China Builds Asean Role in Obama Absence

Southeast Asian leaders on 9 October start a two-day summit where talks with China on territorial disputes in the resource-rich South China Sea may overshadow discussions on progress toward forming an economic community.

Heads from the 10-member Association of Southeast Asian Nations are gathering in Brunei and will then take part in the broader East Asia Summit, where U.S. President Barack Obama’s absence may give China space to press for more influence in the region.

Major powers are asserting themselves in Asia as they hunt for new sources of growth, while assuring leaders they are not trying to dominate smaller countries or contain each other. China has softened its tone after disputes over waters rich in oil, gas and fish raised tensions with countries such as Vietnam and the Philippines, agreeing to talks on a code of conduct for the area.

The summits in Brunei’s capital of Bandar Seri Begawan come after leaders from the 21-member Asia-Pacific Economic Cooperation forum concluded meetings in Bali on 8 October. They pledged to work together to revive growth while those involved in a key trade deal kept to a year-end deadline on completing talks.

Downside Risks

“Global growth is too weak, risks remain tilted to the downside, global trade is weakening and the economic outlook suggests growth is likely to be slower and less balanced than desired,” the leaders said in the statement.

U.S. and China touted their partnership credentials to Asian leaders in Bali. U.S. Secretary of State John Kerry -- standing in for Obama -- and Chinese President Xi Jinping each pledged to work with countries to boost trade and investment.

The meeting was overshadowed by the absence of Obama, who stayed home to deal with the partial government shutdown, raising questions about the U.S.’s commitment to its so-called military and economic pivot at a time China has become more assertive in Asia.

Advantage China

“I’m sure the Chinese don’t mind that I’m not there right now in the sense that, you know, there are areas where we have differences and they can present their point of view and not get as much of a pushback,” Obama said at a White House news conference on 8 October.

China’s handling of territorial spats has set back its ties with Southeast Asia, said Li Mingjiang, an associate professor at the Singapore-based S. Rajaratnam School of International Studies. “Beijing realizes that and wants to reverse the trend to establish a stronger footprint to compete with the U.S.,” Li said. “In the past half year or so, China has adopted a sensitive strategy to Southeast Asia, more moderate, more engaging, more accommodating.”

Moving quickly to draft a code of conduct for the South China Sea is a priority, said Philippine President Benigno Aquino. “I am not saying that we are close to signing the code of conduct, but all parties have been convinced to discuss it,” Aquino told reporters in Bali on Oct. 7, according to a transcript released by his office.

Energy Reserves

The region is estimated to have as much as 30 billion metric tons of oil and 16 trillion cubic meters of gas, which would account for about one-third of China’s oil and gas resources, according to China’s official Xinhua News Agency.

Japanese Prime Minister Shinzo Abe used his speech to the Bali summit to also stress Japan’s interest in the region, as it builds strategic ties with countries such as the Philippines to act as a counterweight to China’s assertiveness.

Japan is courting Southeast Asia with loans and investment, while China’s foreign direct investment is rising rapidly, Chua of Bank of America said.

Asean Interests

“Southeast Asia faces risks and opportunities in being the object of attention between the superpowers,” he said. “Yet the inherent danger is that the desire for bilateral gains may come at the cost of sacrificing wider regional Asean interests.”

Officials from the 10-member Asean are working to allow free movement of goods, services, investment, capital and skilled labor as part of a European Union-style integration plan, without a common currency. The Asean Economic Community is targeted for the end of 2015.

The contest for influence in Asia is unavoidable as the U.S. has treaty allies such as Japan, South Korea and the Philippines, while China sees its rise as a way to regain the leadership role it had for hundreds of years, said Manu Bhaskaran, a Singapore-based partner at strategic advisory firm Centennial Group.

Less Stimulus

A slowdown in China and India is reverberating across the region with the World Bank cutting its expansion forecasts for this year and next, putting pressure on policy makers to bolster their economies. The Group of 20 countries repeated their concern last month that stimulus pullback in developed nations may prove damaging to global markets.

APEC leaders said after their meeting in Bali they would be vigilant against protectionism. “While trade growth and investment flows within the APEC region have outperformed the rest of the world, we should nevertheless guard against the pressure to raise new trade and investment barriers,” they said in their statement.

The leaders sought momentum for trade deals such as the 12-nation Trans-Pacific Partnership as an uneven global recovery and volatility in financial markets constrain growth.

TPP Deadline

Negotiators still aim to complete the talks this year, the heads of TPP countries said in a statement on 8 October that didn’t mention specific progress made in Bali. “We will further intensify consultations with stakeholders to craft a final agreement that appropriately addresses the interests of our citizens,” they said.

A TPP accord, which involves countries such as the U.S., Australia, Japan, Malaysia and Vietnam, would link an area with about $28 trillion in annual economic output. Countries are seeking concessions for industries such as agriculture, with Prime Minister Najib Razak saying some areas of the talks are cause for “great concern” for Malaysia.

Chief Cabinet Secretary Yoshihide Suga said Japan still aimed to wrap up the talks this year. “Difficult problems remain, including market access, intellectual property, the environment and publicly held companies,” Suga told reporters in Tokyo today. “I understand it was agreed at the leaders’ meeting to tackle these problems.”