China's Economic Strategy in ASEAN Countries

Economic relations between China and the Association of Southeast Asian Nations (ASEAN) have clearly become closer as China is now ASEAN's No. 1 trade partner and ASEAN is China's No 4 trade partner with a possibility to surpass Japan to No 3 soon. Not only in trade, investment by China's private sector and state enterprises in ASEAN countries has grown in a big leap. China now tops the investor list in ASEAN countries like Myanmar, Laos, and Cambodia, while ranking fourth for foreign investment in Thailand.
Regional Economic Trend
It is not a matter of coincidence or regional economic trend but the Chinese Government does intend to tighten economic ties with ASEAN under what I would call a "southward strategy." China began with its serious move southward in the year 2000, when Chinese and ASEAN were then fiercely competing in the world market. The China-ASEAN trade volume was not so big at the time. Then came the day when then Chinese Prime Minister Zhu Rongji wooed ASEAN to form ASEAN-China Free Trade Area (FTA). The Chinese Government has been seriously pushing for the FTA since then. The trade cooperation started with a gradual cut of import tax until the rate became zero in January 2010.
Chinese have paid frequent visits to ASEAN countries to pave the way for an army of Chinese investors. Chinese Prime Minister Wen Jiabao has visited almost all ASEAN members. Prospective fifth-generation Chinese top leader Vice President Xi Jinping has also visited Myanmar, Cambodia and Laos.
PBG Program
The Chinese Government has been using every stage, framework and forum available to continuously and seriously promote economic cooperation with ASEAN, including the push for the Pan-Beibu Gulf Economic Cooperation (PBG) program. Chinese Prime Minister Wen Jiabao has been pushing the PBG among ASEAN leaders since 2007.
As a Thai representative invited to join the Joint Expert Group for the PBG since 2008, I made the latest trip to attend the ratification of the feasibility study for the PBG early this month. I would like to cite the PBG as a case study for China's "southward strategy".
The prominence of the PBG is the participation by three key southern Chinese provinces of Guangdong, Guangxi and Hainan. The trade volume that the three provinces have with ASEAN represents one-third of the whole China-ASEAN trade. After the ASEAN-China FTA fully took effect in 2010, the trade between the three provinces and ASEAN has expanded as showed in the table above.
China's 12th Development Plan
For Guangxi in particular, it was designated by the Chinese Government as key player in China-ASEAN relations. Guangxi was officially declared Gate to ASEAN (not Yunnan as many think). It hosts China-ASEAN Expo on yearly basis in Nanning, the principal city of the province, since 2004. With conducing factors and guidance brought about by the government, economic ties between Guangxi and ASEAN have enjoyed a big leap. ASEAN has become Guangxi's No 1 trade partner. Businesspeople from Singapore, Malaysia and Indonesia have flocked to invest in the province. In the latest drive, China's 12th Development Plan targets injecting a mammoth budget of 2.6 trillion yuan in five years into the so-called Guangxi Beibu Gulf Economic Zone (GBEX) covering four key cities of Nanning, Fangcheng, Jinzhou and Beihai.
Some of you may wonder why it must be Beibu, a city bordering the South China Sea. Those who have well followed news on international politics and relations have asked me a hit question what the Chinese Government has in mind for pushing its "southward policy" through the realization of the PBG.
Of course, China does not expect to gain from the PBG only in terms of economy and investment. There are points about military strategies and security involved. China and some ASEAN countries have claimed their rights over overlapping marine territories in the South China Sea. Vietnam's Navy has gone so far as to have conducted a military exercise with live ammunition in the South China Sea recently. Vietnamese people have also staged noisy protests against China over the marine territorial dispute.
Role of Vietnam
Vietnam is sensitive to the issue in every aspect, even in the academic field. We members of the PBG panel of experts had to spend a long time to find a suitable name for the disputed marine border as the Chinese representative preferred the term South China Sea, while the Vietnamese counterpart wanted it changed to East Sea, the official term used by the Vietnamese Government. The Chinese expert would not yield to the Vietnamese counterpart's demand and it took several months for the panel to end up with just the word Sea (LOL) so as not to be biased towards any country.
The South China Sea territorial dispute and the push for the PBG could become boiling regional issues in the future. The Thai Government will have to come up with how to properly handle them. It will be certainly better for all parties concerned to cooperate than fight.

Financial Crisis in Vietnam

As the world community focuses attention on Egypt and on the political crisis in its surrounding countries, the financial crisis in Vietnam is spreading subtly and speedily. If Vietnam's financial crisis cannot be handled by its government properly, Vietnam can become a new financial disaster center in this region.

When the International Monetary Fund (IMF) advocates Asian countries to use their respective currency appreciation to resolve inflation problem; but of late, the devaluation of Vietnam's currency Dong against the US dollar has already reached as high as 9.3 percent. Such a development has caused export pressure to Vietnam's neighboring countries.
In 2003, since Vietnam implemented its Free Trade Area, the speedy economic growth of Vietnam and the economic future and prospect of Vietnam were viewed by all sectors as very good. Vietnam has even been viewed by many as "the next China."

Pursuing Rapid Economic Growth
However, to pursue rapid economic growth, Vietnam has introduced massive foreign investment to its country. Vietnam has absorbed more foreign capital than what its own economy could bear. Within a short period of less than one year, Vietnam has already faced severe inflation and its economic bubble has burst. All of a sudden, Vietnam's economy plunged into the verge of collapse. It was only through the Vietnamese Government's strong intervention that Vietnam was able to barely stabilize the spread its financial crisis.

At present, Vietnam's currency has devalued drastically and its inflation is getting out of country. At this juncture, no one dares to optimistically speculate if the financial crisis in Vietnam has indeed reached the bottom and from now onward, Vietnam's financial outlook should face a brighter future. This is because simultaneously, political and societal crisis have also emerged in Vietnam. If the Vietnamese Government cannot handle these entire crisis properly, the ruling party of Vietnam which is described as an evergreen party that can last a thousand year, may face collapse and disintegration. In short, Vietnam has suddenly turned into a modern apocalypse for other countries to observe of how a developing country can suddenly suffer such a severe setback.

To the outside world the multiple crises in Vietnam have seen to burst out too sudden and too fast. Although on the surface, whether it is in the area of politics or economy, Vietnam has given the outside world an illusion of progress and prosperity. But in actual fact, the problem relating to Vietnam's real structure crisis has long existed. But all along, Vietnam's ruling party refuses to face the fact. This has led to the present deteriorated condition in Vietnam that is difficult to clean up.

Toward Open Reform Process
In 1986, Vietnam has already begun to push forward economic reform. Vietnam has, from the past collective economy gradually transformed and transited into a free market socialist economy. In 2007, Vietnam entered the World Trade Organization as an equal status member. The fact that Vietnam can become a member of this international organization has reflected the reality that Vietnam has already gone through its past suffering and adversity, entered a better road and allowed its politics to move toward an open reform process.

The steady and rapid growth in trade and economy in Vietnam has helped to resolve its foreign debt crisis and the people in Vietnam are full of confidence and hope toward the nation's future. It is because of such development that many Asian countries have used Vietnam as a good development model and vowed to follow the economic growth path of Vietnam. Many other Asian countries hope that like Vietnam, their countries also can also go through economic and economic reform similar to that of Vietnam within short period of time. Many Asian countries also hope that they can promote the development of Free Trade Area and together with Vietnam, also enjoy a new era of political reform and economic prosperity.

Present Danger and Situation

However, at the 2006 Annual General Assembly of the Communist Party of Vietnam, the leadership transition process for both Vietnam's party leadership and its government leadership from one generation to another has set off the nightmare of Vietnam's present danger and crisis. Because of the fact that the Communist Party of Vietnam is the single domination ruling party that controls Vietnam's political, economical, societal and communication media, the Communist Party of Vietnam has become Vietnam's 'thousand-year" evergreen and an unmatched ruling party in the country.

However, when a party such as the Communist Party of Vietnam takes up a single party dominant structure that has also controlled too many vested interests, benefits and resources of the nation, it has the tendency to produce too many self-interest pipelines for their leaders and create issues relating to corruption and abuse of power.

Impact of Asian Financial Crisis
After Vietnam went through the Asian financial crisis, the Communist Party of Vietnam did carry out innovative efforts to encourage local people with good reputation as well as with good international experience to take part in politics to push forward its economic reform.

As such, under Vietnam's favorable condition of having geopolitical competitive advantage, the economy of Vietnam has also begun to rebound from the valley and appeared to attain an affluent and prosper economy on the surface. Because of the fact that the United States has the intention to pull Vietnam closer to its side in order to strengthen the US controlling power and influence in the South China Sea, the United States has given Vietnam many opportunities to participate in international organizations' programs and activities. Overnight, Vietnam has entered an international community that is fully open. However, Vietnam's political structure could not adjust to such changes. As such serious crisis occurred within the nation.

Communist Party of Vietnam's Interest
The conservative fraction of the Communist Party of Vietnam that controls major party affairs felt uneasy and shock when the reformation fraction of the party wanted to expand its full fledged influence and demanded the ruling party and government to carry out comprehensive reform. On the handling of personnel, financial affairs and vested advantage, the reformation fraction wanted these issues to be done in a transparent manner.

However, leaders from the conservative fraction were disturbed and shocked about such reformation measures. This was because all along, they were the ones who have taken up the vast and wide vested interest of the Communist Party of Vietnam. How could they withstand the impact of such party reform? As so, the conservative faction of the party began to make plot and block the reform in Vietnam. At the recent Communist Party of Vietnam reelection, this rule party has appointed Nguyen Phu Trong as its secretary general and it seems that the retaining of its Prime Minister Nyuyen Tan Dung who was earlier rumored to step down was a compromise reached between the conservative and reformation fraction of the party.

Development Trend
In recent years, the developments in many developing countries have also suffered the bottleneck phenomenon. One of the main reasons is due to the fact that the reformation pace of the ruling parties in these countries cannot catch up with the pace of advancement in economics, societal and political progress of their countries.

As of today, some of the ruling parties in the developing countries have not even gotten rid of the Lenin's political decisionmaking model. Under these governments, many decisions relating to personnel, finance, party affairs are manipulated and controlled by the different political factions within the party. Under such development trend, outstanding party talents that process good image and integrity can suffer what is termed as "count-you-out" phenomenon. Good leaders could be phased out in the process. Moreover, when it is general election time, since the talents of the ruling party are limited, the ruling party leaders must depend on money politics and money power to gain the different political camps' support to win the election battle.

However, once the ruling leaders counted on the support of the different camps within the party through money power and money politics to win the election, the ruling party has to pay a high price to reward their supporters for what they have done. Second, those politicians from the different political camps who depended on money power to retain their position and power are usually those without any lofty goals to implement good national policy for the people. These politicians only know how to please the voters blindly. As such, they tend to give out astonishing welfare checks to the people and caused massive deficits in their nation's federal treasury. To many countries, the problem in Vietnam can serve as a good warning and lesson for many countries to learn.

Malaysia, China Expand Bilateral Trade Ties

Chinese Ambassador to Malaysia Liu Jian said that the Malaysia-China relations in recent years have indeed entered a best period in the diplomatic history of both nations. He added that after the mutual visits by the two national leaders to each other's country, the bilateral ties between Malaysia and China have turned even better.

Therefore, both nations should take such opportunity to follow through and create more favorable conditions for both nations to push the bilateral exchange and cooperation in the economic, cultural and other fields to a new high.In accepting Nanyang Siang Pau's exclusive interview, Ambassador Liu Jian said that in this New Year, the Chinese Embassy in Malaysia would focus on coming out with programs to advance the friendly bilateral ties between the two countries.

The first item on Ambassador Liu's to-do list is in the expansion of trade and related investment between the two nations. The Chinese envoy said that in 2009, the Malaysia-China bi-lateral trade volume has reach $50 billion (about M$ 170.1 billion ringgit). This bilateral trade volume accounted for China's one-fourths trade volume with ASEAN (Association of South East Asian Nations). It was a heavy percentage.

Economic and Trade Supplement
Ambassador Liu said that on economic and trade, Malaysia and China could supplement each other's need. Both nations could promote the diversification of trade and deepen economic and trade exchanges. He disclosed that at this juncture, when more and more Chinese enterprises were keen to "explore the outside world", the Chinese authorities would continue to encourage large Chinese enterprises to invest in Malaysia. He said that at present stage, many Chinese provincial and municipal leaders have already begun to promote work in this area. At the same time, China also welcomed Malaysian companies to continue their investment in China. When Prime Minister Datuk Seri Najib made his first official visit to China in his capacity as the Prime Minister in June 2009, both countries have agreed on three agreements and one memorandum of understanding. Ambassador Liu Jian was one of the backstage contributors toward cementing these agreements between the two countries.
The first important agreement signed between Malaysia and China as witnessed by Malaysian Prime Minister Najib and Chinese Prime Minister Wen Jiabao was the "Malaysia-China Joint Action Plan on Strategic Cooperation." The second agreement was the "Abolition of Visa Agreement" which covers regulations on the travel of holders of diplomatic and official or service passports. These personnel will no longer be required to get visas for travel to China or Malaysia. The third document signed between the two countries was the "Marine Science and Technology Cooperation Agreement." The memorandum of understanding signed was the" Malaysia-China Postal Cooperation MoU (Memorandum of Understanding)."

Strong Business Opponent
Chinese Ambassador to Malaysia Liu Jian opined that Malaysian businesses should not hold the concern that once the ASEAN-China Free Trade Zone was fully implemented, Malaysia's domestic enterprises could not face the strong competitors coming from China and that it the process the Malaysian enterprises would be "swallowed" by the Chinese enterprises. He added that all nations should look at the bigger picture and the overall situation of the Free Trade Area Agreement and avoid "losing the big issues just because we focus on smaller ones."
The Chinese envoy said that it was based on common interest that China and ASEAN countries worked to achieve this ASEAN-China Free Trade Area. He said China and ASEAN countries have spent ten years to prepare for the free trade area. He added that the reduction of tariffs between China and ASEAN would be done year by year gradually.
Therefore, the implementation of the ASEAN-China Free Trade Area would not bring much economic and trade impact to all countries concerned. Ambassador Liu said, "The full implementation of the ASEAN-China Free Trade Area will be carried out in two stages. The first stage of implementation is between China and the few founding members of ASEAN. By 2015, the full ASEAN-China Free Trade Area will then be expanded to cover all the newer ASEAN nations." This was what Ambassador Liu Jian said when he accepted the interview with Nanyang Siang Pau.
When asked to comment on the dilemma faced by the Malaysian SMEs (Small and Medium Size Enterprises) as the direct result of the implementation of China-ASEAN Free Trade Area agreement in Malaysia, Ambassador Liu Jian said that if what the Malaysian enterprises produced were similar to the products of what the Chinese enterprises came out, it was quite normal for Malaysian enterprises to have such concern and fear. However, he added that we should all look at the overall situation and should not allow the smaller issues to block out the bigger issues as well as the bi-lateral trade benefits in the long run.
Setting Up Bank's Branch When asked to comment on the internationalization of Chinese currency Renminbi (RMB), Ambassador Liu Jian that it would be a long process to get it done. First of all, China must begin with carrying out such process with neighboring countries surrounding China. He also hoped that after the establishment of Bank of China in Malaysia, the Industrial and Commerce Bank of China could also open a branch in Malaysia as planned.
He hoped that the setting up of this second Chinese bank in Malaysia could be materialized within this year. He commented that on the setting up of this second bank in Malaysia as far as China was concerned everything was ready. He believed there should not be any procedural problem on this.

Closer Cooperation in Education
Ambassador Liu Jian hoped that in this New Year, the educational cooperation between Malaysia and China could move closer. He said that there were about one million Chinese students studying in Malaysia. There were also about 2,000 Malaysian students doing their courses in China. He said the number of Chinese and Malaysian students pursuing courses in each other's county respectively were on the increase.
Ambassador Liu Jian stressed that the mutual recognition of university degrees from both nations would require the joint efforts of two nations. He suggested that the governments and local community from both countries should encourage and assist Malaysian students and Chinese students to study in each other's country, including the provision of scholarships to the students concerned.The US envoy to Malaysia was happy to note that a Confucius Institute has already been established at the University of Malaya. He hoped that more Confucius Institute could be established in other Malaysian universities so that Chinese language teaching and learning could be provided to more Malaysian students for them to understand the Chinese culture.On the development of bi-lateral tourism, Ambassador Liu Jian said that Chinese was in the process to expand its tourism market and domestic demand for it. He expected China would soon have a vigorous tourism development and that would also encourage more Chinese tourists to visit Malaysia.

Goals To Become Advanced Nations
US Ambassador to Malaysia Liu Jian described the ASEAN -China Free Trade Area as a very important first step for China and ASEAN countries to implement. He said that through this Free Trade Area agreement, "Asian power" could be enhanced. He said that through this Free Trade Area, Malaysia, China, and other ASEAN countries could have an additional economic development channel to strengthen respective trade.
He said that when we added 10 ASEAN countries plus China together, the total market has a potential market for 1.9 billion people. Therefore, the potential market development toward that direction was very huge. It could become one of the world new economies comparable to the European Union and the North American economic bloc.
Ambassador Liu Jian opined that the implementation of the ASEAN-China Free Trade Area would enable the trade between Malaysia and China to further expand. It would also create new cooperation opportunities between the two nations in agriculture and other sectors.
Ambassador Liu Jian said that China should enter the well-off society by 2020; Malaysia also has its Vision 2020 goal to become a developed nation. Therefore, it could be said that Malaysia and China share similar goal to become advanced countries. He said the two nations should further explore new cooperation points and opportunities to face a brighter future ahead of Malaysia and China.