China’s growing role in the Asia-Pacific (APAC) region raises concerns for other APAC countries, as well as for its trade partners. Its growing tensions with the U.S. and increasing flexing of its military prowess do not bode well for China’s neighbours.
The United States and China are two of the largest economies in the world. According to forecasts, China’s GDP growth is slated to overtake America’s GDP in the next 10 years. The two interact extensively on trade and geopolitical issues. Diplomatic relations between the U.S. and China was first established in 1844 with the Treaty of Wanghia. This agreement allowed the US to trade in Chinese ports. After the Qing Dynasty was overthrown, in 1911, the US recognized the legitimacy of the Republic of China (ROC) government.
The U.S.–China Strategic and Economic Dialogue was created in 2009. Every year, high-level representatives from both nations open up dialogue to improve economic partnership. In 2017, the meetings that occurred were reported as being “tense”. Upon conclusion, the two countries cancelled a joint press conference and did not release a statement. They also did not release a plan of action.
The escalating trade war between the US and China has been a crucial factor behind the heightened tensions between the two countries. During the recent Asia-Pacific Economic Cooperation (APEC) summit, the focus remained on these two key players, leaving a more diminished role for the other countries present. As the two countries continue to implement tariffs and other trade impediments against each other, the neighbouring countries involved in China’s supply chain will also be adversely impacted.
Choosing between the US and China can have a variety of consequences for smaller countries. China’s neighbours already have a trading relationship with one or both countries. Alienating one by choosing the other poses enormous risks. Retaliation from the spurned country could be detrimental as trade sanctions and tariffs will have a crippling effect on their still-developing economies. For countries like Vietnam and the Philippines, the rising pressures of the US-China war have a multitude of effects on the peace and stability of the region. The smaller countries already foresee the need to choose between the two economic giants as the conflict worsens. Beijing and Washington are proposing diverging economic models, leaving the others to choose a side.
In addition to monitoring China’s economic relationships, neighbouring countries have to keep a close eye on China’s highly controversial occupation of the South China Sea, occupation that is rapidly increasing. The South China is an integral part of regional power plays as it borders several countries, including Vietnam, Malaysia and the Philippines, and is a key trade channel for international partners. A third of all global maritime traffic passes through these waters and roughly $5 trillion goods are transported through this channel. In the last few years, China has constructed artificial structures in the area and begun to militarize these structures. The fundamental need for access to these waters makes it indispensible to most of the world, with particular impact on the U.S. specifically.
China contends that it has a historical right to the waters in which the structures were built. However, the US and its allies argue that it is a vital international maritime corridor, and as such, China is out of bounds with these structures. Neighbouring countries fear China’s overreach and worry about China’s potential intrusion into their own borders. The United States is also an interested party in China-APAC relations, as it seeks to be the chief navel power in the East Asian waters. However, China’s increasing presence in the area poses a threat to the East Countries and to the US’s goal of regional dominance. International courts have found China’s claims to the water to be invalid, but Beijing rejected the ruling and has continued its growing presence. Simultaneously, Beijing is also vocal about its opposition to the US having a naval presence in the region.
As China has militarized these structures, it has also quickly advanced its military capabilities. The US has seen its military edge erode as China rapidly develops its own, raising further concerns about China’s role and intentions in the East Asia region. Tensions around these issues have further intensified as countries bordering the waters worry about their ability to defend their border access to the South China Sea against Chinese aggression, given their increase in military capabilities.
In addition to military factors, diminished border access is problematic for East Asian countries because China’s occupation of the waters prevents them from exploring the minerals found in it. China is now trying to regain political support from neighbouring countries by proposing a joint collaboration to develop oil and gas facilities in the region. While critics suggest that entering into the collaboration effectively provides validation of China’s occupation of the waters, some countries cannot afford to immediately reject China’s offer. The Philippines has depleting oil and gas resources, and it is expected to run out by 2030.
The U.S. is taking a hard stance against China on both trade and regional dominance, and is hoping to gain more support from the neighbouring countries to combat China’s aggressions. President Trump has been vocal about his critical views of China. He blamed the country for loss of jobs within the US and has often criticized the US trade deficit with China. China's trade surplus with the United States widened in 2017 while total foreign trade volume maintained rapid growth. The Trump Administration has also amplified efforts to restrain China’s military flexing. A coalition, called the Quad, comprises of the US, Australia and Japan, and their main goal is to identify effective ways of containing China.
As other countries watch the deterioration of US-China relations with increasing concern, they are more likely to get involved. As two giant economic powers, the rest of the world will not be able to abstain from this entanglement. However, with increasing aggressions reminiscent of the Cold War, economic and geopolitical concerns need to be monitored closely to avert an extreme escalation.