This is part of a series of posts aimed at helping companies doing business in China better understand political issues concerning Asia and China in particular. These statements are not intended to advocate a specific point of view, but are rather intended as an educational tool for companies hoping to better understand China and its foreign policy interests.
Businesses entering the Chinese marketplace have long been wary of lax copyright enforcement, opposing cultural norms, and confusing regulations. However, a new concern has manifested itself amongst established multinationals and start-ups trying to negotiate with Chinese partners. China has begun to politically assert itself more in the region. Many companies will need help navigating the minefield of East Asia’s political theater.
The most well known conflicts involve China’s territorial disputes in the East and South China Seas and China’s support for the Kim Dynasty in North Korea. Less well publicized issues may be the United States’ economic overtures towards ASEAN (The Association of South East Asian Nations) and an increase in the U.S. Military presence in Asia, particularly Australia and the Philippines. If your company is attempting to open sales, manufacturing, or trade relationships in the Chinese Mainland, it will be well worth your efforts to familiarize yourself with these issues. This series will introduce the aforementioned issues and others as they arise to help prepare you for interaction with Chinese partners.
This week we are going to look at a less well publicized issue that nonetheless has instigated a discussion concerning China’s sphere of influence in Asia. ASEAN is one of the world’s most important developing marketplaces. Officially comprised of ten South East Asian nations, the six major economies of the ASEAN zone are Indonesia, Malaysia, Thailand, Singapore, the Philippines, and Vietnam. ASEAN is a political and economic organization seeking to strengthen the regional bonds of member nations and establish stronger trade relations with other prominent non-member states.
In November, 2012 ASEAN commenced their seventh summit in Phnom Penh, Cambodia. As usual, delegations from Australia, New Zealand, Japan, China, and the United States were invited to attend. U.S. President Barrack Obama extended his stay in South East Asia, also visiting Thailand, Singapore, and Myanmar (Burma) before continuing on to India. Obama’s trip came less than three weeks after his re-election, highlighting the importance of Asian policy to his second term. The purpose of his ASEAN trip was to explain the United States’ re-balancing of Asian relations. The five-pillared plan includes strengthening ties with long time allies and expanding American influence to nations who have not been traditional allies of the United States.
This plan to pivot the United States’ attention squarely on China’s backyard has not gone unnoticed by Beijing. China long been the big brother to South East Asia. Strong economic ties have been very beneficial for China, importing raw materials and exporting completed products. However, there are currently several heated territorial disputes in the South China Sea, and Beijing is concerned the United States will attempt to exert some force in maritime negotiations. China is disputing ownership of islands with several nations in the South China Sea, namely the Philippines, Indonesia, and Vietnam. While the Philippines has a long-standing relationship with the U.S., losing economic or political influence over Indonesia or Vietnam would be a huge blow to the Chinese plans in South East Asia.
Beijing has largely perceived Obama’s visit and the overtures Washington D.C. has made to ASEAN to be a containment strategy intended to limit China’s growth. It is worth noting Obama’s visit coincided with Xi Jinping’s introduction as the new head of China’s government. What may be more worrying to Beijing is a statement made in March, 2013 by US National Security Advisor Thomas Donilon. While attempting to clarify Obama’s statements on re-balancing U.S.-Asia relations he laid out a five-pillared plan for the United States to follow. While it was hoped that China would be placated by a clarification of U.S. Policy, Donilon’s statements haven’t been received well in China. Furthermore, Obama has stated several times that he would like to discuss maritime territorial issues at the ASEAN Summit in October of this year. It is unlikely that China would agree to any serious discussions during the summit if such a negotiation involves the United States. However, the first US-ASEAN summit will commence shortly after the ASEAN summit meetings end. If the ASEAN nations form a united front against China in their shared territorial disputes, and have strong economic and military support from the United States, the South China Sea could be a new hot spot in a series of increasingly tense situations in Asia.
While officials are keeping a close eye on Obama’s Asia-pivot, the new policy hasn’t really made waves economically. U.S.-China relations can still be extremely profitable and Chinese businessmen are unlikely to cut ties with American partners because of Obama’s overtures to Asia’s developing nations. However, if these words turn to action and the United States intervenes in Asia with military or heavy handed economic force, it could spell trouble for American operations in China. This would be especially true if the United States took a hard line stance in favor of ASEAN allies on their territorial disputes in the South China Sea.