China has problems in the ASEAN region. Its reputation, its history, and its ability to deliver on its promises.
by Tan Jie Ying, edited by Francesca Ross
Chinese companies are putting huge amounts of cash into Southeast Asia. This is despite an overall decline in foreign direct investment (FDI) in the region from traditional sources. This does not mean the Chinese and their cash are always welcome. Beijing and her representatives must consider how popular sentiments complicate their trade and investment ties.
One good example are concerns among Chinese executives about doing business in Indonesia. The former governor of Jakarta is ethnic Chinese and just lost a divisive election campaign which soured public opinion towards his people.
“We need to understand [Indonesia’s] policy and law relating to labour, tax and especially land…[or] there is no business,” said Zhao Baige, a senior Chinese diplomat. He also urged the Indonesian leadership to offer Chinese firms assistance in public relations and tax incentives.
The inflow of Chinese workers into Indonesia is also heightening tensions. “Local unskilled labour cannot work because the jobs have been filled by the Chinese,” said Said Iqbal, leader of the Confederation of Indonesian Workers’ Union.
The same rise in hostility happened in Myanmar after allegations that Beijing was supporting Chinese rebels in the north of the country. Anti-Chinese sentiments there grew so strong that the viability of the Kyaukphyu Special Economic Zone project was once in question.
The South China Sea issue is fuelling tensions
Animosity towards the Chinese is deep-rooted in Southeast Asia; the product of history, business and clashes of culture. Nationalist sentiment is currently heightened because of the scramble for natural resources in the South China Sea.
Beijing is unwilling to back down on large swathes of the area. The political sensitivity of these claims means a solution is unlikely to be reached in the foreseeable future.
Citizens of countries across the ASEAN region have taken to the streets to express their indignation at China’s belligerent assertions. There were protests in the Philippines last summer and Vietnam at the turn of this year.
The history of Southeast Asia’s Chinese community feeds anti-Chinese sentiments
The suspicion of the Chinese can even be seen in local laws. Discriminatory regulations against Indonesia Chinese have been in place since the 1950s. Foreign nationals, many of whom came from this group, were banned from doing retail business outside urban areas. This forced many to relocate their businesses into built-up areas.
The Chinese population in Cambodia, meanwhile, suffered victimisation by both the Khmer Rouge and ethnic Cambodians. There were 425,000 Chinese in Cambodia in the late 1960s. There were only 61,400 in 1984.
Chinese business practises are aggravating resentments
Citizens of Southeast Asia are also concerned about China’s disdain for environmental issues. Copper mining operations in Myanmar have been halted several times thanks to local opposition. They are worried about the project’s environmental effects and low rates of compensation for land confiscations.
“This is a murderous and land-grabbing project. Our residents are against this project because it breached the investigation report written by Daw Aung San Suu Kyi. We totally disagree with restarting the project,” said Daw Sandar, a Letpadaung resident and protester.
Other Southeast Asian countries share similar experiences. Chinese-owned banana plantations in the Laotian district of Ton Pheung are feeding animosity thanks to their undesirable side effects.
“There are big economic incentives to rent out the land, because it represents a large amount of cash that Laotian villagers could never get in one go from their farming work,” explained Cecille Friis, a human geographer at Humboldt University.
“[But there are a lot of consequences] in terms of chemical inputs used by the Chinese investors, destruction of land markers and destruction of traditional irrigation channels,” she added.
Chinese tourism money is still widely welcomed
People working in the tourism sectors across the ASEAN region want to damp down anti-Chinese sentiment. This is because China’s large numbers of high-spending tourists are a force to be reckoned with in the fight to prompt economic growth.
China already contributes the second largest number of tourists to the ASEAN region. This industry directly accounts for 5% of the region’s total GDP and supports more than 32 million jobs.
The Cambodian Ministry of Tourism has a five-year plan to attract two million Chinese tourists each year by 2020. Singapore launched a S$1 million campaign, named “Rediscover Singapore From Your Heart”, to woo Chinese tourists back to the country. The Chinese are welcome to visit, perhaps not to stay.
Corruption and bureaucratic red tape are greater problems for Beijing
The rising tide of overt distaste for the Chinese is a problem for Beijing. There is, however, a bigger issue affecting the health of the Chinese-Southeast Asian relationship. Corruption and bureaucratic red tape are obstructing Beijing’s ability to deliver on its big promises to Southeast Asian countries.
Only 7% of the planned Chinese investments planned in Indonesia came to fruition between 2005 and 2014. Beijing has also delivered little of the US$26 billion in aid and assistance promised to projects in the Philippines since Duterte came to power.
China is increasingly relying on its economic muscle to strengthen links with Southeast Asia. It becomes weaker when these trade and investment promises come to nothing.
It is easier to deal with corruption than bureaucratic red tape
Corruption and bureaucratic red tape are perhaps the easiest of China’s problem to solve. That is not because it is simple; instead regulating Chinese firms’ business practices and settling maritime disputes are just incredibly difficult.
More than 30 senior Chinese officials have been arrested since Chinese President Xi’s anti-corruption drive started. This has included high-ranking administrators such as the former vice-chairman of the Chinese People’s Political Consultative Conference National Committee, Su Rong.
Cutting down on bureaucracy is less clear-cut. Leaders must decide which rules are worth keeping to keep the level of regulation is balanced. Excessive rule-making kills efficiency and competitiveness; insufficient regulation undermines coordination between agencies.
Complicated processes are also limiting overseas opportunities for Chinese interests. China “maintains a more restrictive foreign investment regime than its major trading partners,” said the American Department of State. Beijing must start by eliminating vague or inconsistent laws about the country’s outbound cash flows. This will improve its ability to deliver on its promises.
Premier Li Keqiang has admitted efforts to cut through red tape were “too slow.” This is comforting because it shows an appetite for reform. China’s big changes need to come from within. Only then will its image improve for those looking on.