Xi’s ASEAN visit signals China’s aim for closer ties
What’s happened?
On April 14th-18th China’s president, Xi Jinping, visited three ASEAN countries—Vietnam, Malaysia and Cambodia—and met their respective leaders, while his delegations held meetings with their counterparts. Numerous memoranda of understanding and joint statements were signed.
Why does it matter?
Mr Xi’s visit largely illustrates China’s long-term strategy towards the region and is not a reaction to the recent US policy, although some commitment offers to the ASEAN countries may have been crafted with Mr Trump’s protectionist policies in mind. China’s once-in-a-decade conference on neighbour diplomacy has reaffirmed its strategy to deepen ties with the global south, particularly South-east Asian countries that are geographically close to China and diplomatically friendly compared to their South Asian neighbours.
During Mr Xi’s visit, China offered expanded market access for agricultural goods, technology exchanges and infrastructure developments for those ASEAN countries. Although infrastructure development has always been a common feature in China’s bilateral relations with these countries, the expanded co-operation in technology and better access to China’s domestic market—as well as closer defence overture—are relatively new. The choice of the countries also demonstrates China’s recognition of the important roles that Vietnam and Malaysia play in China’s global supply-chain footprint and China’s desire to deepen such engagements. Meanwhile, Cambodia has always been China’s closest ally in South-east Asia.
The visit signals that ASEAN engagement with China will not materially reduce in the light of US trade tensions. A warm reception was accorded to Mr Xi and his delegation by the host countries and there were extensive new agreements signed between them. The continuing amicable relationship between these ASEAN countries and China is testament to the strong economic clout that China has on their countries amid other considerations; Vietnam and Malaysia have outstanding conflicting maritime claims in the South China Sea against China.
Mr Xi’s tactic was to contrast China’s style with the US’s coercive approach. China is not asking its neighbours to choose a side (at least not overtly). Closer co-operation frameworks are in the works after the visit: the “3+3” strategic dialogue mechanism on diplomacy, defence and public security between Vietnam and China; the “2+2” dialogue mechanism on diplomacy and defence with Malaysia; and the “2+2” dialogue mechanism with Cambodia.
Vietnam and Malaysia are likely to see less aggression from China on the issue of the South China Sea, as China is keen to preserve good relations to preserve its sphere of influence. In particular, we note that the joint statement with Vietnam stated that the two countries agree to “uphold the role of the joint patrol mechanism in the Gulf of Tonkin…[and] deepen the exchange and co-operation mechanism between the navies and coast guards of the two countries.” In the joint statement with Malaysia, both sides “emphasised the importance of maintaining peace, security and stability in the South China Sea…[and] agreed to resolve disputes by peaceful means”, as well as “look forward to the conclusion of an effective and substantive Code of Conduct in the South China Sea in 2026”. This may not guarantee a lasting resolution on maritime territorial disputes, but we consider it a prelude to a lull in recent confrontations.
What next?
While there are plenty of positive signs that Vietnam, Malaysia and Cambodia will continue to tighten their constructive engagements with China, there will be challenges that cause minor trade conflicts between China and ASEAN. Under the de facto trade embargo with the US, cheap Chinese goods will make their way to South-east Asia and cause grievance to local producers, which will require limited and temporary trade barriers (such as the anti-dumping duty that Vietnam imposed on Chinese steel). Vietnam and Malaysia will also, to a certain extent, be stricter about China’s export transshipment via their countries in order to preserve good relations with the US. Nevertheless, we believe that any trade measures introduced against China by Vietnam and Malaysia in the future will be measured and moderate.
ASEAN’s strong ties with China will not go unnoticed by the US and are likely to affect those countries’ negotiations with the US. Whether or not the US will keep the bulk of the threatened reciprocal tariffs intact after the 90-day pause, it will continue to curtail China’s activities through punitive trade measures more so than against other countries, which will still affect the “connector” countries for China. The US’s plan to impose sky-high tariffs (reported at more than 3,000% for some manufacturers in Cambodia) on solar cells and panels imported from South-east Asia is another extreme case in point that will cause great harm to the ASEAN solar manufacturers with close China ties. China’s transshipment issues via ASEAN have existed since the first Trump administration, and the second Trump administration is now more determined to clamp down on it. Given existing close supply-chain ties with China, ASEAN as a bloc will face harsher US trade restrictions relative to other regions such as Africa or Latin America.
The analysis and forecasts presented in this article are drawn from EIU’s Country Analysis service. This comprehensive solution offers essential insights into the political and economic outlook of nearly 200 countries, empowering businesses to manage risks and develop effective strategies.