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Spratlys > News > English News > Nov 2002

Category: @News  @China

China's Growing Clout Worries ASEAN

DIRK BEVERIDGE - AP Business Writer The Miami Herald - Posted on Mon, Nov. 04, 2002

PHNOM PENH, Cambodia (AP) - Southeast Asian nations are putting on a brave face as they seek closer ties to China with a free trade deal. But they may not have much choice.

Chinese Premier Zhu Rongji met Monday with leaders of the Association of Southeast Asian Nations and signed a framework intended to liberalize trade within a decade, driving down tariffs and spurring investment.

The free-trade area would have a combined market of 1.8 billion people and a gross domestic product of at least $2 trillion.

That may sound good for all concerned, but ASEAN members recognize that China has the upper hand in attracting outside investment.

The trade deal is just one area where the world's most populous nation is bringing its power to the forefront in this region, leaving many worried about how much clout Beijing ultimately will end up with.

Critics say development money handed out by Beijing is impossible to account for, and its projects on the Mekong River, which flows through five nations after leaving China, could bring profound and possibly unwanted changes to the environment.

They may not like it, but the ASEAN nations, many of them still developing, find themselves tagging along behind giant China in what they hope won't turn out to be a harmful undertow.

Many are reluctant to say so publicly, however.

Despite widespread concerns about Chinese dams in the Mekong River, which will affect flows to Cambodia, Vietnam, Laos, Thailand and Myanmar, there was apparently no criticism leveled at Beijing during a meeting on Sunday of the six members of the Greater Mekong Subregion grouping.

"We are fully conscious that China is a superpower," a senior official with Cambodia's Ministry of the Environment said afterward. "Maintaining economic ties with it is very important."

China is a big donor to Cambodia. It provides water wells in the countryside and built a major annex to the National Assembly compound. Traffic lights around Phnom Penh were funded by loans from Beijing, and Cambodia's King Sihanouk flies to China for regular medical checkups while maintaining a palace there, all provided at no charge.

But social activists wonder what the payback will be, and they are blunt in their criticisms that China keeps silent about where all its money goes as it builds increasingly greater influence.

"Everyone is afraid to stand up to China in this region," said Aviva Imhof, of the U.S.-based International Rivers Network, on the sidelines of the ASEAN summit that wraps up here on Tuesday.

International lenders like the World Bank might be viewed as evil institutions by the enemies of economic globalization, but at least there is more accountability about where the money goes, activists say.

China has said that a China-ASEAN free trade agreement would bring about a 50 percent increase in exports on both sides. It is expected to add one percentage point to annual economic growth in the ASEAN countries and 0.3 percent in China.

Even as China and the 10 ASEAN members signed a deal late Monday outlining a timetable for a free trade zone to be set up over the next decade, Japan was trying to provide a counterbalance with its own free trade package or packages.

Earlier Monday, China proposed to Japan and South Korea that they establish a three-way deal. They agreed to let private-sector experts study the feasibility, a Japanese official said.

China can produce most things more cheaply than rivals in Southeast Asia, and while they fear the loss of investment money, the ASEAN nations are hoping the free trade deal will at least open Chinese markets to the goods they can offer.

"China is seen as frightening figure," said Yutaka Aoki, a senior official at the Japanese Embassy here.

"China's economy has been booming, and its population of 1.3 billion makes a huge market, compared to some 500 million for all of ASEAN combined," Aoki said. "ASEAN members fear that China may take away foreign investment, and they see China as a major competitor rather than a partner."

Noting China's huge advantages, an ASEAN study released Monday said the region's "small, fragmented markets are not attractive to investors compared to the large Chinese market and more integrated regions elsewhere in the world."

Zhu insisted later the deal will be good for all.

"Nearly a year after China's entry into the WTO, facts have shown that economic growth in China has not come about at the expense of the development of others," Zhu said. "On the contrary, it has become an important pillar and stimulus to the East Asian economy as a whole."