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Where US and China will clash after the plague

SINGAPORE – With the world at a standstill, the Covid-19 pandemic has laid bare an increasingly tense rivalry between China and the United States, the most dangerous dimensions of which could play out in Southeast Asia, a region at the heart of the superpowers’ strategic tensions and rival economic strategies.

On one hand, China has strived to position itself as a global leader in a time of crisis, pursuing a campaign of “face mask diplomacy” in Southeast Asia and beyond with certain success, despite being the initial source of the novel coronavirus that has since caused the most debilitating global disruption seen since World War II.

On the other, US President Donald Trump administration’s widely viewed as inept response to the pandemic, both domestically and internationally, has sown crucial doubts about American leadership, including its failure to work with both allies and adversaries to mount a credible and effective global response to the health emergency.

The superpowers have sparred in a war of narratives and nomenclature to apportion blame for the contagion-caused death and disruption, with a firebrand Chinese spokesperson at one point alleging the US military planted the virus in China and the Trump administration earlier insisting on referring to Covid-19 as the “Chinese” virus. 

Those rising contagion-linked tensions have put Southeast Asia, a region struggling to contain its own outbreaks of the disease, on new edge.

“At a time when US-China cooperation is needed most, finger-pointing and squabbling by Washington and Beijing have left the rest of the world decidedly unimpressed,” said Ian Storey, a senior fellow at the ISEAS-Yusof Ishak Institute in Singapore. “Covid-19 has dealt a severe blow to the image of both China and the US.”

Decoupling of the world’s two largest economies was already well underway before the pandemic struck, with the Trump administration consistently casting China as a major threat to American economic and security interests.

With a US presidential election on the horizon, decoupling narratives will likely gain post-pandemic traction, particularly in sight of the acute US shortages of medical equipment that is produced largely in China and Beijing’s strategic, if not cynical, distribution of the supplies to reward allies and squeeze rivals.

In recent weeks, China has aimed to score diplomatic points in Southeast Asia through the provision of medical supplies, including in the Philippines, Laos and Thailand.  

If Washington and Beijing each lose access to their single largest overseas market in such a post-pandemic scenario, trade-geared and resource-rich Southeast Asia will assume even greater strategic importance than previously.

Indeed, if the post-pandemic order gives rise to a zero-sum superpower contest for global leadership, diplomatic efforts will likely intensify to enlist Association of Southeast Asian Nations (ASEAN) members to their competing visions for the strategic region’s future.

Both have their merits. Washington’s Free and Open Indo-Pacific (FOIP) strategy deploys governance and economic programs focused on catalyzing private investment in infrastructure projects in the so-called “Indo-Pacific” region, a bid to counter Beijing’s US$1 trillion Belt and Road Initiative (BRI) global infrastructure building program.

The term “Indo-Pacific” refers to a recently adopted strategic concept advanced by the Trump administration that envisions the Indian and Pacific Oceans as a single strategic theater which intentionally and linguistically deemphasizes the regional centrality of China.

The US strategy’s security component refers to a “Quadrilateral” (Quad) alliance among major maritime powers India, Japan and Australia, all with power-projecting naval capabilities to challenge China’s rising assertiveness in maritime areas like the South China Sea.  

The initiative, however, has notably failed to take-off in Southeast Asia, where there is an impression among experts and observers that the Trump administration has disengaged from the region, including through a dearth of top-level diplomacy. 

Security-oriented engagement with ASEAN, led by the Pentagon, has instead guided Trump’s China-confronting policy.

“The biggest problem with the Trump administration and Southeast Asia is that the White House and State Department are absent or much less engaged [with the region] than during the [Barack] Obama administration,” said Malcolm Cook, a senior fellow at the ISEAS-Yusof Ishak Institute.

“The Department of Defense (DoD), State Department and White House each run their own engagement strategies with Southeast Asia. The DoD has done a much better job than the White House and State under the Trump administration, making the US posture look very defense-oriented,” Cook told Asia Times.

Prior to the Covid-19 pandemic, US-Southeast Asian relations had arguably hit their lowest point since Trump assumed the presidency in early 2017. Relations have faltered since Trump backed away from the Trans-Pacific Partnership (TPP) multilateral trade pact, designed by Obama’s administration explicitly to exclude China from a US-centric order. Ties have also been strained by the absence of US leaders at ASEAN annual summits.

Critiques of Trump’s strategy, including from Singapore’s Prime Minister Lee Hsien Loong, have opposed Washington’s use of unilateral tariffs to address trade imbalances and attempts to pressure countries to choose sides between the two superpowers, thereby splitting the region into rival US and China-aligned blocs.

“ASEAN countries simply won’t sign up to US initiatives that seek to compete with China and turn Southeast Asia into the primary arena of Sino-US competition,” said Storey. “There is a risk that if America pushes Southeast Asian countries too far vis-à-vis its competition with China, it will alienate those countries.”

While US cumulative foreign direct investment (FDI) in the Indo-Pacific region hit $941.2 billion in 2017, dwarfing China’s $307.7 billion, Beijing has been ASEAN’s largest trade partner for over a decade. Even so, the region’s foreign policy elites have raised concerns over the BRI.

The 2020 State of Southeast Asia Survey Report, published in January by the ISEAS-Yusof Ishak Institute, showed that while China is now widely viewed as the most influential strategic actor in the region, survey respondents – mainly from public office, academia and think tanks – view China’s growing dominance with unease.

Of the survey’s 1,300 respondents, over 60% “distrusted” China, up from around 52% in 2019. Nearly 40% of respondents agreed that Beijing was “a revisionist power and intends to turn Southeast Asia into its sphere of influence.”

The survey’s results also showed a precipitous decline in regional confidence in the US.

Nearly half of the respondents, or 47%, said they have little or no confidence in the US as a strategic partner and provider of regional security, while the percentage that picked the US as the foremost political power in the region fell to 27% from 31% in 2019.

Over 73% of the survey’s respondents said their top concern was ASEAN becoming an arena of major power competition. Meanwhile, almost 80% of respondents viewed China as the region’s most influential economic power, up from 73% in 2019.

What effect the Covid-19 crisis will have on regional perceptions of China as the region’s preeminent economic partner, however, remains to be seen. Some, however, believe the situation has laid bare an untenable overreliance on Chinese trade and investment.

“I think people [in Southeast Asia] will now realize that the Belt and Road Initiative and big-ticket Chinese-funded infrastructure projects that involve mostly Chinese state-owned banks and state-owned companies, that there are risks that come with that that are not simply financial,” said Ryan Clarke, a senior fellow at the East Asian Institute, a Singapore-based think tank.

“As the evidence and as the data becomes clearer around vectors of Covid-19 spread and the correlations between that and the intensity of activity around infrastructure projects in certain geographies, I think that is going to result in people viewing Chinese investment in funding big-ticket infrastructure projects in a much different way than they had previously.”

While there are no indications yet that Chinese personnel managing BRI and other projects contributed to Covid-19’s regional spread, Southeast Asia may have reason to be less open than previously to Chinese aid, investment and tourism as the health crisis spotlights the region’s strong reliance on manufacturing-related supply chain inputs from China.

“Everyone is aware that [China’s] cover-up in the suppression and in some cases the outright deletion of critical epidemiological information early on is a large reason that the spread happened the way it did,” said Clarke. “And that’s not lost on people, and I think that’s going to linger and condition interactions with China in Southeast Asia.”

While regional countries may now re-evaluate BRI and other infrastructure projects on more critical terms than previously, the severe Covid-19 driven economic downturns projected for ASEAN could see recovery-minded regional governments looking to China for new deals and growth.

China’s own economic performance hinges, however, on a major extent to sustained demand from European and US markets, both of which have been brought to a standstill by the deadly contagion. China’s growth could slow to 2.9% this year, potentially the slowest rate since the Cultural Revolution, economists from more than a dozen banks project.

“Key markets in Southeast Asia want to run their own affairs and have control over all the core variables that determine their overall economic future,” said Clarke, adding that the region will “start to be much more focused on determining their own destiny, as opposed to waiting for third parties who are outside of the region” as a result of the pandemic.

If ASEAN takes a more skeptical posture on integration and connectivity with China, the region’s foreign investment-geared economies could give more weight to economic initiatives promoted by Washington’s Indo-Pacific strategy, including the Blue Dot Network (BDN) plan to certify “sustainable” global infrastructure projects.

The US, Japan, and Australia announced the initiative last November, while denying it is a competitive response to China’s BRI. The BDN, which has yet to shed light on its planned monetary outlays, seeks to promote private-sector-led investment in development projects, contrasting Beijing’s state-led strategy.

No ASEAN countries have signed on to the network, which has yet to be fully fleshed-out, analysts say.

“America doesn’t do BRI-type initiatives,” said Storey, “but let’s not forget that America’s cumulative investment in Southeast Asia is greater than the combined totals of China, Japan and South Korea. It’s thousands of companies doing deals within the region, quietly, efficiently and often low-profile.”

Whether the Covid-19 emergency gives definitive shape to a bifurcated post-pandemic regional order is still too early to determine, many analysts say. “The only thing we can be certain of is that when we emerge from the other side of this crisis, the world will be a very different and more difficult place,” Storey said.

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