Southeast Asia featured prominently in Beijing’s increasingly strong international efforts to portray China as a source of strategic stability and economic growth with comprehensive global governance plans supportive of interests of developing countries and opposing the United States. These efforts intensified after the landmark 20^th Party Congress in October and the 14th National People’s Congress in March. They were reinforced as Xi Jinping emerged from COVID restrictions and preoccupation with domestic matters to engage actively in summitry with leaders of Vietnam, Laos, the Philippines, Cambodia, Malaysia, and Singapore. China’s economic importance for regional countries grew as did its dominance over the contested South China Sea. Its show of force against Taiwan in April had little discernible impact on China-Southeast Asia relations, while notable US advances in military cooperation with the Philippines warranted Chinese warnings that escalated during the reporting period.

China’s Regional Leadership

Singapore’s Institute of Southeast Asian Studies’ annual survey of regional elites again showed that China was viewed as the region’s leading economic power by 60% of respondents, compared to 10% who saw the US as that influential. China was deemed the region’s leading political-strategic power by 42% vs the US by 32%. As in recent years, the majority of those polled expressed concern about China’s influence. The Lowy Institute Asia Power Snapshot of April 22 also affirmed that the United States has lost influence to China in Southeast Asia over the last five years, with China ahead in economic and defense relations in particular.

China’s trade with ASEAN in 2022 reached almost $1 trillion, 11% annual growth. The end of China’s strict COVID restrictions forecast improved economic relations with the return of Chinese tourists and ease of doing business. Beijing commentary repeatedly claimed that the coming into force of the Regional Comprehensive Economic Partnership (RCEP) agreement adds momentum to China’s trade with the members of this trade group including all 10 ASEAN members. China’s trade with the other 14 RCEP members expanded 7.5% in 2022 to $1.88 trillion, accounting for 30.8% of China’s foreign trade value. Predicted Chinese growth of 5% in 2023 is more modest than in past years but it complements a similar prediction for Southeast Asian growth, suggesting steady gains.

The sustained growth in China-ASEAN trade has important implications for US and Western interests, progressively weakening their influence. Interregional East Asian trade has often involved extensive supply-chain networks where firms in China obtain raw materials, intermediate inputs and components from regional partners, process them locally, and export value-added goods. Estimates vary, but 10 years ago such so-called processing trade was said to make up well over 30% and up to 50% of China’s total trade. Singapore’s ambassador in China told Chinese media in August 2013 that 60% of the goods produced by extensive supply-chain regional networks between China and ASEAN countries were ultimately manufactures that went to the United States, Europe, and Japan. Only 22% of these goods stayed in the China-ASEAN region.

In contrast, Brookings Institution specialists in March 2023 highlighted remarkable growth in the consumption of these final products in China and ASEAN. China is not only the largest trading partner of regional countries but it is the largest source of demand for these finished products, surpassing the US and the European Union. ASEAN countries’ demand for these final products has also increased substantially, further diminishing the importance of the West as the purchaser and consumer of manufactures of China-East Asian supply chains.

Against this background, China stepped up efforts to weaken the standing of the US dollar, used by Washington to threaten and counter Russia, Iran, China, and other opponents. It encouraged Southeast Asian countries and ASEAN as well as many other developing countries in the so-called Global South to restrict use of US dollars and to carry out transactions with China using the renminbi (RMB). Chinese official media applauded an ASEAN move in March to assess how to use local currencies for financial transactions and positively highlighted remarks by Malaysia’s prime minister and Indonesia’s finance minister critical of US dollar dominance in international payments.

Treatment of Southeast Asian issues at the National People’s Congress in March was minimal. Summit meetings with visiting leaders from the Philippines, Cambodia, Malaysia, and Singapore, discussed below, signaled confidence in China’s leading position in Southeast Asia as was evident during the visits of Vietnamese and Lao leaders to Beijing in late 2022.

Southeast Asia was a target of Chinese efforts to muster support from the Global South in direct competition with the US-led global order. The keynote speech by Prime Minister Li Qiang at the Boao Forum for Asia on April 3 referred extensively to authoritative statements by Xi Jinping as well as Xi’s foreign policy advances in China’s Global Development Initiative (announced in 2021), Global Security Initiative (announced at the Boao Forum in 2022), and Global Civilization Initiative (announced in March 2023) to lay out an alternative view for international order of stability and prosperity. He sharply contrasted China’s plans for global governance with disruptive and confrontational actions of the United States and its allies and partners. Li gave special attention to ASEAN centrality, good neighborliness, and amity and unity between China and Southeast Asia. He affirmed that the “high quality” Belt and Road Initiative, broadly successful and sought after by Southeast Asian governments, would help regional countries achieve faster development.

Figure 1 China’s Premier Li Qiang speaking to Boao Forum on March 30, 2023 in Boao, Hainan. Photo: Lintao Zhang/Getty Images

South China Sea Disputes and Broader US-China Strategic Rivalry

Chinese summitry with Southeast Asian leaders and accompanying diplomatic and economic blandishments saw leaders of Vietnam, the Philippines, and Malaysia, the main claimants contesting China’s assertion of sovereignty over most of the South China Sea, agree separately to pursue dialogue and discussion with China on their maritime disputes.

These developments did not diminish Beijing’s determination to use coercion and criticism to counter South China Sea claimants and condemn US military deployments and other actions to check China’s claims. The Asia Maritime Transparency Initiative in March documented an advance of Chinese Coast Guard challenges to Vietnamese claims and active oil and gas wells in areas China claims. It also disclosed more active Chinese Coast Guard patrols to oppose Malaysian and Indonesian development of oil and gas fields in areas China disputes. The Chinese Coast Guard ships are usually much larger than the law enforcement or naval ships of claimant states, advantaging China in efforts to intimidate claimants and thwart their exploitation of oil and gas resources. Such harassment in the recent past caused Vietnam and the Philippines to halt at great cost ongoing or planned oil and gas ventures.

China also continued harassment using Coast Guard and Maritime Militia vessels sometimes numbering over 100 to prevent resupply of the Philippines military outpost on Second Thomas Shoal. The Philippines Coast Guard on Feb. 13 issued a statement reporting an incident on Feb. 6 when a Chinese Coast Guard ship directed a military-grade laser at a Philippines Coast Guard vessel that was accompanying a resupply ship advancing toward the outpost at Second Thomas Shoal. It caused temporary blindness of the crew on the bridge. The statement recalled that Chinese Coast Guard and Maritime Militia vessels in August 2022 created a 13-mile radius blockade surrounding Second Thomas Shoal and prevented Philippines resupply efforts. After the February 2023 incident, President Marcos summoned the Chinese ambassador to register his serious concern while the US State Department issued a statement on Feb. 13 supporting “our Philippine allies” and condemning China’s “dangerous” behavior.

Attention to South China Sea disputes was overshadowed briefly by Chinese military exercises surrounding Taiwan for three days in April following the Taiwan president’s meeting with the Speaker of the US House of Representative in California. The regional response to the Taiwan episode was muted and reflected less concern than reactions to the larger Chinese military shows of force following the visit by previous US House Speaker Nancy Pelosi to Taiwan last August. Nevertheless, some saw a connection between the recent Taiwan exercises and the South China Sea disputes when Xi Jinping immediately after the Taiwan exercises visited the military command covering the South China Sea and urged improving combat-oriented military training and preparations.

Figure 2 China’s President Xi Jinping delivering speech at the navy headquarters of the Southern Theater Command of the People’s Liberation Army (PLA) on April 11, 2023. Photo: Xinhua

Highlights of US military actions in the South China Sea included the deployment of the US Aircraft Carrier Nimitz Strike Group three times in 2023 for operations in the South China Sea. US Freedom of Navigation Operations challenging Chinese claims in the Paracel and Spratly Islands in March and April were criticized in Chinese statements and media. In February, a Wall Street Journal reporter aboard a US reconnaissance plane operating over the South China Sea documented repeated Chinese warnings and over one hour of close shadowing by a Chinese jet fighter. It cited US officers for the judgment that such encounters are now a near-daily occurrence and are becoming more dangerous.

Chinese officials used the Boao Forum to condemn the United States for its expanding military deployments in the region and deliberately stirring up conflict and creating threats to regional peace and stability. Assistant Foreign Minister Nong Rong targeted “about 1,000” large US reconnaissance aircraft sorties over the South China Sea in 2022. Foreign Minister Qin Gang said China was ready to work with ASEAN countries to adopt the long-pending Code of Conduct in the South China Sea. Beijing averred the Code is not intended to eliminate disputes but to create a cooperative framework for the joint management of South China Sea matters while putting aside differences.

On the matter of massive Chinese fishing fleets supported by Maritime Militia and Coast Guard vessels overwhelming other claimants in the South China Sea and elsewhere, an academic assessment in April pointed to steady progress in Chinese efforts to limit wild catch and reduce fishing vessel numbers since 2016. 40,000 working vessels were removed by 2020 and the total catch reduced by 9.5 million tons. It cited the phase out of fuel subsidies that had contributed to the “phenomenal expansion” of China’s fishing fleet in the recent past. It predicted reduced fishing conflicts in disputed waters.

Broader Chinese criticism of the United States in Southeast Asia and nearby areas featured sharp criticism of the various initiatives of the Quad—the Quadrilateral Dialogue of Australia, India, Japan and the United States; formal announcement of the AUKUS trilateral alignment involving Australia, Great Britain, and the United States; and NATO’s growing involvement in Southeast Asia and other regional matters. It predicted a US-led Asian NATO seeking to contain China’s rise. In response, Beijing favored expansion of both the BRICS alignment and the Shanghai Cooperation Organization, which routinely adopt policies targeting US policy. Indonesia and Thailand are seen as candidates for the former and Cambodia and Myanmar are linked to the latter. Also, Beijing begun impeding projects to lay and maintain subsea internet cables in the South China Sea in purported response to US efforts to block Chinese involvement in international consortiums building such cable networks. A Chinese state owned telecom firm reportedly is developing a $500 million undersea fiber-optic cable network that will link Asia, the Middle East, and Europe. It will rival a similar US backed project. The move was said to be in response to successful US government efforts to block Chinese undersea cable projects.

Philippines Tilts to US, Beijing Objects

Philippines-China relations deteriorated substantially during 2023, moving from President Ferdinand Marcos’ warm reception by Xi Jinping while visiting China in January to sharp warnings from Chinese Foreign Minister Qin Gang’s during a special trip to Manila in April. From Beijing’s perspective, Marcos’ efforts to balance growing security and other ties with the United States with continued economic and political ties with China resulted in strong advances and consolidation of US-Philippines security and diplomatic ties that challenged Chinese interests in the South China Sea, Taiwan, and the broader Indo-Pacific. Beijing commentary in April held out the possibility that Marcos would adjust policy in directions favorable to China.

The deterioration came in three phases.

1. President Marcos visited China Jan. 3-5; he signed 14 agreements, received pledges of $22 billion in investment pledges, opened a hotline on South China Sea issues, and agreed with President Xi to resume talks on joint oil and gas exploration in “non-disputed areas” of the South China Sea. Reviewing the results of the summit, official Chinese media highlighted Marcos’ admonition that South China Sea territorial disputes should not define Philippines-China relations; the commentary said Marcos refused “outside instigation” that the Philippines get “tough” with China in US-led efforts to drive a wedge between Southeast Asian countries and China. The long joint statement on the visit affirmed that the two sides had reached a broad consensus on bilateral cooperation and agreed to properly manage differences on the South Chinese Sea issue, reinforcing the mutual trust in Sino-Philippines relations.
2. Official Chinese commentary registered serious public concern following the visit of US Defense Secretary Lloyd Austin to Manila in early February and the announcement of the US-Philippines agreement allowing US troops to use four additional bases in the Philippines along with five existing sites under the bilateral Enhanced Defense Cooperation Agreement. The new bases were not specified but official Chinese commentary foresaw use of bases close to Taiwan and China’s outposts in the South China Sea. The agreement with the United States was seen as a result of US pressure to use the Philippines locations for strategic advantage against China. Beijing commentary advised Marcos it would be “unwise” to allow foreign forces to disrupt what it called the “rosy picture” of Chinese-Philippines relations.

Following the Feb. 13 confrontation between Philippines and Chinese security forces at Second Thomas Shoal, official Chinese media took aim at the concurrent five-day visit to the Philippines of Japanese Prime Minister Kishida Fumio. That visit resulted in agreements seen leading eventually to deployment of Japanese forces in the Philippines. Beijing commentary cited Marcos discussing a possible trilateral US-Japan-Philippines security pact.

3. The announcement on April 3 of the locations of the four new bases available for US troop deployments confirmed their positions near Taiwan and the South China Sea. At a US-Philippines 2+2 meeting in Washington April 11, the senior leaders jointly challenged China and supported regional groups and initiatives Beijing strongly opposes. The joint statement of the 2+2 meeting condemned Chinese coercion against the Philippines in the disputed South China Sea; affirmed the UNCLOS tribunal ruling of 2016 nullifying Beijing’s South China Sea claims; advanced plans for US-Philippines joint naval patrols in disputed South China Seas; committed the Philippines to consultations regarding the AUKUS trilateral partnership; expressed Philippines’ welcome to activities of the Quad; and pledged Manila would seek to expand operational military coordination with both Australia and Japan, including the Japan-Philippines-US Trilateral Defense Dialogue. All this occurred against the background of more than 17,000 US and Filipino troops carrying out the annual Balikatan military exercise for three weeks beginning April 11.

In reaction to the bases announcement, Politburo Member and top diplomat Wang Yi publicly advised Marcos not to “lose the momentum” of his agreement with Xi regarding appropriate management of South China Sea differences. The Chinese embassy registered its strong opposition, especially to US use of Philippine bases near Taiwan.

Figure 3 President Marcos of the Philippines meets with China’s State Councilor and Foreign Minister Qin Gang on April 22, 2023 in Manila, the Philippines. Photo: Xinhua

Foreign media said Chinese Foreign Minister Qin “lashed out” against Philippines-US actions during his visit to Manila, but official Chinese media put the blame on the United States and portrayed Manila as facing US pressure to acquiesce to American demands for access to more bases. It said the Philippines invitation to Qin to visit just prior to Marcos’ scheduled visit to Washington on May 1 showed “the prudence with which it is trying to handle relations with Beijing and Washington.” It pointed out Manila’s assurances that the Philippines will not allow the US military to use Philippine bases to intervene in Taiwan-related issues and expressed hope that the Philippines will respect China’s sovereignty, security, and territorial integrity.

Marcos seemed to test Chinese forbearance on April 26 when he participated in events monitoring the US-Philippines exercises with the US ambassador and US military officials.

China’s Neighborhood Diplomacy on Display

China’s diplomatic interactions with other Southeast Asian countries point to its ambitions to strengthen regional coordination amid increasing tensions and competition with the United States. The flurry of regional diplomatic activities kicked off with Chinese Foreign Minister Qin Gang’s visit to Jakarta, Indonesia in February 2023 for the 4^th meeting of the Joint Commission on Bilateral Cooperation. The trip was Qin’s first official overseas since his appointment as foreign minister late last year. Given Indonesia’s chairmanship of ASEAN in 2023, the visit signaled China’s willingness to support greater cooperation with ASEAN on regional security and economic issues, including accelerating negotiations with the regional body on the Code of Conduct in the South China Sea. Following Qin’s visit, senior ASEAN and Chinese officials convened the “China-ASEAN Joint Working Group on the Implementation of the Declaration on the Conduct of Parties in the South China Sea (JWG-DOC)” in March 2023. ASEAN officials indicate that there is commitment from all sides to intensify diplomatic negotiations to make substantive progress on an actionable and legally binding Code of Conduct that is consistent with international law.

China also hosted high-profile visits from Singapore, Malaysia, and Cambodia. In late March 2023, Singapore Prime Minister Lee Hsien Loong embarked on a weeklong visit to China. In his meeting with President Xi, the two sides agreed to upgrade their bilateral ties to a “high-quality, future-oriented partnership.” This would entail extending cooperation across all sectors, including science and technology, supply chains, the digital economy, food security, trade, investment, finance, and aviation. In his meeting with Lee, Chinese Premier Li pointedly reaffirmed China’s ties to Southeast Asia, adding that ASEAN is a priority for China’s foreign and security policy with the region and that it supports ASEAN centrality in regional affairs. During his visit, the Singapore leader also attended the Boao Forum and delivered a speech at the opening plenary where he emphasized the importance of upholding the rules-based multilateral trading system.

Malaysian Prime Minister Anwar Ibrahim made his first official visit to China in early April since becoming head of government last year. Solidifying bilateral trade and economic ties was a priority for Anwar. Two-way trade reached nearly $190 billion in 2022 and saw a nearly 20% increase. Chinese investment in Malaysia reached $11 billion in the first half of 2022, and amounts to well over half of Malaysia’s total foreign direct investment. Hoping to increase the vibrant business, economic, trade, and investment ties with China, Anwar’s visit also highlighted China’s commitment to help deliver on a number of important infrastructure developments. Most notable is the East Coast Rail link, part of the Belt and Road Initiative, which would facilitate travel and trade between China and Malaysia and runs through continental Southeast Asia.

Cambodian Prime Minister Hun Sen reaffirmed close ties during his Feb. 9-12 visit to China.

Figure 4 China’s President Xi Jinping meets with Cambodia’s Prime Minister Hun Sen on Feb. 10, 2023 in Beijing, China. Photo: Huang Jingwen/Xinhua

Beijing said Hun Sen’s warm meeting with Xi Jinping came against the background of record foreign trade over the past year valued at $16 billion, marking an annual increase of 17%. Xi highlighted construction of the Sihanoukville Special Economic Zone, a flagship project under China’s Belt and Road Initiative, adding to previously announced Chinese projects. The latter included a $1.6 billion expressway from Phnom Penh to the Vietnamese border and a rail link connecting the Cambodian capital to the high-speed rail project now operational from China to Vientiane, Laos, and due to connect to Bangkok and ultimately further south to Singapore. The Cambodian rail link and expressway were scheduled to be completed in 2027.

Chinese-funded construction at and near the Cambodian Ream Naval Base progressed with reports by the Asian Maritime Transparency Initiative disclosing major land clearing, a new pier, and several new structures at a 28-acre site comprising 15% of the base. The US government and many foreign observers cite evidence of Chinese plans to use the base as a strategic strongpoint despite repeated Cambodian denials. The Thayer Consultancy reported development inside the nearby Ream National Park to construct an air defense base and radar facility on a large 187 hectares (462 acres) location. Meanwhile, a mega project of China’s Belt and Road Initiative of possible Chinese military use, construction of an international airport of the “highest class” on a 2,600-hectare site 20 km south of Phnom Penh, reportedly progressed with construction of the air terminal hall.

Figure 5 A new Phnom Penh Airport under construction on Nov. 9, 2022. Photo: Xinhua

To mark the 15^th anniversary of China and Vietnam’s “comprehensive strategic cooperative partnership,” Qin discussed the state of bilateral ties with Vietnamese counterpart Bui Thanh Son via a phone call on March 28. Indicating that Vietnam remains an important country in China’s “neighborhood diplomacy,” Qin pledged to “strengthen strategic communication, consolidate political mutual trust, and intensify interactions at all levels and in all fields.” Their phone call came as bilateral tensions rose following a reportedly tense encounter between a Chinese coastguard vessel and a Vietnamese fisheries patrol boat earlier in March in the South China Sea. Both sides agreed to jointly maintain a peaceful and stable environment in the region. The diplomatic call also followed a report that the United States is keen to upgrade its ties with Vietnam this year, the 10^th anniversary of their bilateral comprehensive partnership. Officials in Hanoi are wary of upgrading the U.S.-Vietnam partnership, given Vietnam’s geographic proximity to China and possible retaliation by Beijing.

Australia: Beijing Hits AUKUS and the Quad, but Hopes for Improved Relations

As the AUKUS agreement was dramatically announced on March 13 by President Biden and the prime ministers of Australia and Great Britain against the backdrop of US naval forces in San Diego, Chinese officials and media roundly criticized the event. The Australian government bore the brunt of the criticism. Beijing took the opportunity to appeal to Southeast Asian concerns over possible implications of the deal for the presence of nuclear weapons in the region, asserting that China is willing to sign a treaty making Southeast Asia a nuclear-free zone. China Daily reported that Indonesia, the ASEAN chair in 2023, has started negotiating with the five recognized nuclear powers—China, France, Russia, the UK, and the US—to sign the protocol to the Treaty on the Southeast Asian Nuclear Weapon-Free Zone passed 30 years ago. Chinese media continued criticizing activities of the Quad, as well as Australian government efforts to work with Japan, Pacific Island countries, and others in the region to counter Chinese initiatives and objectives. The Chinese ambassador in Canberra took special aim at assertions that Australia was prepared to go to war against China over Taiwan.

Nevertheless, Chinese commentary persisted in emphasizing what it depicted as positive signs of reviving constructive relations. It cited the government of Prime Minister Norman Albanese, in power since May 2022, as ending tensions of recent years. The Chinese ambassador said the China-Australia relationship is showing “positive momentum” as “all sectors of the two countries generally wish to strengthen exchanges and cooperation.” Beijing commentary focused on the benefits of highly complementary trade relations and active people-to-people cultural exchanges.

Pacific Islands: China on the Defensive as US, Australia, and Japan Advance

Chinese commentary remained low-keyed and on the defensive as the United States, Australia, Japan, and partners followed through on improved assistance and engagement at odds with Chinese ambitions. Specific US steps included assistance to the three Freely Associated Pacific Island States (Palau, Marshall Islands, and the Federated States of Micronesia), opening a US embassy in the Solomon Islands, beginning negotiations on a defense cooperation agreement with Papua New Guinea, and announcing more robust US Coast Guard patrols to assist Pacific Island states against illegal foreign fishing. China is by far the leader in illegal fishing in the region. A prominent UN official judged that “the loss of tuna to illegal fishing is almost equal to the total grant assistance to the Pacific Islands.”

As a sign of the much higher US priority given to relations with Pacific Island countries, in late April it was announced that President Biden would briefly visit Papua New Guinea on May 22 to meet 18 Pacific Island leaders while traveling between the G7 summit in Japan and the Quad summit in Australia. Meanwhile, the president of Federated States of Micronesia followed his stark warnings in 2022 about Chinese influence operations and efforts to control Pacific Island governance with detail in a publicized letter in March that showed how Beijing carries out political warfare by bribing many of his nation’s senior officials and elected representatives.

Amid periodic tepid commentary advising Pacific Island countries to avoid purported US efforts to use relations as a power play against Chinese initiatives, the Chinese Communist Party International Department hosted in April the Third Annual China-Pacific Island Leadership Dialogue. Chinese rhetoric supported China’s ambitions to expand trade while treating all regional countries as equals, reporting that the value of annual Chinese trade with Pacific Island countries recognizing Beijing grew over 40 times in 30 years, reaching $6.6 billion in 2022.

Outlook

Facing increasing competition from the United States, Chinese officials have been keen to step up engagement with Southeast Asian partners in its neighborhood diplomacy. China sees greater coordination with the region as an important part of limiting US influence in regional security. Beyond strengthening trade and economic ties, however, there needs to be a stronger commitment from China to work more closely with Southeast Asian counterparts on strategic issues that matter, like conflict management in the South China Sea and developing a legally binding Code of Conduct. Whether progress on those fronts will unfold merits closer observation of key developments in China-Southeast Asia relations throughout the rest of 2023.