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China-ASEAN Summit
Beijing's Charm Offensive Continues
Ian Storey, The Jamestown Foundation, China Brief
12/28/2006

As has become the norm with Chinese diplomacy, trade issues topped the agenda. The two sides agreed to place a priority on accelerating the pace of negotiations to establish the China-ASEAN Free Trade Area (CAFTA). As part of the CAFTA negotiations, talks between China and ASEAN on trade in services and investment are currently on going. The CAFTA initiative calls for China and the ASEAN-6 (Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) to impose zero tariffs on most goods in 2010, followed by Cambodia, Laos, Burma and Vietnam in 2015. The proposed CAFTA region will include over 1.7 billion people with an estimated GDP of over US$2 trillion dollars.

Both sides praised the expansion of bilateral trade, which has grown 15-fold since 1991. According to Chinese statistics, the volume of bilateral trade in 2005 reached $130 billion: between January and September 2006, it had hit $116.3 billion, a 23.1% increase on a year-on-year basis (China Daily, November 2). The two sides estimate that by 2008, China-ASEAN trade will reach $200 billion, making China ASEAN’s largest overall trade partner. Chinese Commerce Minister Bo Xilai said China would continue to welcome imports from ASEAN countries despite running a trade deficit of $20 billion (Xinhua, October 31).

At the summit, several proposals were put forward to increase economic interaction between ASEAN and China. In particular, the ASEAN states called on China to reciprocate its investment activities in Southeast Asia. Since 1991, the ASEAN countries have invested far more in China than the other way round—about $38.5 billion as opposed to China’s $1 billion. In 2005, for instance, the ASEAN countries invested $3.1 billion in the PRC; China, on the other hand, invested a mere $158 million in Southeast Asia (Straits Times, November 2). This situation is slowly changing, however, as the PRC increases its investment in infrastructure and resource extraction projects in the ASEAN countries. At the Nanning Summit, Premier Wen announced that by the end of the year China would provide $5 billion in preferential loans to Chinese companies starting business ventures in ASEAN countries. Other proposals to advance economic ties included a China-ASEAN Open Skies Agreement, a railway linking Singapore with Kunming and the China-ASEAN M-Shaped Regional Economic Cooperation Strategy. The latter is a Chinese infrastructure project aimed at linking the PRC with Singapore, Malaysia, Thailand, Cambodia, Laos and Vietnam by rail and road.

The Nanning Summit provided an opportunity to highlight the maturation of Sino-ASEAN political links. Premier Wen emphasized that since 1991, China and ASEAN have “together gone through the experience of eliminating suspicions and developing dialogue, as well as promoting mutual trust.” In fact, the Chinese premier continued, ASEAN-China relations were at “their historic best” (Xinhua, October 30). Philippine President Gloria Macapagal Arroyo, who co-chaired the Nanning Summit with Wen, agreed with his assessment by characterizing the relationship as “more confident, mature and comprehensive” than it was 15 years ago. In order to promote political relations, Wen suggested that the two sides maintain regular high-level meetings and expand links between governments, parliaments and political parties. In addition, as a gesture of support for the organization’s efforts toward greater integration, Beijing would donate $1 million to the ASEAN Development Fund and $1 million to the Initiative for ASEAN Integration, the first extra-regional power to make a financial contribution to the two programs.

Enhanced defense and security ties between ASEAN and China were also addressed at the Nanning Summit. In his opening speech, Premier Wen advocated the expansion of military dialogue and exchanges as well as the institutionalization of defense cooperation. In particular, he suggested greater cooperation in the areas of counter-terrorism, maritime security, humanitarian and disaster relief, transnational crime, and the spread of infectious diseases such as avian flu. On the sidelines of the conference, ASEAN and China agreed to coordinate customs and quarantine measures, establish a data-sharing network on epidemics, and share technology and training. Wen also reiterated Beijing’s support for ASEAN’s 1995 treaty on the Southeast Asia Nuclear Weapons Free Zone (SEANWFZ), and that China was ready to sign the protocol “at an early date” (AFP, October 30). On the issue of the Spratly Islands dispute in the South China Sea, both sides pledged to work toward the eventual adoption of a code of conduct. The ASEAN leaders praised China for its “hands on role” in the Six Party Talks designed to diffuse the North Korean nuclear crisis.

Bilateral Meetings

On the sidelines of the summit, Premier Wen Jiabao held bilateral meetings with each of the ten ASEAN leaders. These meetings enabled the heads of government to reaffirm existing ties with the PRC and map out future relations.

- Brunei

For Brunei, the Nanning Summit not only marked 15 years of ASEAN-China dialogue relations, but also 15 years of formal diplomatic relations with the PRC (China Brief, November 22, 2005). At Nanning, Sultan Hassanal Bolkiah welcomed Wen’s suggestion to bolster Sino-Brunei ties through increased high-level exchanges, the promotion of trade and investment, and more cultural and educational exchanges. On the issue of the two countries’ only outstanding bilateral problem—overlapping territorial claims in the Spratly Islands in the South China Sea—Wen suggested that China and Brunei shelve their sovereignty dispute and engage in the joint exploitation of natural resources (Borneo Bulletin, November 1).

- Burma

When Premier Wen met Burmese Prime Minister General Soe Win, Wen stressed that China would continue to develop friendly relations with Naypyidaw based on the Five Principles of Peaceful Coexistence, including non-interference in each other’s internal affairs. Wen stated that Beijing supported Burma’s political stability, economic development, and national reconciliation. Soe Win thanked the Chinese government for its “strong support” at the UN Security Council (UNSC), a reference to China’s unsuccessful attempt to prevent the United States placing Burma’s human rights record on the Security Council’s agenda in September.

- Cambodia

Cambodia has, since 1997, become one of China’s closest friends in Southeast Asia, and Wen told Prime Minister Hun Sen that Beijing was ready to raise bilateral relations to a “higher level” (China Brief, April 26). During the course of their meeting, Hun Sen thanked Wen for China’s developmental assistance, and asked for $100 million in loans to finance infrastructure projects, including the establishment of an industrial park.

- Indonesia

Indonesian President Susilo Bambang Yudhoyono paid a five-day visit to the PRC during October 27-31. Prior to the Nanning Summit, Yudhoyono attended the Second Indonesia-China Energy Forum in Shanghai; energy cooperation has become the key driver of Sino-Indonesia relations. At the forum, Yudhoyono presided over the signing of six major energy-related projects valued at between $3.6-4.3 billion. During their bilateral meeting, Wen and Yudhoyono reaffirmed bilateral trade targets of $20 billion in 2008 and $30 billion in 2010. The two leaders also agreed to step-up defense cooperation, including more ship visits, defense consultations and joint maritime exercises. In a related development, Indonesian Defense Minister Juwono Sudarsono announced that Jakarta was considering the purchase of arms from the PRC to reduce the country’s dependence on Western suppliers. Juwono did not identify any particular weapons systems, but indicated that a team from his ministry would visit the PRC soon (Antara, November 1). Wen and Yudhoyono also discussed North Korea’s nuclear test and agreed to coordinate their positions at the UNSC where Indonesia was recently elected as a non-permanent member.

- Laos

Wen told Laotian Prime Minister Bouasone Bouphavan that bilateral ties were at an “all-time high” and that the PRC was especially interested in developing Laos’ infrastructure, hydroelectric power generation and mineral resources. Wen added that Beijing would consider financing a third bridge across the Mekong River to link Thailand and Yunnan Province through Laos.

- Malaysia

Malaysian Prime Minister Abdullah Badawi expressed strong satisfaction with the development of Sino-Malaysian relations and reiterated that for Malaysia, China’s development presented an opportunity, not a threat. During the summit, Wen and Abdullah announced that Malaysia’s state-owned energy company, Petronas, had secured a contract with Shanghai to provide 3.03 million tons of Liquefied Natural Gas (LNG) on an annual basis for 25 years starting in 2009. Valued at $25 billion, the contract represents the largest trade deal between the two countries. The two sides also announced they were exploring the possibility of negotiating a Free Trade Agreement.

- The Philippines

President Arroyo undertook a six-day visit to the PRC, predicting that it would further the “golden age” in their bilateral relations (China Brief, August 16). During her trip, which included tours of three provinces, Arroyo called on China to increase imports from the Philippines, and encouraged Chinese businessmen to invest in the country’s infrastructure, mining, agriculture and fishery sectors.

- Thailand

The Nanning Summit allowed Thailand’s new Prime Minister Surayud Chulanont to introduce himself to the Chinese leadership and to put bilateral relations back on track. In this regard, Premier Wen urged the two countries to conclude a strategic framework agreement, which was held up by the downfall of the Thaksin government (China Brief, September 20). Alluding to the events surrounding the Thai coup of September 19, Surayud noted that Beijing “understood” Thailand’s political situation well and added that Wen had been the first world leader to send a congratulatory message on his appointment as Prime Minister.

- Singapore

Singapore and China agreed to advance bilateral relations in a “sustainable, healthy and stable manner” (Straits Times, October 31). In particular, the two sides pledged to move forward on the China-Singapore FTA agreement that is currently being negotiated. Prime Minister Lee Hsien Loong thanked the Chinese government for agreeing to expand the Suzhou Industrial Park by 10 square kilometers, and for signing up to the Regional Cooperation Agreement on Combating Piracy and Armed Robbery Against Ships in Asia (ReCAAP), whose Information Sharing Centre is located in Singapore.

- Vietnam

During their bilateral meeting, Vietnamese Prime Minister Nguyen Tan Dung and Premier Wen verbally agreed on three points; first, to speed up negotiations on a framework agreement covering economic and trade cooperation; second, to finish delineating the Sino-Vietnamese land border by 2008, reach agreement on the demarcation of the maritime boundary in the Gulf of Tonkin and continue discussions on territorial issues in the South China Sea; and third, to hasten agreement on the “Two Corridors, One Circle” development program (Jiefangjun Bao, November 1). The Two Corridors refers to the transport links between Hanoi and Kunming, and between Hanoi and Nanning, while the One Circle refers to the Beibu Gulf economic area. Sino-Vietnamese bilateral trade is expected to hit $10 billion in 2006.

The 2006 Nanning Summit provided China with an opportunity to do three things vis-à-vis its relations with the ASEAN countries: reaffirm, recommit and reassure. China reaffirmed its ties to the ASEAN states, emphasizing shared interests and the benefits of “win-win cooperation” over the past 15 years. As Premier Wen remarked in his keynote speech: “Our cooperation has facilitated regional integration, raised the competitiveness and international profile of our region, and promoted peace and prosperity in Asia” (Xinhua, October 30). China also used the commemorative summit to recommit itself to agreed Sino-ASEAN projects, especially the CAFTA, which both sides see as crucial to deepening economic integration between the PRC and ASEAN. Nanning also enabled the PRC to provide further reassurance that its rising power presents the ASEAN states with a historic economic opportunity rather than a strategic threat; enhanced security and defense ties with China are meant to assuage strategic anxieties in Southeast Asia. Yet, the Summit also served more practical purposes. Premier Wen used the occasion to meet with each of the ASEAN leaders one-on-one, and chart the future direction of bilateral ties, especially the expansion of trade and investment ties. Moreover, the Third China-ASEAN Expo and Third China-ASEAN Business Investment Summit underscored China’s growing economic clout in the region: more than 132 cooperative projects were signed, valued at $5.85 billion (Xinhua, October 30). Overall, China could be satisfied that its hosting of the Nanning Summit represented another step forward in its charm offensive toward the countries of Southeast Asia, an offensive that President Hu Jintao has continued in Hanoi, Vietnam at the APEC Summit a few weeks later.

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