For those concerned about a rising China, Southeast Asia is of particular interest. It is a region of diverse states and cultures that involves all the major powers in the Asia-Pacific in a multiplicity of strategic interests. It is thus a fluid arena, offering the potential of different strategic games, options, and uncertain outcomes, but without a significant crisis hotspot such as those in Northeast Asia.

In this complex playing field, the key players have adopted strategies and policies departing from the dichotomies that many analysts predicted at the end of the Cold War. China and most Southeast Asian states have avoided committing to a specific strategic path. Instead, maximizing room for maneuver in expectation of changing distributions of power and influence in the region, Beijing has worked hard to dispel any fears of a “Chinese threat.” The challenge for Washington now is how to cope with such fluidity in Southeast Asia.

Chinese Activism

China’s approach to Southeast Asia during the last decade has been characterized by a conscious dampening of outstanding regional disputes, a willingness to engage in multilateral dialogue and institutions, and a rhetoric of good neighborliness and mutual benefit. Beijing proposed a free trade agreement with the region. It negotiated a Declaration on the Code of Conduct for the South China Sea. And it acceded formally to the Treaty of Amity and Cooperation of the Association of Southeast Asian Nations (ASEAN).

But this recent Chinese “penetration” into Southeast Asia has focused primarily on economic cooperation and mutual gains. While the figures vary, China is certainly now among the top two or three trading partners for all the Southeast Asian countries. Sino-ASEAN trade as a whole has grown from $8 billion in 1981 to over $130 billion in 2005. If the ongoing negotiations for the ASEAN-China Free Trade Area (ACFTA) are successful, by 2010 the world’s largest free trade zone will be created with 1.7 billion people, a total GDP of $2 trillion, and total trade volume exceeding $1.2 trillion.

Beijing also wants to show that Chinese economic expansion, while necessitating structural adjustments in neighboring economies, can also offer some positive trade-offs in return. The Early Harvest program, which has allowed neighbors like Thailand to negotiate mutual reductions in trading barriers in some agricultural goods ahead of the ACFTA, is one example of such a policy, as is the extension of aid to the least developed Indochinese countries for infrastructural projects. If China manages to convince its Southeast Asian neighbors that Chinese economic growth is good for them too, and thus increases the degree of interdependence between them, then the costs to a potential challenger to Chinese interests are raised significantly. This approach gives the region a strong stake in ensuring China’s future development.

To dispel fears of a “China threat,” Beijing has used its policies in Southeast Asia to demonstrate its desire to behave as a responsible and amiable international player. In East Asia, China butts up against Japan and grapples with the limits of its influence on the Korean peninsula; Central Asia is subject to competitive strategic intrusions by the United States and Russia; and South Asia is complicated by ambivalent Sino-Indian relations and sub-continental politics. Southeast Asian states are smaller but also more realistically reconciled to living with China’s inevitable resurgence.

Thus China has participated assiduously in the ASEAN-led regional institutions like the ASEAN Regional Forum (ARF) and ASEAN Plus dialogues. China became the first external signatory to the Treaty of Amity and Cooperation in 2003, an important symbolic gesture toward its acceptance of ASEAN norms. More importantly, its willingness to negotiate multilaterally with rival Southeast Asian claimants the territorial disputes over the Spratly Islands in the South China Sea reassured them that Beijing is serious about its “peaceful rise,” at least for the short- to medium-term.

In addition, Beijing has pursued regional leadership subtly, mainly through economic avenues. For instance, Chinese aid and loans in Indochina have been competing with traditional Japanese donations to the region. More recently, Beijing has also reached out deliberately to two key strategic maritime Southeast Asian countries. In April 2005, Chinese President Hu Jintao signed a Strategic Partnership agreement with President Susilo Bambang Yudhoyono, extending credit and loans for $300 million worth of infrastructural projects and more than $10 billion of private sector investment to Indonesia. While providing relatively modest sums, the agreement came a few weeks before a U.S.-Indonesia memorandum of understanding for a significantly less generous $74 million aid package. In September 2006, China announced a large aid package comprising $2 billion of loans a year for the next three years for the Philippines, outshining offers of $200 million from the World Bank and Asian Development Bank, and negotiations for $1 billion from Japan. Beyond economics, Beijing has raised its leading regional profile by backing the East Asian Summit, offering to take part in joint patrols in the Malacca Straits, and repeatedly suggesting an ASEAN-China Defense Ministers meeting.

Chinese leaders are well aware that China’s rise causes great disquiet among its neighbors and in the international community. They are wary that the United States, Russia, India, and other countries may react by trying to contain its growth. From Beijing’s viewpoint, its activism in Southeast Asia is an important element of a “hedge” against such potential containment. Reassuring and pacifying Southeast Asia not only contributes to its economic development, it helps secure China’s most porous periphery from encirclement, a perennial fear of the continental power. But China has chosen a positive means of hedging, by deploying astute diplomacy to reassure the region and demonstrate its “peaceful rise.” This strategy buys time and friends for China to develop, while preserving and expanding its options for future strategy and policies.

Southeast Asia Responds

Southeast Asians have responded to a decade of Chinese regional activism with open arms. It is a deeply pragmatic region, and its reaction to China’s rise is colored by geographical location and historical experience. Because of their proximity, these small- and medium-sized states accept the inevitability of living in China’s shadow. While they may be wary of Chinese domination, many Southeast Asian leaders believe that the region suffered when China was weak and divided, and they are more optimistic about a growing, self-confident China that embraces capitalist values. In spite of its optimistic rhetoric, ASEAN started engaging China in the early 1990s with relatively low expectations. Since then, China has not only engaged in ASEAN’s dialogues and institutions but has surpassed the bloc with its own trade and diplomatic initiatives.

Most importantly, Southeast Asia has been enthusiastic about Chinese regional activism because it advances the region’s two critical strategic imperatives. First, because of an intense post-independence struggle for regional leadership between Indonesia and Malaysia, the core regional security principle of ASEAN has always been the prevention of intramural hegemony. In addition to preventing the exercise of regional hegemony by any one external power, ASEAN has been committed to diversifying the region’s dependencies. While acknowledging that they cannot avoid being part of the ambit of the big powers, Southeast Asian nations share a desire not to fall within the exclusive sphere of influence of one great power.

Therefore, China’s rise has been good in some ways for Southeast Asia. It has started to counter incumbent American strategic dominance in the region. While the United States is dominant in the region, Southeast Asians fear not so much its hegemonic intentions but rather its inconstancy. China’s most significant contribution, then, has been to provide a strategic concern that can help anchor longer-term U.S. attention in Southeast Asia. Along with its role as the third engine of economic growth in the region, after the United States and Japan, China has perhaps inadvertently fulfilled ASEAN’s imperative of strategic diversification.

Southeast Asian strategic imperatives also limit regional enthusiasm for China’s growing influence. The region will continue to feel relatively comfortable with China’s rise if Beijing continues its policy of benignity and mutual benefit but only if ASEAN’s strategy of diversification continues to work. In other words, ASEAN must see that the other major powers, mainly the United States, but also Japan and India, are responding to attempts to draw them into closer strategic ties.

This dynamic is often referred to inadequately as Southeast Asia’s hedging strategy, with the implication that the region simply does not want to choose between China and the United States. Thus the region engages China politically and economically. At the same time, it buys a strategic insurance policy mainly by facilitating U.S. forward military deployment in the region to deter Chinese aggression. This formulation is narrowly correct but implies a short-term avoidance strategy. But hedging in fact involves a more active creation of space and options as part of long-term Southeast Asian diplomacy.

Thus, the countries that can create the most options hedge most successfully. Singapore, Thailand, and Malaysia are most effective at diversifying their dependencies because they best exploit the resources that both China and the United States want. In contrast, “leaning to one side” is the often-unwilling fallback position of weaker countries like Cambodia and Laos, which have few strategic alternatives to Chinese patronage. Furthermore, if the imperatives for Southeast Asia are diversification and counter-hegemony, then other major players like India and Japan—and other, particularly economic, bases of power—are necessarily critical to the region’s strategic aims.

Losing Southeast Asia?

U.S. discussions of China’s gains in Southeast Asia are sometimes couched in terms of whether and when the region will be “lost” to a Chinese sphere of influence. If we allow any credence for Southeast Asian strategic preferences, then it becomes apparent that ASEAN states don’t want to alienate the United States but, on the contrary, desire to maximize economic and technological gains from closer relations. None of the states currently enjoying military ties with the United States wishes to diminish them, while those that do not have such ties wish to develop them. And no state in the region would willingly choose to place all its strategic eggs in the Chinese basket. Finally, those that may seem to do so hold very little strategic attraction for the United States and thus have no alternative.

Therefore, the United States retains an extremely favorable position in Southeast Asia, even in the face of China’s growing influence. Given this situation, Washington can react in one of two general ways. First it can carry on with a reliance on bilateral alliances and other military arrangements with individual countries to bolster the southern section of the “East Asian littoral,” protecting sea-lanes of communication and U.S. business interests. This low-level approach can be supplemented when necessary by initiatives related to Washington’s own strategic imperatives, such as the current war on terrorism. Because the United States has more power, more instruments, and provides more common security goods for the region than China does and because Southeast Asians wish to maintain U.S. involvement in their affairs, this status-quo approach makes a certain amount of sense.

However, the second, more desirable way forward for the United States in Southeast Asia involves strategic re-evaluation and re-calibration. Washington may recognize that even though its own preponderance remains, China is changing the regional strategic game by its participation and by the nature of its gamesmanship. Rather than trying to contain China’s growing power, Washington could use Southeast Asia as a testing ground to evaluate China’s intentions by giving engagement policies a chance. ASEAN’s attempts to enmesh and socialize China have no chance of success without U.S. help. Washington must be willing to extend its security umbrella so that these countries dare to reach out to China.

But now as China gains economic and diplomatic weight, ASEAN also needs more high-profile U.S. activity in these areas to avoid over-dependency on China. Thus, the agreement in November 2005 to expand relations through the U.S.-ASEAN Enhanced Partnership, emphasizing more trade and investment and closer cooperation against illegal drug trafficking and maritime and border security, is a welcome development beyond the boilerplate issues of counter-terrorism and counter-proliferation. The idea of an annual U.S.-ASEAN Summit, floated in early 2006, would also be a useful gesture as well as venue at which to cultivate American participation in Southeast Asian affairs. Other possibilities include the development of mechanisms under the APEC aegis to support an Asian Bond Market and continued cooperation with other like-minded Southeast Asian states to push the ARF toward preventive diplomacy.

Southeast Asian strategies toward China are underpinned by the twin roles of the United States as a regional bulwark or deterrent, and the United States as the world and the region’s premier economic powerhouse. ASEAN is not looking for a zero-sum standoff between the United States and China. Rather, Southeast Asian nations want to work with the United States and other major regional players to persuade China to build on and deliver on the progress it has made in the last decade.

, Evelyn Goh is university lecturer in international relations and fellow of St. Anne's College, Oxford.