Despite their important economic links, China is far from dominant in Southeast Asia, in the sense of being able to dictate to countries or to maintain clients there. There are exceptions, like Cambodia or Laos where China has major diplomatic, economic, and military ties. But, in general, countries and businesses in the region seek to gain maximum benefit from China’s economy but also to hedge against the country being overly dominant in political or military terms (including when it comes to disputed territorial claims in the South China Sea).
At the same time, though, China has increasingly proven willing to use economic leverage, through coercion and inducements, to pursue its interests. Examples of coercive trade measures—tied to political and diplomatic spats—have included restricting exports of rare earths to Japan, the flow of Chinese tourists to South Korea, and the import of coal from Australia and of bananas from the Philippines.
For the United States, Southeast Asia was a key region for rivalry with China during the Cold War. The most obvious example of indirect and direct confrontation between them was the Vietnam War (from the early 1960s to the early 1970s). In the early post-Cold War era (the 1990s), the United States treated Southeast Asia with “benign neglect,”5 and it was more concerned about financial crises in the region (particularly in 1997) than about overt competition with China.
The Obama administration re-engaged with the region as part of its broader pivot or rebalance to Asia. This was at least partially motivated by rivalry with China. With the Trans-Pacific Partnership (TPP), it sought to lead an economic initiative that did not include China but that was constructed with setting the trade and investment standards with which Chinese firms would have to operate in mind.
The TPP was at least indirectly aimed at setting trade rules in Southeast Asia and elsewhere in Asia that were more closely aligned with US than Chinese interests. The rebalance included a heightened military focus, including the 2014 Force Posture Agreement with Australia, on China’s increasingly assertive maritime posture in the South China Sea.
At the same time, the United States engaged in direct geopolitical competition with China for influence in Southeast Asia. The most prominent example was the normalization of diplomatic ties with the newly democratic government of Myanmar after 2011, which was seen as a diplomatic setback for China.
The Trump administration rejected the TPP, which was the main economic component of the rebalance. At the same time, it introduced a new, largely security-focused emphasis on a “free and open Indo-Pacific” (FOIP), a concept first outlined by Japan under Prime Minister Abe Shinzo. The administration’s emphasis on the FOIP included a clear focus on the perceived threat posed by China in Southeast Asia, including in maritime disputes in the South China Sea, but it came also in response to China’s BRI and its deepening economic interdependence with ASEAN. The Trump administration also argued that China was a malignant actor with increasing influence in the region.
The Biden administration has maintained certain Trump policies and introduced new ones. It emphasizes the Indo-Pacific, and Southeast Asia in particular, as a region where it and its allies and partners can and should compete more effectively with China. Like its predecessor, it has emphasized military cooperation, including in the South China Sea (for example, with the AUKUS security pact with Australia and the United Kingdom) more than economic or trade initiatives.
The United States joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (the reformulated version of the TPP) appears to be a non-starter for the administration. In part this is because of the recent bipartisan consensus in the United States that trade deals have strengthened China’s hand while leaving American workers less well-off.
The Biden administration has also put more emphasis on US-led infrastructure cooperation, including in Southeast Asia, to counter the BRI. Recently, in an overview of its draft Indo-Pacific Economic Framework, the administration said it would initially focus on “trade facilitation, digital economy standards, supply-chain resiliency, infrastructure, decarbonization and clean energy, export controls, tax and anti-corruption.”6 One expanding arena of rivalry with China in Southeast Asia is US assistance to governments in the region to build technical and legal capacity to evaluate and structure Chinese investments and loans.7
Yet, despite the above, security and defense cooperation has been more prominent than economic (including trade) measures when it has come to the Biden administration’s regional agenda for competing with China. For example, cooperation with Australia in nuclear-submarine technology has been the cornerstone of its efforts with allies in the region.
Overall, while the US-China rivalry in Southeast Asia has deep historic roots and covers a comprehensive array of issues and countries, some key trends have emerged. In terms of connectivity and technology, the region is at the heart of the maritime and continental versions of the BRI. This includes not only traditional transport infrastructure like railways but also energy and digital infrastructure, such as for electronic payments and smart-city technology. In attempting to forge a competitive response, the Biden administration is pursuing cooperation with partners in the region to offer higher standards in terms of financing and environmental quality through its Build Back Better World (B3W) and Blue Dot Network schemes.
In the months and years ahead, China and the United States will also increasingly focus on the quality and size of their respective contributions to the region’s health and climate challenges. Countries such as Myanmar and the Philippines will be at the heart of the US-China rivalry as they grapple with their economic, social, and governance challenges and their broader geopolitical alignments.
For Europe, the US-China rivalry in Southeast Asia creates opportunities as well as risks. The region is a key trade and investment partner and its economic dynamism, as well as potential volatility amid this rivalry, will require ever-greater European competitiveness and understanding of regional dynamics. Managing supply chains in the region, including as a hedging strategy against overdependence on Chinese, will be one of the key challenges European firms and governments face in the years ahead.
One of the greatest opportunities for Europe in Southeast Asia arises from its potential to be an advocate for high-standard, rules-based, and practical approaches to issue areas that are most contentious and polarized in the US-China relationship: connectivity, technology, and health and climate governance. Its Indo-Pacific and Global Gateway strategies reflect a recognition of the importance of Southeast Asia to the EU, but for these to live up to their aims will require implementation that highlights that European firms and public policies offer viable, attractive alternatives amid the growing US-China rivalry.