China is not only strengthening its military but is also seeking to firmly establish its economic presence in South-East Asia. Beijing had hoped to sign a free trade agreement with the Associaiton of South East Asian Nations at the weekend Summit that was cancelled in Thailand. But that has not deterred the government from announcing plans to allocate 10 billion US dollars to an ASEAN infrastructure investment fund . . . and make 15 billion US dollars available for loans.
Presenter: Helene Hofman
Speaker: He-Ling Shi, professor of economics at Melbourne’s Monash University; Pande Silalahi, economist with the Jakarta-based think tank Center for Strategic and International Studies
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HOFMAN: This month’s ASEAN summit in Thailand should have marked a turning point in economic ties between China and ASEAN member countries. Had it not been cancelled because of Thailand’s political protests, the summit would have overseen the signing of an agreement between the two – creating the world’s largest free trade area. That agreement may have been delayed, but on a flight back from Thailand the Chinese foreign minister, Yang Jiechi, announced plans to inject billions of dollars into ASEAN in the form of aid and infrastructure funding.
He-Ling Shi, a professor of economics at Melbourne’s Monash University says the timing of the announcement is not accidental.
SHI: China basically wants to have a series of agreements with all these Asian countries so after they establish a free trade agreement China can export more goods and invest more in these countries. All these ASEAN countries, with the exception of Singapore, lack the funding to finance their infrastructure projects and so they can use this funds to improve their infrastructure.
HOFMAN: Over the next three years, China will contribute 10 billion US dollars to infrastructure projects which it hopes will improve its links with ASEAN member countries. A futher 15 billion US dollars will be made available in credit, with part of that reserved for co-operation projects. It has also announced plans to offer almost 40 million US dollars to help Cambodia, Laos and Burma, the three ASEAN member states that have been hardest hit by the global economic downturn.
Pande Silalahi is an economist with the Jakarta-based think tank the Center for Strategic and International Studies. He says the funding is part of a confidence-building exercise:
SILALAHI: This is the time for China to build confidence because if you look at the last few decades the Asean countries have become the centre of economic growth and I think China wants to contribute to that in the region. I think its a very important opportunity and I think the aim of China is to build the confidence.
HOFMAN: China has already made significant contributions to infrastructure projects in Burma, Laos and Vietnam for the building of roads. But, this round of funding will go further than economic support, with the Chinese offering to train 1,000 agricultural technicians and give 2,200 Chinese government and public administration scholarships. Dr Shi says its all part of China’s intention to increase its influence in the region:
SHI: At the moment there are some investment funds established by the Asia Development Bank, but that is mostly dominated by Japan so China basically wants to establish another mechanism in which China could dominate and in addition to this investment in the fund there’s cultural and education exchange programs so I think its a starting point for China to try to exert a great influence on this area. Not just an economic influence but a cultural and political influence.
HOFMAN: The trade volume between China and ASEAN is already worth over 200 billion US dollars a year. Once the free trade agreement is signed this is expected to rise to over 1.2 trillion US dollars a year.
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