per cent of the raw materials for Vietnamese apparel heading for the US market come from China.

Trade, a complicated issue, is likely to top the agenda. Caught between the US tariffs and the risks of China’s goods flooding local economies, South-east Asia finds itself with limited options.

Since Mr Trump imposed tariffs on Chinese goods in his first term, these countries have been alternative routes for those goods to reach the US. That made Vietnam and Cambodia a target for Mr Trump’s steep tariffs – which he has paused for 90 days.

These countries will also be concerned that as a result of the tariffs that Mr Trump has maintained on Chinese goods, a glut of cheap Chinese goods – shut out of the US market – could instead flow into South-east Asia and overwhelm economies there.

Mr Xi will want to know more about how other countries might respond to the US-China trade war. He will also want to bolster ties in case frictions arise, said Mr Ja Ian Chong, a professor of political science at the National University of Singapore.

“There is the very real potential that PRC goods will start flowing to these areas, and questions about overcapacity, potential Chinese dumping would come up again,” he said, referring to the People’s Republic of China. “So he’s got to fix those relations.”

Ms Sonal Varma, chief economist for Asia excluding Japan at Nomura, said local economies would probably introduce measures to prevent China from dumping its goods on local economies. “Every country is now trying to protect its home turf,” she said.

Balancing China with the US

While seeking opportunities from China, South-east Asian leaders may also need to avoid appearing too close.

There are fears among some Vietnamese officials, for instance, that the high-profile nature of Mr Xi’s trip, as well as language emphasising China’s partnerships, might make it harder for Vietnam to win a long-term reprieve from Mr Trump’s tariffs.

Mr Khang Vu, a visiting scholar in the Political Science Department at Boston College, said: “Vietnam surely welcomes Xi’s visit to minimise its economic pains. But it will have to avoid creating the impression that Vietnam is siding with China while negotiating a tariff reduction with the Trump administration.”

Malaysian Prime Minister Anwar Ibrahim defended the region’s relationship with China at a recent gathering of its officials.

“China is a very important player we can’t ignore, and yes, some countries have problems with it,” he said at the meeting. “We continue to navigate in the best manner possible, to secure peace, security and obtain most benefits in terms of economy and investments.”

Security and territorial disputes

China has also financed the reconstruction of a major naval base in Cambodia, giving the Chinese military access to one of the world’s most vital sea lanes. While in Malaysia, Mr Xi is expected to offer his support of existing agreements to build rail links and ports in the country.

As Mr Xi seeks to bolster ties, he may need to address China’s territorial disputes with Malaysia and Vietnam.

Chinese naval ships held military drills and live firing-training near Vietnam just weeks ago. And in the past few months, Chinese authorities have beaten, shot and arrested Vietnamese fishermen.

Professor Chong said: “It has to show that it’s willing to ease off a little on the coercive pressure.” NYTIMES