World Economy

China to Promote Asean Ties as US Turns Protectionist

Najib Razak (L) and Xi Jinping in Beijing in November.Najib Razak (L) and Xi Jinping in Beijing in November.

China is embracing Southeast Asia with a renewed trade and investment push, a trend that’s set to accelerate as the region grapples with the prospect of a more protectionist US under Donald  Trump.

Aside from courting Southeast Asian nations with a  proposal for a trade pact, China has almost doubled foreign direct investment  into the six biggest nations in the region this year, according to estimates from Credit Suisse Group AG. The world’s second-largest economy is already the top trading partner for most of the countries in the region, Business Mirror reported.

“China has a clear angle, they know what they want from this kind of mutually beneficial growth,” said Santitarn Sathirathai, an economist at Credit Suisse in Singapore. “But it’s not only government to government anymore, there’s also a rise of private companies taking a bigger initiative.”

The Philippines and Malaysia have already made more explicit moves to align themselves with China. On his first visit to Beijing in October, President Duterte said he wants to cut the cord with the US, a key military ally, and pivot to China.

During a trip to Beijing in November, Malaysian Prime Minister Najib Razak signed about $30 billion worth of deals from energy to rail infrastructure. He said China and Malaysia have a special relationship based on a shared culture and mutual respect, and ties between the two countries are set to reach new highs.

While the US is the largest investor in the Philippines, China is poised to take that title next year with $24 billion of hard and soft investment and $2.5 billion in inflows, according to estimates from HSBC Holdings Plc. China unveiled a range of steps to strengthen economic ties with the Philippines, including boosting agricultural imports, encouraging companies to invest there, financing infrastructure projects and lifting restrictions on foreign investment.

Credit Suisse estimates Chinese FDI in the six largest economies in the Asean will reach about $16 billion this year. China already accounts for 30% of all FDI into Thailand, and 20% into Malaysia, according to the bank.

In Indonesia, Asean’s largest economy, Chinese investment has surged following five meetings between President Joko Widodo and Chinese President Xi Jinping in the past two years. China is now the No. 3 investor there behind Singapore and Japan, with FDI rising to $1.6 billion in the nine months through September from about $600 million for the whole of last year.

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