China's economic cooperation in East Asia

The Fifth APISA Congress Regional Integration in Asia and Europe in the 21st Century China's economic cooperationin East Asia SasinanKruaechaipinit PhD. Student Institute of China and Asia-Pacific Studies National Sun Yat-sen University, Kaohsiung, Taiwan 24 November 2011 Overseas Chinese University Taichung, Taiwan

Introduction • An open-door policy since 1978 has made China increasing integrate into the world market, especially in East Asian Regime. • “China was a major engine of growth for most of economies in the region.” (an UNCTAD report in 2003 and 2004) • Close economic linkages with the East Asian countries have been formed through exchange of goods, capitals, services and technology. • China’s neighboring countries received economic benefits from expanding China’s market. APISA5, 24 November 2011

Questions: • How does China approach to East Asia economy while still maintain the primary objective of securing its national, political and economic interests? • What are China preferences for regional approach? APISA5, 24 November 2011

Purpose of the study • To explore China’s economic diplomacy toward East Asia region. • This study applied the international relations theory of neo-realism to examine China’s commitments to economic cooperation in East Asia. • In order for China to achieve these neo-realist oriented objectives, the mechanism of regionalism; an economic integration was applied in China’s economic cooperation with the East Asian regime. APISA5, 24 November 2011

1.Regional Affairs in East Asia Definitions of regionalism: • Mutual gains shaped by both states and non-states actors • political structures that both reflect and shape the strategies of governments, business cooperation, and variety of non-governmental organizations and social movements (Katzenstien 2000: p. 353) • cooperation among governments or non-government organizations in three or more geographically proximate and independent countries for pursuits mutual gain (Alagappa 1995: p.362) APISA5, 24 November 2011

Government policies and formal institutions lead the development of independence and cohesion within a given geographical area (Hurrell 1995: p.32). • ‘A state-led or states-led project designed to recognize a particular regional space along defined economic and political lines’ (Payne 2003: p. 213-214). APISA5, 24 November 2011

Characteristics of East Asia • First, the United States, Japan and China are the three major power countries. • the actions and policies of smaller states tended to be considered as a bandwagon. • neo-realists theory predicts that this kind of behavior is most likely occur when power differentials are very great and when the smaller state is in close geographic proximity. • The smaller states have been forced to adopt different strategies to secure their interests. APISA5, 24 November 2011

Second, major East Asian states have strong adherence to sovereignty. • maintain and strengthen national unity and collective national identity • most of East Asian economies show rapid growth, with expand linkages with the outside world. Yet, such moves are not accompanied by the rapid eclipse of national self-interest and sovereignty • the nature of national sovereignty tends to produce the government’s negative attitudes toward international cooperation, especially institutionalization, which might lead to any surrender of political autonomy. APISA5, 24 November 2011

Third, East Asian states have maintained the state’s superiority over society in state-society relations. • the political economy in China, Vietnam and Laos is one of party-state dominance where the state controls the existence and activities of civil society. • Japan and South Korea, and some Southeast Asian states, achieved high economic growth under the developmental state system in which the states played the decisive role in creating an efficient and competitive industrial structure, establishing an intimate relationship with society through various formal and informal networks. APISA5, 24 November 2011

2.The assumptions on China’s economic cooperation in East Asia Neo-realist theory of Kenneth Waltz (1979: p. 18-37) • The state is a unitary and regional actor and pays due attention to maximization of national interest in international games. • engaging in cost-benefit analysis • States are acting according to the principle of self-help and seeking to ensure their own survival. • Thus, states do not differ in task they face, only in their capabilities. APISA5, 24 November 2011

Neo-realist theory of Kenneth Waltz (1979: p. 18-37) • Power remains a central concept. • States always pursue power as a means of survival. • the “means fall into two categories: internal efforts (move to increase economic capability, to increase military strength, to develop greater strategies) and external efforts (move to strengthen and enlarge one’s own alliance or to weaken and shrink an opposing one)”. • Therefore, states are differentiated in the system by their power, not by their function. APISA5, 24 November 2011

Neo-realist theory of Joseph Grieco (1988: p. 498) • Focusing on the concepts of relative and absolute gains. • states are interested in increasing their power and influence (absolute gains) and, thus, will co-operate with other states or actors in the system to increase their capabilities. • However, he claims that states are also concerned with how much power and influence other states might achieve (relative gains) in any co-operative endeavor. • In the world of uncertainty and competition, the fundamental question, according to Grieco, is not whether all parties gain from the co-operation; but, who will gain more if we co-operate? • Rapid widening in relative capabilities may encourage weaker parties to enter regional arrangements with strong states in an attempt to constrain them. APISA5, 24 November 2011

The developmental state like China, state is still at its core. The increasing role of the state in the economic affairs is a key component in developing countries. • China participation in international affairs depends on the cost-benefits calculation. • These benefits include enhanced domestic status, financial resources, or useful ideas and information. But when the costs exceed the benefits, they will not cooperate. • This observation shows that China is rational actor within its own political. APISA5, 24 November 2011

Additionally, China is increasingly integrates in the East Asia region for its own interests. • China’s economic may have potential threats to its neighboring countries. • Most of China’s neighboring countries are aware that a rapid rising China will undermine their political autonomy and their ability to pursue their own national interests. APISA5, 24 November 2011

In order for China to achieve these neo-realist oriented objectives, the mechanism of regionalism, economic integration has been applied in China’s cooperation with the East Asian regime. • The study on economic integration believes that the commerce can increase prosperity and reduce the confliction between the states. The growing bilateral economic ties can generate a reduced probability of military conflict between states. • Balassa, S. (1974) classified four types of economic integration: free trade area, custom union, common market, and economic union. • The economic integration between China and its neighbors has reached to the first level of regional economic integration only. APISA5, 24 November 2011

Assumptions on China’s economic cooperation in East Asia • First, China has moved forward to East Asia economic integration to maintain the primary objective of securing China’s interests and accelerate China’s economic growth. • Second, China has heavily integrated economic to East Asia and Southeast Asia to increase regional stability and willing to be a good neighbor. • Third, China has deepening economic integration in East Asia to increase trade among members. APISA5, 24 November 2011

3. China’s economic diplomacy toward East Asia Region Argument of this study: “China has implemented its economic diplomacy towards East Asia to protecting its domestic economy and to enhancing its political position in the international system.” APISA5, 24 November 2011

What is China’s interest in the East Asia region? • China’s first core interest is to maintain Chinese Communist Party (CCP) legitimacy and concern about national security. • The second core interest is concern about the sovereignty and territorial integrity and • thirdly, China concerns about economic and social sustained development. APISA5, 24 November 2011

The CCP’s legitimacy is largely based on the effective management of domestic economic affairs. • The party believes that building the economic prosperous in the society will buy its legitimacy in the eye of Chinese people. • Improving of incomes and social welfare are the most tangible accomplishment and the CCP can earn this creditability from Chinese people. APISA5, 24 November 2011

China’s interests in East Asia somehow paralleled with its core interests. • China’s goal is to make China the strongest and most influential nation in the East Asia region. • China may not want to have physical control over its neighbors but China will be likely a regional hegemon. • The rise of China has added significant momentum to East Asian regionalism. Its economic dynamism restored confidence that East Asia could become the center of global economic growth. • China wants to secure a peaceful international environment that would allow it to focus on development. APISA5, 24 November 2011

China’s increasing reassuring foreign policy postures have helped ally the persistent anxiety about its strategic intention among some members. • East Asia is of great economic interests to China as well. • In 2007, the ASEAN countries, Japan and South Korea account for some 27.6% of China’s foreign trade, very near to the US (13.9%) and the EU (16.4%) put together. • In terms of FDI, Singapore, Japan and South Korea are respectively the 2nd, 3rd and 5th foreign investors in China in 2008. • Therefore, closer economic cooperation and integration towards freer movements of goods, capital, services and persons in the region are beneficial to all. APISA5, 24 November 2011

Southeast Asia is also an important strategic region for China. • China’s traditional concerns were fear of invasion and encirclement from the North and West. • The United States and the Soviet Union both used Southeast Asia as an important component in their plot to encircle China during the Cold War. • These perceived security threats on China’s border made the leader of China feel that it needed to respond military, and China’s leader were willing to make economic sacrifices to ensure that the PRC had sufficient military capabilities to deal with such threats. • After the collapse of the Soviet Union and its withdrawal from Southeast Asia, China has tried to maintain good relations with the region to remove any incentive for Southeast Asia to join in an anti-China coalition. • These may reflect a desire to increase intraregional economic cooperation and political stability only for the sake of China’s economic modernization. APISA5, 24 November 2011

China seeks to constrain the US capability in the East Asian region. • After the end of Cold War, the United States is in a position of hegemon by its military strength. • Moreover, the United States gives priority to democracy and human right. • The United States is a top leader of democracy among the democratic countries both in Europe and East Asia. It is possible that Washington may adopt an anti-Chinese authoritarian regime action to against China. • Therefore, excluding the US influence in the regime may support China to gain great-power status. APISA5, 24 November 2011

China and economic integration in East Asia • After the economic reform in 1978, Beijing needed a peaceful international environment to pursue economic modernization and stimulate China’s economic growth. • This new image of peace and confidence has raised the external trade and investment transactions between China and its neighbors. • This has been evident in its involvement in ASEAN Plus Three or APT. • The APT includes thirteen countries which comprise ten ASEAN countries and three Northeast Asian countries of China, Korea and Japan. • As an important member of APT, China gets some inspiration from the EU model to accelerate its own economic cooperation and integration. APISA5, 24 November 2011

China’s economic integration has been apparent more in trade relation with ASEAN. • China proposed to ASEAN countries in 2001 to form the China- ASEAN Free Trade Area (CAFTA). • Economic integration between China and the Association of Southeast Asian Nations (ASEAN) was formally started with the two sides signed the “Framework Agreement on Comprehensive Economic Cooperation Between the ASEAN Nations and the People’s Republic of China” in November of 2002, which aimed at establishing the China-ASEAN Free Trade Area (CAFTA). APISA5, 24 November 2011

The CAFTA is the most important region in the world economy in the 21st century with the largest population, which includes 1.9 billion consumers, total trade estimated at $4.5 trillion and $6 trillion of world GDP with an average 7-9% of yearly growth. • The commitment of CAFTA is both economic and political to nearly one third of the world population. It will become the third largest economic entity after the North American FTA and the European FTA. APISA5, 24 November 2011

The premier WenJiabao further proposed to push for establishment of EAFTA, to deepen financial and investment cooperation, and to enhance further cooperation in the field of non-traditional security within the framework of the APT. • China’s moving toward political and security fields demonstrated China’s sincere efforts to establish a trust worthy relationship within the East Asian and ASEAN countries. APISA5, 24 November 2011

China is willing to be a good neighbor? • In the last two term of HuJintao leadership is expected to use country’s economic muscle to convince the global community that the rapid rise of China will bring win-win scenario, especially in the trade and business front. • China also afraid that the United States will have an influence over its neighbor in what China perceived as the anti-Chinese authoritarian regime. • China’s economic integrate to its neighboring countries have provided platforms for China and its neighbors to work together and to minimize conflicts. At the same time, China has made great efforts to maintain peace and relieve conflicts with its neighboring states (Yahuda, 2005: p.7-13). • The relationship between China and South Korea and between China and some Southeast Asia countries have been improvement. According to Cha, China’s relationship with South Korea improved dramatically in the 1990s. Nowadays, China is perceived as a ‘status quo’ power rather than a ‘revisionist power’ by many South Koreans (Victor Cha,1999:p.32-56). APISA5, 24 November 2011

Table1: China’s Top ten trading partner in 2010 ($ Billions) APISA5, 24 November 2011

Table 1 show China’s Top Ten Trading Partner in 2010 ($Billions). Japan, ASEAN, Hong Kong, South Korea and Taiwan are in the top ten trading partner in 2010, respectively. • Japan was China’s second trading partner, largest import source and fourth export destination. China-Japan bilateral trade amounted to US$297.8 billion, up by 30.2%, of which, China’s import from Japan was US$176.7 billion up by 35.0%, accounting for 13.8% of its total import; China’s export to Japan was US$121.1 billion, up by 23.7%, accounting for 7.8% of its total. • It shows that China and Japan being major partners in economic and trade and both sides continue to deepen their mutual beneficial bilateral cooperation. APISA5, 24 November 2011

On the other hand, China’s trade with ASEAN in 2010 was worth an estimated $293.2 billion, compared to the United States $178 billion. • China believes that this economic diplomacy will somehow buy the trust from them and sincerely show China is a good neighbor which provide a source of opportunity, not a threat. • Moreover, increasing economic integration among China and the East Asian Regime has accelerated trade flow in the region and lead to economic prosperity for all. APISA5, 24 November 2011

Conclusion • This study has examined China’s economic cooperation in East Asia through the lens of China’s economic diplomacy. • In recent year, China has shifted its diplomacy to economic interests in order to protect China’s core interest. • Maintaining Chinese Communist Party (CCP) legitimacy and national security is the first priority of China’s core interest because the CCP legitimacy has been based on the effective management of domestic economic affairs. • The party believes that building the economic prosperous in the society will buy its legitimacy in the eye of Chinese people. • Therefore, Chinese policymakers need to formulate foreign policy that tends to bring about the steady growth of the domestic economic and industry. The most tangible creditability thing is to improve an income and a social welfare of its citizens. • Closing country economic was only brought China to the economic collapse like china experienced in the past forty years ago. That’s why China has started to integrate its economic to the outside world. APISA5, 24 November 2011

East Asia is an important strategic region for China since its politic and economic are related. China’s ambition is to become the strongest and most influential nation in the East Asia region in order for China to continuous economic growth and be recognized of its status as a hegemon in the region. • It argued that China has implemented its economic diplomacy towards East Asia to protecting its domestic economy and to enhancing its political position in the international system. • China has been looking to join the regional economic integration mainly to maintain the primary objective of securing China’s interests and accelerate China’s economic growth; to build good economic relationships particularly with its neighbors, i.e. ASEAN and to increase trade flow in the region. • Beijing took the lead in promoting cooperation under the ASEAN+3 framework by developing informal dialogue and providing concrete proposals guiding the cooperation process. • China also has joined with Southeast Asian countries, China-ASEAN Free Trade Area (CAFTA). They gradually expanded the scope of cooperation in economic and social. APISA5, 24 November 2011

The successful development of the economic integration would lead China to be a leader in East Asia and could isolate the US’s influence in the region. • China believes that this economic diplomacy will somehow buy the trust from its neighborhood and sincerely show China is a good neighbor. • Moreover, increasing economic integration among China and the East Asian Regime has accelerated trade flow in the region and lead to economic prosperity for all. • Lastly, even though the economic cooperation between China and Japan is being continued to deepen their mutual benefits, it may be only for short-term gains because both sides seek to be a regional hegemony. Persistent mistrust of China and Japan will affect the future of East Asia economic integration. APISA5, 24 November 2011

Thank you! APISA5, 24 November 2011

China's economic cooperation in East Asia