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ASEAN Industries and the Challenge from China Anthony Welch; Darryl S.L. Jarvis ISBN: 9780230309050 DOI: 10.1057/9780230309050 Palgrave Macmillan Please respect intellectual property rights This material is copyright and its use is restricted by our standard site license terms and conditions (see http://www.palgraveconnect.com/pc/connect/info/terms_conditions.html). If you plan to copy, distribute or share in any format including, for the avoidance of doubt, posting on websites, you need the express prior permission of Palgrave Macmillan. To request permission please contact [email protected]

ASEAN Industries and the Challenge from China Edited By Darryl S.L. Jarvis and Anthony Welch

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ASEAN Industries and the Challenge from China

10.1057/9780230309050 - ASEAN Industries and the Challenge from China, Edited by Darryl S.L. Jarvis and Anthony Welch

Also by Darryl S.L. Jarvis INFRASTRUCTURE REGULATION: What Works, Why, and How Do We Know? Lessons from Asia and Beyond (co-edited with Ed Araral, M. Ramesh & Wu Xun)

INTERNATIONAL BUSINESS RISK: A Handbook for the Asia Pacific Region (edited) INTERNATIONAL RELATIONS AND THE “THIRD DEBATE”: Post-Modernism and its Critics (edited) INTERNATIONAL RELATIONS: Still an American Social Science? Toward Diversity in International Thought (co-edited Robert M. Crawford)

Also by Anthony Welch EDUCATION, CHANGE AND SOCIETY first and second edition (with R. Connell, C. Campbell, M. Vickers, D. Foley, and N. Bagnall) AUSTRALIAN EDUCATION: Reform or Crisis? (published in North America and Europe as Class, Culture and the State in Australian Education: Reform or Crisis?) THE PROFESSORIATE: Profile of a Profession (edited) GLOBALIZATION AND EDUCATIONAL RESTRUCTURING IN THE ASIA PACIFIC REGION (co-edited K-H. Mok) QUALITY AND EQUALITY IN THIRD WORLD EDUCATION (edited) TRADITION, MODERNITY AND POSTMODERNITY IN COMPARATIVE EDUCATION (co-edited with V. Masemann) KNOWLEDGE, CULTURE AND POWER: International Perspectives on Literacy Policies and Practices (co-edited with P. Freebody) CONTEMPORARY PERSPECTIVES IN COMPARATIVE EDUCATION (co-edited with R. Burns) HIGHER EDUCATION IN SOUTHEAST ASIA: Blurring Borders, Changing Balance

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INTERNATIONAL RELATIONS AND THE CHALLENGE OF POSTMODERNISM: Defending the Discipline

Edited By Darryl S.L. Jarvis Anthony Welch

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ASEAN Industries and the Challenge from China

Introduction, selection and editorial matter © Darryl S.L. Jarvis and Anthony Welch 2011 Individual chapters © contributors 2011 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission.

Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2011 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries ISBN 978-0-230-54234-1

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This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data ASEAN industries and the challenge from China / [edited by] Darryl S.L. Jarvis, Anthony Welch. p. cm. Includes index. Summary: “This book explores the impact of the rise of China on South East Asia, addressing the consequences for some of Asias key economic sectors, including educational services, bio-technology, financial services, and the food industry” – Provided by publisher. ISBN 978–0–230–54234–1 1. Southeast Asia–Economic conditions 2. China–Economic conditions–2000–. 3. Southeast Asia–Foreign economic relations–China. 4. China–Foreign economic relations–Southeast Asia. I. Jarvis, D.S.L. (Darryl S.L.), 1963– II. Welch, Anthony R. HC441.A8565 2011 330.959–dc22 2011001646 10 20

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10.1057/9780230309050 - ASEAN Industries and the Challenge from China, Edited by Darryl S.L. Jarvis and Anthony Welch

Contents List of Map, Tables and Figures

viii xi

Acknowledgements

xiv

Notes on Contributors

xv

Chapter 1

Introduction: Structural Changes, Economic Challenges and Political Accommodation: Managing the Rise of China in Southeast Asia Darryl S.L. Jarvis and Anthony Welch

Chapter 2

Rising China, US Influence, and Southeast Asia: Background, Status, and Outlook Robert Sutter

18

Chapter 3

The Dragon, The Tiger Cubs and Higher Education: Competitive and Cooperative China-ASEAN Relations in the GATS Era Anthony Welch

39

Chapter 4

International Financial Centres in Asia: Contest, Competition and Possible Trajectories Darryl S.L. Jarvis

123

Chapter 5

Being Sandwiched: The Reshaping of ASEAN-China Food Trade Niels Fold, Jeff Neilson and Bill Pritchard

180

Chapter 6

Energy Security and Competition in Asia: Challenges and Prospects for China and Southeast Asia Benjamin K. Sovacool and Vu Minh Khuong

210

Chapter 7

The Impact of China on the Electrical and Electronics Industry in Southeast Asia Frank Ben Tipton

230

Chapter 8

Agricultural Biotechnology in China: Prospects for New Economy Industries in Southeast Asia Fredoun Ahmadi-Esfahani

265

Index

1

294 vii

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Preface

List of Map, Tables and Figures Map Southeast Asia

5

Tables 3.1a and 3.1b ASEAN-China trade growth, 1991–2006 3.2 Export earnings from international students (higher education), selected major providers, 1989–2008, and percentage of total national service sector trade 3.3 Modes of provision of cross-border educational services 3.4 International students in OECD countries, by number and percent, 1999 and 2006 3.5 English-speaking countries’ share of international students, by origin, 1995 and 1999 (%) 3.6 Destinations of students from Asia-Oceania, 1995 and 1999, by percent 3.7 Size and role of overseas Chinese in ASEAN Three economies, 1990s 3.8 ASEAN Three + China – Economic and educational indicators 3.9 Singapore’s sites of foreign direct investment, 1997–2007, in SG$ millions 3.10 Number of public HEIs and enrolments, 1990–2006 3.11 Changes in staff-student ratios, Chinese universities, 1985–2006 3.12 Chinese students studying abroad, by category, 1997–2000 3.13 ASEAN students in Chinese universities, 2000–2006 3.14 University scholarships offered by China, 2003–2004, and 2004–2005 3.15 Numbers and destinations of Singaporeans studying overseas, 1981–1990 (self-financed) 3.16a Undergraduate enrolments and graduations, local and external, 1997–2000 3.16b Postgraduate enrolments and graduations, local and external, 1998–2000

41 46 47 48 50 51 55 57 62 66 67 73 74 75 82 84 84

viii

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1.1

List of Map, Tables and Figures ix

3.18 3.19 3.20 3.21 3.22 3.23 3.24 3.25 3.26 3.27 4.1 4.2 4.3 4.4 5.1 5.2 5.3 6.1 6.2

7.1 7.2 7.3

Higher education enrolments, degree and diploma, Malaysia, 1970–2008 Undergraduate enrolments in Malaysian public and private HEIs, 1995–2000 Private HEIs in Malaysia, as of May 2001 International enrolments, Malaysian public and private HEIs, 2002–2007 Awards to Chinese students covered by MOUs, to study at Malaysian public universities Viet Nam’s higher education targets, 2001, 2010 and 2020 Higher education enrolments by institution and category, 2000/1 and 2006/7 Enrolments, public semi-public and private HEIs, 1996/7–1998/9 Vietnamese students at Chinese universities, institutional agreements, 1992–1993 to 2003–2004 Chinese students at Vietnamese universities, institutional agreements, 1992–1993 to 2003–2004 China-ASEAN cross-border educational services – a summary Hong Kong financial centre: Banking sector and financial sector composition Evolution of financial services sector in Shanghai: 1990 to 2007 PRC banking system Singapore financial centre: Banking sector and financial sector composition ASEAN food exports to China, major flows, selected years, 1992–2005 (US$ millions) Chinese food exports to ASEAN, major flows, selected years, 1992–2005 (US$ millions) A framework to account for ASEAN-China food trade Selected indicators on China’s energy consumption Level of per capita consumption of electricity for the world average, China and ASEAN-6 countries (US in 2000 = 100) Indicators of conditions of doing business in Southeast Asia, compared to the United States, 2004 Corporate structure in Southeast Asia Indicators of conditions of doing business in Hong Kong and China, compared to United States, 2004

90 91 92 95 97 99 100 100 103 103 105 134 144 147 153 188 189 190 212 216

243 245 246

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3.17

x List of Map, Tables and Figures

8.2 8.3 8.4 8.5

Corporate structure in Hong Kong and China Estimated number of biotechnology-related ventures in Asia China’s plant biotechnology research budget by source in the sampled institutes, 1986–1999 Numbers and composition of plant biotechnology research staff in sampled institutes in China, 1986–1999 Crop biotechnology research and development in selected East Asian countries Number of GM plants approved in China through 1999

247 267 270 271 275 281

Figures 3.1 3.2 5.1 5.2 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8

Host countries for international students, 2001 Chinese students studying abroad and returning, 1997–2007 Two-way food trade between ASEAN and China The influence of palm oil – ASEAN’s food trade balance with China Chinese consumption, production, and reserves of oil, 1981 to 2008 Total energy consumption for seven ASEAN countries, 1990 to 2005 by country ASEAN’s consumption, production, and reserves of oil, 1981 to 2008 Crude oil prices, 1990–2009 Chinese energy-related carbon dioxide emissions, 2005–2030 (million metric tons) Total energy consumption for seven ASEAN countries, 1995–2006 (million tons of oil equivalent, by fuel source) Environmental damages from various electricity sources (in US cents/kWh) Variations among developing Asian countries on energy efficiency and intensity

49 72 188 189 213 214 215 217 219 220 221 222

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7.4 8.1

The “rise of China” is by now a well worn phrase known the world over. Few doubt the momentous changes that China’s entry onto the world stage has wrought. From dramatically changing trade patterns to the growth of global financial imbalances, China’s explosive growth has been the story of the late twentieth and early twenty-first century, transforming international economic and political relations in ways that few scholars could have predicted a mere two decades ago. With hindsight, we should perhaps not be surprised by this. Both China and India have historically accounted for a far greater proportion of global economic activity than their most recent pasts betray. As far back as the 1870s China had a significant presence in the global economy accounting for as much as 17.1% of global GDP and India for 12.1% (Maddison, 2003). The “rise” of China thus represents a return to an historical norm rather than an aberration; indeed the aberration being its near disappearance from the global economy between 1949 and the early 1970s. In historical terms it is thus the rapidity of China’s growth rather than the size of its economy that is most remarkable. As the Economist magazine reported recently, “In China each person now produces four times as much as in the early 1970s” with as many as 400 million people being lifted from abject poverty into the ranks of an urban dwelling middle class in the space of a single generation (Economist, 2007). Not before has the world witnessed such a rapid transformation. While the historical debate about China’s growth and (re)emergence will occupy historians for centuries to come, it is the impact such developments are wreaking on the global political-economy and, importantly, on Asia itself which rightly attracts current attention. In the West this has manifested as a consuming preoccupation with debates about the decline of the West or the displacement of American hegemony and the implications for global order. In the East, in contrast, these debates have been much less noisy and subsumed amid the practical problems of managing and accommodating China. Indeed, while the West has been busy contemplating the coming new age, in the East they have started to live it. The changes are visceral. In Southeast Asia and ASEAN (The Association of Southeast Asian Nations) strategic landscapes, the projection of US power, and the security guarantees extended through xi

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Preface

carefully crafted US-Asian bilateral relationships, are all experiencing increasing flux as the pull and push of China’s security and economic power fundamentally impacts the region. More immediately, the threat posed by China to those traditional growth engines that have been responsible for ASEAN’s own “economic miracle” has created stresses requiring rapid re-engineering. The rise of China has thus been greeted with mixed feelings in Southeast Asia; celebrated as evidence of the emergence of the “Pacific century” but also met with concern and trepidation about the implications for economies and ways of life. Contradictory tensions in Southeast Asia’s economic and political relationships thus appear to be the order of the day. Yet the precise dimensions of these implications are not well appreciated or researched. Aggregate accounts of China’s rise and the sheer size of its economy seem popularly to be interpreted as a kind of market “crowding out” phenomenon, with ASEAN and Southeast Asia coming off second best. Indeed, the “pull” effects of the Chinese economy have been variously greeted as marking the end of Southeast Asia’s miracle economies, with foreign direct investment (FDI) heading towards the eastern coastal seaboard of China in search of cheaper cost havens to make and assemble its wares. As the contributions to this volume have discovered, however, this is only part of the story – albeit an important part. China’s rise does indeed represent challenges for ASEAN and Southeast Asia but also increasing opportunities, many of which are only now becoming apparent. Appreciating the contours of these challenges and the opportunities they represent for ASEAN and Southeast Asia is the principle concern of the contributions to this volume. They do so, however, not through a generic lens focused on China per se, but a series of micro-studies focused on discrete industry sectors in Southeast Asia in order to map the impact, consequences and likely trends that China’s rise poses for these sectors. Only in the context of empirically informed research might we then begin to put together the myriad consequences that China’s rise poses for ASEAN. Our volume is, of course, an incomplete one and given the rapidity of change in the region a mere snapshot of selected industry sectors and their current experiences. However, we hope the narratives and conclusions each of the contributors provides go some way to informing debate and help observers better understand the evolving changes sweeping Southeast Asia. Darryl S.L. Jarvis and Anthony Welch

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xii Preface

Preface xiii

References

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Angus Maddison (2003) The World Economy. Historical Statistics, OCDE, Paris. “Rich Man, Poor Man”, The Economist, January 20–26, 2007, p. 11.

10.1057/9780230309050 - ASEAN Industries and the Challenge from China, Edited by Darryl S.L. Jarvis and Anthony Welch

Research for this project originally commenced through the commission of the Research Institute for Asia and the Pacific (RIAP) at the University of Sydney, Australia, and through research funding generously provided by the Ministry of Finance, Overseas Bureau, Japan, in support of the project “Building Institutional Capacity in Asia” (BICA). The editors and authors gratefully acknowledge the support of RIAP and the Ministry of Finance, Japan. In particular, the editors would like to thank Leslie Williams for his support and logistical input into the early research phase of the project and Dr Stephanie Fahey, previously Director of RIAP, for her mentorship. Subsequent research support was provided by the Lee Kuan Yew School of Public Policy, National University of Singapore (NUS), the Research Institute for Higher Education, University of Hiroshima, and the Fulbright Commission. Financial support provided by the NUS Staff Research Support Scheme generously supported preparation of the manuscript. The Editors also gratefully acknowledge the editorial assistance, copy-editing and research support provided by Kelly Sovacool and Lin Hui, both Research Fellows at the Lee Kuan Yew School of Public Policy. Finally, we would like to thank each of the authors for their patience and diligence in the preparation of their contributions. Darryl S.L. Jarvis and Anthony Welch

xiv

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Acknowledgements

Anthony Welch, co-editor of this volume, is Professor in the Faculty of Education and Social Work, University of Sydney. A policy specialist, his more than 100 publications include studies of reforms and policy issues, principally within Australia and Asia. Professor Welch has consulted to international agencies, governments in Australia, Asia, as well as within Europe, and to US institutions; and he has project experience in several parts of Asia, particularly in the area of higher education reforms. His work has been translated into eight languages, and he has been Visiting Professor in the USA, UK, Germany, France and Japan. A Fulbright New Century Scholar (2007–2008), his most recent books are The Professoriate: Profile of a Profession (2005) and Education, Change and Society (2007, 2nd Edition) and Higher Education in Southeast Asia: Changing Balance, Blurring Borders (2011), that examines the shifting balance of public and private higher education, and associated issues such as finance, equity, transparency and regulation. Darryl S.L. Jarvis, co-editor of this volume, is Associate Professor in Lee Kuan Yew School of Public Policy, National University of Singapore. His research and teaching interests focus on international and political risk, and the political economy of investment into Asia. Prior to joining NUS he was Senior Lecturer in the Faculty of Economics and Business at University of Sydney. He is currently the recipient of a large multi-year grant investigating the role of regulatory risk in five of Asia’s leading economies; China, India, Thailand, the Philippines and Indonesia. His recent publications include, Jarvis, Darryl S.L., Ed Araral, M. Ramesh & Wu Xun (2010) (eds), Infrastructure Regulation: What Works, Why, and How do We Know? Lessons from Asia and Beyond (2010), Handbook of International Business Risk: The Asia Pacific (2003), International Relations and the Challenge of Postmodernism: Defending the Discipline (2000), International Relations. Still an American Social Science? Toward Diversity in International Thought (2001), and Post-modernism and Its Critics: International Relations and the Third Debate (2002). He has also contributed articles to Regulation & Governance, Journal of International Relations and Development, Politics and Society, Asian Survey, Policy, Organization & Society, Global Society, Journal of Interdisciplinary International xv

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Notes on Contributors

xvi Notes on Contributors

Fredoun Ahmadi-Esfahani is currently an Honorary Associate Professor in Agricultural Economics at the University of Sydney. He has served as Leader of the Discipline of Agricultural and Resource Economics and Associate Dean of the Faculty of Agriculture at Sydney, and held visiting positions at the Harvard Business School and Stanford University. His research interests include food policy in China and Australian food exports to East Asia. He has published over 80 articles on a wide variety of applied economic issues in more than 15 international journals and a significant number of other scholarly outlets, including “Is Regulation of Biotechnology Economically Justified?”, Asia Pacific Journal of Environmental Law, 8 (3 & 4), December 2004. Niels Fold is Professor in the Department of Geography and Geology, University of Copenhagen, Denmark. His research focuses on the dynamics of global agro-industrial chains relating to perennial crops in developing countries. Jeff Neilson is a Research Fellow in School of Geosciences at the University of Sydney, Australia. His research focuses on the geography of tropical agriculture and commodity trade. His current research is concerned with India and Indonesia and addresses the relationship between local institutional settings and global markets, and the implications of this relationship for poverty reduction. Bill Pritchard is Associate Professor of Geography in the School of Geosciences at the University of Sydney, Australia. His research focuses on the geographies of global change in agriculture, food and rural places and the ways that the emerging global economy in food and agriculture is transforming places, industries and people’s lives. Dr Pritchard is author of two books and has published 43 refereed articles and book chapters. He is an active member and former convenor of the Agri-Food Research Network, and a member of the Australian Research Council Research Network on Spatially Integrated Social Sciences. Benjamin K. Sovacool is an Assistant Professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore. He is also a Research Fellow in the Energy Governance Program at the Centre on Asia and Globalisation. Dr Sovacool has worked as a researcher, pro-

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Relations, The Australian Journal of International Affairs, as well as authored a series of invited papers.

fessor, and consultant on issues pertaining to energy policy, the environment, and science and technology policy. He has published more than 80 academic articles and presented at more than 30 international conferences and symposia. He has worked in advisory and research capacities at the US National Science Foundation’s Electric Power Networks Efficiency and Security Program, Virginia Tech Consortium on Energy Restructuring, Virginia Centre for Coal and Energy Research, New York State Energy Research and Development Authority, Oak Ridge National Laboratory, Semiconductor Materials and Equipment International, and US Department of Energy’s Climate Change Technology Program. He is the co-editor with Marilyn A. Brown of Energy and American Society: Thirteen Myths (2007) and the author of The Dirty Energy Dilemma: What’s Blocking Clean Power in the United States (2008). He is also a frequent contributor to such journals as Electricity Journal and Energy Policy. Robert Sutter is Visiting Professor of Asian Studies at the School of Foreign Service, Georgetown University. Prior to joining Georgetown he specialised in Asian and Pacific Affairs and US foreign policy in a US government career spanning 33 years involving the Congressional Research Service of the Library of Congress, the Central Intelligence Agency, the Department of State, and the Senate Foreign Relations Committee. He was for many years the Senior Specialist and Director of the Foreign Affairs and National Defense Division of the Congressional Research Service. He has also served as the National Intelligence Officer for East Asia and the Pacific at the US Government’s National Intelligence Council, and the China Division Director at the Department of State’s Bureau of Intelligence and Research. Professor Sutter holds a PhD in History and East Asian Languages from Harvard University and is the author of 17 books, numerous articles and several hundred government reports dealing with contemporary East Asian and Pacific countries and their relations with the United States. His most recent book is The United States in Asia (2008). Frank Ben Tipton holds a Personal Chair in the Discipline of International Business, Faculty of Economics & Business at the University of Sydney, Australia. He previously held positions at Harvard University, Wesleyan University, Connecticut, and the University of California, Riverside. His research interests are concerned with governance structures and strategic management, and the ongoing impact of information and communication technologies. His most recent book is a comparative

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Notes on Contributors xvii

xviii Notes on Contributors

Vu Minh Khuong is Assistant Professor at the Lee Kuan Yew School of Public Policy, National University of Singapore. His research interests are in economic growth and competitiveness, the impact of Information and Communication Technology on economic development, and Asian economic integration. His articles have appeared in publications such as Scandinavian Journal of Economics, German Economics Review, and the New Palgrave Dictionary of Economics. Dr Vu has held various positions when working in Viet Nam, including: CEO of Songcam Chemical Company, Vice-Chairman of Dinh Vu Economic Zone, Deputy Chief of Haiphong City Government’s Office, and Associate Fellow at the Prime Minister’s Research Commission. He has also been extensively involved in international development projects as a consultant to the IMF, World Bank, IFC, and USAID and currently serves as the faculty chair for the Viet Nam Program (Asian Development Bank) at the Asia Competitiveness Institute, Lee Kuan Yew School of Public Policy. Dr Vu holds a PhD in Public Policy and an MBA from Harvard University, and a BA in Mathematics from Hanoi National University.

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study of firm governance in Asia, set in a historical and institutional context (2007). His most recent research focuses on the intersection of public and private governance structures, and the ways in which state structures and public policy affect business strategy in Asia.

Introduction: Structural Changes, Economic Challenges and Political Accommodation: Managing the Rise of China in Southeast Asia Darryl S.L. Jarvis and Anthony Welch

Asia is changing, and China is a principal cause (Shambaugh, 2005) Too often, China-ASEAN relations are seen through the narrow prism of trade. The figures are impressive enough, of course – total trade reached US$202.5 billion in 2007, an increase of nearly 30% over the previous year. Of this, China’s exports to ASEAN comprised US$94.2 billion, while ASEAN exports to China totalled US$108.4 billion (Leese, 2009: 930). The ratification of the China ASEAN Free Trade Agreement in 2002, followed by agreements to reduce tariffs on around 7,000 traded goods in 2005, and services in 2007, is only the latest chapter in a developing regional trade relationship that, however challenging, is proving valuable to both sides. China’s economic growth, previously seen as a threat, is now more often seen as an opportunity by the countries of Southeast Asia. Notwithstanding the impact of the Global Financial Crisis of 2008–10, further strong growth will result from the planned implementation of a zero tariff regime between China and six old ASEAN member countries – Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand – (for most goods) by 2010, and between China and the other four new ASEAN members – Cambodia, Laos, Myanmar and Viet Nam – by 2015. By 2010, the China-ASEAN free trade area will embrace a regional population of 1.8 billion and a combined GDP of two trillion US dollars, making it the third largest market in the world after the European Union and the North American free trade area. While the pattern of trade has historically been characterised by ASEAN economies acting as suppliers of parts or resources to China for assembly 1

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1

or production and export to the West, trade relations are increasingly diverse, as this book reveals. By 2006, for example, China and ASEAN were each other’s fourth largest trading partners, and according to Chai Yu of the Asia Pacific Institute of the Chinese Academy of Social Sciences, the region is witness to a change in forms of trade – “from raw products to finished industrial products, especially mechanical, electrical or high-tech products” (China Daily, Oct. 30th, 2006). By 2005, these categories formed 60% of China ASEAN trade and 45% of ASEAN-China trade. Indeed, the increasing complexity of this two way trade and its ever growing volume (now valued at over US$200 billion dollars), indicates a maturation not just in the formal trade policies and practices between ASEAN and China, but also fundamental transitions in the structure of their economies and the nature of the production systems each are evolving. Where previously, for example, the ASEANChina relationship could be defined principally in terms of the competitive dynamics between the two to produce and supply goods to Western markets, now a more complex series of dynamics and a greater level of economic reciprocity is witnessing the emergence of economic complementarities. Much of this has occurred incrementally and been propelled as much by a restructuring in the value-chains of private sector actors, particularly large multinational enterprises (MNEs), as by the grand designs of political leaders. The mass movement of private sector capital toward China throughout the 1990s, for example, witnessed ASEAN’s share of FDI into Asia decline from 50% in 1990 to approximately 16% in 2009, with China now capturing 50% of all FDI into the region. Greenfield investment into ASEAN in the ECM sector (electronic component manufacturing), in particular, has declined markedly, predominantly as a result of Japanese MNE’s re-orienting their investment strategies out of Singapore, Malaysia, and Indonesia and toward Northeast Asia (China and South Korea). Yet the sense in which this has collapsed investment into ASEAN and created skewed trade patterns between ASEAN and China is probably overstated. While, to be sure, structural changes in Asia have produced genuine concerns about the sustainability of the ASEAN miracle economies and propelled ASEAN leaders to evolve alternative economic growth drivers, the initial fears about being dwarfed by China or simply “under sold” by China’s comparative cost and size advantages have not materialised. If anything, China’s entry into the world economy has created a new economic growth pole for Asia: one that ASEAN is well placed to advantage from. China’s new found prosperity, for example, has become an important source of investment into ASEAN, now reaching

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2 Introduction

US$1.1 billion by the end of 2005 (from US$150 million in late 1991), while ASEAN’s total investment of US$38.5 billion in China has also grown year on year. These intensifying linkages are remarkable when set against the history of ASEAN-China relations. ASEAN, which dates from 1967, was principally established as a security community: a bulwark against Chinese expansionism and concerns about a “domino effort” as a consequence of the war in Viet Nam. Its inception was thus born of the Cold War and overwhelmingly sponsored by the United States. The evolution of ASEAN-China relations and their flowering into fully-fledged trade agreements thus marks a radical juncture from the inception of the grouping. But history casts a long shadow and it would be incorrect to suggest that these legacies have evaporated entirely. There is still a reserve about China’s regional intentions (Osborne, 2006; Wang, 2005). A recent major survey of elite opinion within the region, for example, strongly expressed the view that in ten years time, China would be the most powerful presence in the region (more than twice as many as indicated America), while also indicating a certain anxiety about what this represented (Whitney and Shambaugh, 2008). While the survey confirmed widespread support for the development of an East Asian Community, with a focus on confidence building and conflict prevention, economic integration, and strengthening good governance and democratic norms, there was also a sense among respondents in Southeast Asia that ASEAN was a useful means of containing larger regional powers. Notwithstanding the coining of the term “China’s Peaceful Rise” (by Zheng, Bijian, at the Boao Forum, in 2003), majority opinion viewed China as the most likely threat to peace and security in Asia over the next decade. We should, perhaps, not be surprised by these results. Asia’s most recent past has been defined by acute security fault lines, with much of Asia separated from China through bilateral and multilateral security treaties and the overreaching security arc of the United States. China, in many senses, has been as much of an anathema to Asia as it has the West, with formal diplomatic relationships only established recently. Thailand, for example, only established diplomatic relations with China in the early 1980s, Singapore, Brunei and Indonesia not until the early 1990s, while Viet Nam fought a war with China as late as 1979. Both China and ASEAN have thus been engaged in a steep learning curve, building political, economic, trade, and financial linkages from the ground up. While trade has served as the principal agent to broker and build relations, it is also evident that China-ASEAN relations are ascending to

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Darryl S.L. Jarvis and Anthony Welch 3

a new plane. China’s provision of a major loan to Thailand and assisting with raising loans for Indonesia in response to the regional financial crisis of 1997–1998, raised its stocks considerably and began its regional charm offensive. A decade later, in the face of an even more severe economic crisis (the Global Financial Crisis of 2008–2010), China’s connections to the region show every sign of deepening. China’s recently announced plans for a China-ASEAN investment cooperation fund totaling US$10 billion, designed for cooperation on infrastructure construction, energy and resources, information and communications, and over the next few years, to offer US$15 billion credit to ASEAN countries, including loans of US$1.7 billion for cooperative projects, signals a more engaged relationship. Indeed, ASEAN appears to be one of the primary beneficiaries of China’s new-found soft power. Recent initiatives to offer 270 million yuan (US$39.7 million) in soft aid to Cambodia, Laos and Myanmar, along with the establishment of the US$5 million China-ASEAN Cooperation Fund, the donation of US$900,000 to the ASEAN plus Three Cooperation Fund, and the provision of over 2,000 scholarships to ASEAN nationals, is indicative of the growing importance Beijing attaches to ASEAN (Cheow, 2004; Vaughn and Morrison, 2006; Whitney and Shambaugh, 2008). This is also reflected in Beijing’s formal political diplomacy toward ASEAN member states. No longer is Beijing overtly critical in its bilateral relations but rather increasingly accommodating, refraining from criticism of domestic policies in an effort to elevate the tone and depth of China-ASEAN relations. China’s formal assent to the ASEAN’s Treaty of Amity and Co-operation in 2003, for example, and Hu Jintao’s visits to Brunei, Indonesia, Viet Nam and the Philippines in 2005, cemented the character of the China-ASEAN relationship, with China stressing its willingness: to strengthen the friendly cooperation of good neighbours with all ASEAN countries … to realise the common development and prosperity and expand the coordination and cooperation in international and regional affairs. China supports ASEAN’s integration course and its leading role in the East Asian cooperation process (Osborne 2006). But geography and history are also powerful influences on relations between China and ASEAN. China, it should be recalled, is bounded on its southern border by several Southeast Asian states: Viet Nam, Burma (Myanmar), and Laos, while also sharing sea borders with all of the Southeast Asian countries, with the exception of Burma (see Map).

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4 Introduction

Darryl S.L. Jarvis and Anthony Welch 5 Map 1.1

Southeast Asia

CHINA TAIWAN BURMA

PHILIPPINES

THAILAND CAMBODIA

VIETNAM

BRUNEI

MALAYSIA SINGAPORE

INDONESIA

PAPUA NEW GUINEA

AUSTRALIA

This geography defines equally collective interests but also points of contestation and fissure. Disputes over oil and gas rights, contests over minor territorial sovereignties, and competitive dynamics over access to energy to support development and sustain economic growth, make for a complex tapestry of interests that can serve equally as points of cooperation or conflict. China’s increasing inroads into Burma (Myanmar) with the construction of USD$2.55 billion Myanmar-China oil and gas pipeline (commenced in 2009) under the auspices of PetroChina,

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LAOS

for example, demonstrate how tentative are forms of cooperation and how geo-strategic interests can easily rival cooperative ambitions. China’s aggressive pursuit of Burmese energy resources leaves little doubt about the lengths to which Sino interests will be protected despite talk of cooperation and trade enhancement. Indeed, recent history is littered with such rivalries. Japan’s dispute with China in the East China Sea over the Shunqiao gas field which lies in the Chinese Exclusive Economic Zone (EEZ) and only four kilometres within the border claimed by Japan, for several years has witnessed increased maritime and air patrols amid growing political acrimony (Fackler, 2004). Similarly, disputes over the Spratly islands witnessed naval clashes between China and the Vietnamese killing 77 Vietnamese naval personnel in 1988, and again resurfacing in March 2004 when China and Viet Nam both reasserted sovereignty over the islands (Vaughn and Morrison, 2006). At the same time, Chinese aggression in seizing the Mischief Reef (part of the Spratly islands) in 1995 marked a low point and continuing irritant in relations with the Philippines. In all these cases ASEAN’s clout has been limited, with the ASEAN Regional Forum playing a modest role in defusing tensions by orchestrating the “Conduct of parties in the South China Sea” signed by ASEAN member states and China in 2002 (Vaughn and Morrison, 2006). The ASEAN-China relationship thus continues to be defined as much by competitive strategic rivalries as by new-found motifs to proclaim cooperation. China’s softly softly approach to ASEAN since the early 2000s, for example, reflects as much its desire to deal with Japan through classic ‘wedge’ diplomacy as it does any innate affinity with ASEAN. China’s historical grievances with Japan, and Japan’s inability to reach political accommodation through a formal apology and public contrition, continues to make for a cumbersome relationship that, at times, has become acrimonious. In part because of this, Beijing views ASEAN as an important counterweight to both help manage its relationship with Japan but also as a means to hem in Japan by usurping Japanese interests in the region. And where China privately harbours fears about head-on economic competition with Japan and the ability of Mainland enterprise to compete effectively against Japanese business interests, trade and investment in ASEAN provides a measured level of assurance to prime Chinese business and enterprise in a grouping that reflects a comparable level of economic development and economic sophistication. For Beijing, ASEAN is thus increasingly seen as both politically useful and economically beneficial to its longer-term interests in the region. What commenced as a security community to protect against the encroaching interests of China is now, ironically, viewed by Beijing

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6 Introduction

Darryl S.L. Jarvis and Anthony Welch 7

as a means to help secure its interests. In this broad context, ASEANChina relations thus appear bound to grow deeper over the coming years.

As the contributions to this volume reveal, however, these broader conclusions belie uneven experiences across various industry sectors. While the geo-strategic and the geo-political ambitions of China and ASEAN’s leadership weigh heavy on the trajectories of future relations, equally these trajectories will be impacted significantly by the economic landscapes that are emerging across industry sectors. China’s rise thus needs to be disaggregated and contextualised in specific domains. Rather than any ubiquitous impact, the story of China’s rise and its implications for Southeast Asia has to be read from multiple landscapes. This volume is a contribution to reading these varied landscapes. It assumes no theoretical lens other than empirical and contextual studies of the industry sectors addressed and how the rise of China articulates in these domains. Each chapter thus attempts to provide a snap shot of the composition of the sector and the forces propelling change within it. But in constructing each of the chapters and mapping the contours of the sector concerned, authors have had to manage a series of analytical problems. First, states in Southeast Asia are inherently dissimilar. Levels of economic development, rates of economic growth, government and institutional capacity, and industry policy and implementation practices vary so enormously that any mapping exercise attempting to get a handle on the state of play in a sector across so many countries is necessarily constrained. Contributors have dealt with this issue in various ways. Some, for example, have concentrated on those states whose footprint is the greatest and who demonstrate leadership in the sector. Others have focused on emergent trends as a means of plotting the changing landscape even though such trends have yet to fully materialise. Second, disentangling the impact of China from the normal multifarious economic forces that operate on each domain makes any analysis a necessarily messy affair. Contributors to this volume have grappled with these issues in different ways, and, invariably, have each reached different conclusions. Rather than a weakness of the volume, however, we think this one of its strengths. What emerges is a series of dissimilar narratives about the rise of China, the impact this is having across Southeast Asia, but told predominantly through specific domain analyses that attempt to map and understand

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Assessing China’s rise: A sectoral approach

the historical emergence of the sector, its trends, and the broader forces shaping its future. Not surprisingly, the overwhelming conclusion of this volume is that there are both winners and losers across the region, disadvantages and benefits that suggest a much more complicated series of developments than first supposed. For Asian policymakers, this book thus confirms what they are beginning to realise: as much as the rise of China has occasioned some economic dislocation in traditional export markets, China’s rise equally presents new opportunities but not without a series of new and confronting challenges.

Organisation of the volume In order to contextualise the rise of China and its significance for a region as wide and varied as Southeast Asia, the volume begins by looking at the seismic shift occurring in the power configuration between the great powers. For decades, the security blanket of the United States and a bifurcated world order under the Cold War provided both the security apparatus in which emergent regimes in Southeast Asia took hold but, more importantly, the economic vortex around which growth and the miracle economies of Asia were conceived. Japan, South Korea, Taiwan, and Hong Kong were all products of this era where economic and security interests were aligned. Subsequently, the emergence of Singapore, Malaysia, Thailand, and increasing levels of economic development in Indonesia, were likewise a product of an era where export-orientated development focused on servicing Western markets and where FDI flowed freely into Southeast Asia from essentially Western economies. As Robert Sutter observes, such a coincidence of interests made for an unparalleled period of growth and increasing prosperity, in essence sidelining Chinese influence. The predominance of the US in this epoch is, perhaps, an anomaly in historical terms but nonetheless created economic dynamics that provided the impetus to growth and a regional security regime. As Sutter observes, however, this American dominated security complex is now breaking down, with states in Asia having to construct new relationships and re-orient their economic and strategic interests. Sutter’s contribution thus helps set the scene for this volume by outlining the geo-political and geo-strategic transformation now occurring in the region, the obstacles and challenges presented in a changing security order and the implications this harbours both for China and the rest of Asia. As Sutter acknowledges, the dimensions of China’s new-found influence in Asia are far from uniform and still evolving. Much of Sutter’s

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8 Introduction

contribution thus attempts to assess where this influence is being peddled and what forms it is taking – indeed whether this will be successful. The second contribution by Anthony Welch begins a series of chapters focused on specific sectoral domains. Appropriately, the volume begins its domain specific focus with an analysis of higher education and educational services. More than in any sector, higher education and the changing dimensions of the sector betray the vibrant level of economic activity occurring in the region. Asia is a quick learner and governments of all persuasions see higher education as a tool for economic development. Moving up the value chain, transitioning from rural to urban society, and sustaining growth so that its benefits are more evenly distributed, is largely a function of the development of educational capacity. Indeed, throughout Asia the emphasis placed on educational attainment and the ends to which families will go to secure access to education for their children, speaks to an ingrained cultural disposition that not only values education as a social good but which sees education as one of the prime vehicles for social mobility. In Singapore, China, Hong Kong, Japan, and South Korea, the individual and national benefits of investment into higher education have been evident for the last number of decades. Singapore, China, South Korea and Japan all now have universities ranked in the top 100 universities in the world, at least on the THES (Academic Ranking of World Universities ) league table, if not on China’s own Shanghai Jiaotong list. This is no accident. Deliberative state policy and investment provisions have witnessed enormous year on year growth in both the hard and soft infrastructure that constitutes higher education. The gap that has historically divided the East from the West and seen mass enrolments of Asian students in Western academic institutions may be on the verge of abating. China and Singapore, in particular, are investing massively in their educational sectors, attracting international faculty, and have in place sophisticated research funding systems all designed to generate internationally recognised research output. At the same time, the provision of higher education to an increasing proportion of local students, is witnessing the emergence of an educational revolution with ever growing numbers of Asian students enjoying access to quality local services. While, of course, these trends vary among the region, Welch’s contribution captures how dynamic is this transformation. Evidence for this is presented through a detailed analysis of state expenditures on higher education, and the emergence of trade in educational services, with China and Singapore leading the way. As Welch observes, the rapid

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Darryl S.L. Jarvis and Anthony Welch 9

emergence of the Chinese higher education sector holds the prospects for the cross-border delivery of higher educational services among neighbours with cultural and linguistic affinities, and has the potential to impact higher education sectors throughout Asia. But as Welch also observes, not all neighbours are culturally or linguistically similar, and the vast diversity among ASEAN member states in terms of educational attainment levels, investment, and quality suggests that students will be motivated to move around the region and beyond in search of quality educational services. This supposes an increasing space for trade in educational services and for the sector generally, with China’s footprint in the sector likely to become dominant if only because of the sheer size of its population. In Chapter 4, Darryl Jarvis turns to address the rise of Asia’s financial centres. The changing nature of Asia’s economic landscape is perhaps most dramatically felt in the flows of fast moving money sweeping between Asian capitals. From the mid-1960s to the early 1990s, Japan dominated Asia’s financial landscape, controlling upwards of 23% of global financial assets – the second largest in the world behind the United States. In more recent years, however, Japan’s importance has diminished. While remaining the third largest financial market in the world after the United States and the Eurozone economies, its relative importance in Asia is in virtual free fall. By 2007 Japan’s share of global financial assets had declined to just 12% while its financial market assets of US$19.5 trillion are now almost equaled in the rest of Asia at US$18.8 trillion dollars (Farrell et al., 2008: 13, 21). Similarly, between 1990 and 2006 the intensity and depth of Japan’s financial connections to the region and the rest of the world stagnated while the rest of Asia enjoyed deepening financial linkages. Singapore, Hong Kong and Taiwan, for example, ‘now have larger cross-border investments with China and other emerging economies than does Japan,’ and where Tokyo managed to attract just four overseas listings on its stock exchange between 2004 and 2007, Singapore by contrast attracted 40 (Farrell et al., 2008: 62; Tucker, 2007). As Farrell observes, while Asia has enjoyed increasing financial linkages, Japan has essentially been ‘shut out of Asia’s financial integration – in part reflecting the fact that Tokyo’s financial might is almost entirely domestically focused; its debt markets driven by government securities and its equity markets semi-protected by onerous regulatory measures (Farrell et al., 2008; see also Kawai, 2008). Equally, these winds of financial change are occurring in China. While historically Shanghai served as one of the great metropolises of the early twentieth century, the destruction of its financial architecture

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10 Introduction

from the late 1930s onwards witnessed the assent of Tokyo, Hong Kong, and Singapore. With the rise of China, Shanghai would again appear poised to become a seat of finance and one of the great commercial centres of the world. Yet, as Jarvis argues, this assumption may prove problematic. China’s economic ascendancy has been visceral, but the institutional architecture necessary to support a financial centre remains relatively porous. Financial clustering is a product of various forces. As much as formal design, financial centres are also a product of the soft institutional apparatus that supports entrepreneurship, the regulatory systems that order behaviour, and the effectiveness and efficiency of these systems. China, Jarvis argues, is a long way from achieving the types of institutional and regulatory apparatus that will allow Shanghai to emerge as the region’s pre-eminent financial centre. Rather, competition from centres like Hong Kong and Singapore is likely to dominate Asia’s financial landscape for some decades to come. Despite China’s rise, its ability to project financial power as perhaps might be expected, thus remains constrained. In Chapter 5, Niels Fold, Jeff Neilson and Bill Pritchard turn to analyse the food sector and food trade between China and ASEAN. Agriculture remains the life blood for large swaths of Southeast Asia’s and China’s population. For hundreds of millions of rural dwellers, it provides work and sustenance. As Ford, Neilson and Pritchard note, “perhaps nowhere in the world has the ‘China question’ loomed larger than in ASEAN countries, given Southeast Asia’s sizeable agriculture-dependent population and the vital role played by agri-food sectors to ASEAN countries’ export earnings”. While trade in agri-food is of course prone to national sentiment the world over, in ASEAN the sector’s role as a safety net undergirding the livelihoods of millions makes for a particularly vexed set of interests and protectionist sentiment. Thus, despite China and ASEAN embracing closer trade ties and attempting to enhance their agri-food sectors through freer trade, in ASEAN farmers remain suspicious of being swamped by cheap Chinese fruits, vegetables and semi-processed food products. Indeed, China’s capacity to produce massive volumes of differentiated products at low cost, as Ford, Neilson and Pritchard note, threatens to devastate ASEAN’s agri-food industries and, in the longer term, create food import dependency across Southeast Asia. ASEAN, it would appear, is positioned in an increasingly problematic way within the global food chain. This pessimistic picture needs to be qualified, however. While ASEAN agricultural producers are being marginalised by subsidised production in Northern economies of fruits, vegetables, and seafood, in products

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Darryl S.L. Jarvis and Anthony Welch 11

such as palm oil, coffee, and cassava, ASEAN producers still maintain a competitive advantage. The problem for ASEAN, however, is that these products are characterised by long-term declining terms of trade and suffer from relatively narrow opportunities for value addition because of their subservient positions in the global value chains. While, then, palm oil and the increasing millions of acres now devoted to its production has managed to provide livelihoods to tens of millions of agricultural workers in Southeast Asia (especially Malaysia and Indonesia), the longer-term prospects of the sector appear marginal. For Ford, Neilson and Pritchard, the key point is that the rise of China is providing more threats than blessings to the ASEAN agri-food sector. Despite ASEAN maintaining a trade surplus in food with China, the vast majority of this is contributed by just one product – palm oil. For Southeast Asia, managing the rise of China in ways that does not generate a future dependency on food imports, remains problematic. Much like the rest of the world, Southeast Asia is still grappling with the fundamental transition occurring in the agri-food value chain. In Chapter 6, Benjamin Sovacool and Vu Minh Khuong turn to the energy sector. Energy competition in Asia is intensifying. Where China used to be a net energy exporter it is now a net energy importer. As have gone the winds of economic change in China and Asia, so energy has become an increasingly precious commodity and vital to the region’s continued growth. For this reason, an understanding of the energy security dilemmas faced by China and ASEAN is essential. As Sovacool and Vu Minh point out, energy demand in Asia is expected to grow rapidly in the next several decades. Estimates by the International Energy Agency, for example, anticipate that global demand for energy will double by 2040, but that more than half of this increase in demand will come from Asia, with fully 45% of growth in demand from Asia coming from China alone. By 2030, Asia will have to invest more than US$13 trillion in energy infrastructure if this demand is to be met. This veracious appetite for energy, however, is occurring in a relative institutional and regulatory vacuum. Unlike most other sectors, energy does not enjoy a region-wide coordination mechanism. Regional forums, agreements, energy sharing, or platforms to coordinate and create regionwide energy grids, remain problematic. Indeed, as Sovacool and Vu Minh point out, while China and ASEAN talk about “regionalism” and “cooperation” on energy issues, by and large such talk appears designed to mask opportunistic and protectionist thinking. Rather, energy competition is witnessing a race for energy sources. China, for example, is scrambling to procure energy supplies from as many sources as possible,

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12 Introduction

while Southeast Asian leaders remain suspicious of each other and distrustful of Chinese plans for expansion. As previously noted, such intense competition for scarce energy resources is witness to various contested sovereignty claims, aggravating the prospects for regional cooperation or of region-wide collaborative efforts to enhance energy security. Perhaps more obviously, however, the institutional contexts within which national energy planning are realised, leaves little prospects for optimism. Poor levels of institutional capacity, institutional inefficiencies, and poor oversight and accountability mechanisms, among others, are not allowing issues of energy efficiency, energy subsidies, energy substitution, access to energy, and environmental emissions to be addressed in ways that will bring about region-wide changes. Pessimistically, Sovacool and Vu Minh suggest that these dynamics may well worsen sector outcomes, creating greater disparities, regional political chasms and environmental outcomes. The rise of China, and with it the demand for energy resources, thus poses unique and likely enduring challenges for ASEAN and Asia as a whole. As the cost of energy increases, the implications for the region’s poor as well as resource poor countries will only become more acute. Finding ways to accommodate these competing interests thus remains one of Asia’s greatest challenges. In Chapter 7, Frank Tipton addresses the impact of China’s rise on the electrical and electronics industry in Southeast Asia. Southeast Asia’s miracle economies were, in large measure, built off the back of Greenfield investments into electronic components manufacturing. From the late 1960s onwards, Japanese investment into Southeast Asia rose year on year, much of it destined for Singapore, Malaysia and Thailand, and in Northeast Asia into South Korea, Hong Kong, and Taiwan. Each enjoyed a veritable explosion in components manufacture and assembly, with nearly all the product destined for western markets. As Tipton points out, this wave of investment into the region created employment opportunities, bolstered export earnings, and provided venture capital that in many instances marked the first wave of export-orientated entrepreneurialism. In Singapore, Hong Kong, and Taiwan, vast fortunes were struck off the back of this change in the global value chain of electrical component manufacture and assembly. Jump ahead to the 2000s and this picture is vastly different. China’s rise has, quite literally, meant the addition of hundreds of millions of low cost workers. Global value chains have been re-oriented, multinational corporations throughout the 1990s moved increasingly into China and out of Southeast Asia, while Southeast Asia was forced to

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Darryl S.L. Jarvis and Anthony Welch 13

rationalise and consolidate its exposure to the sector. As Tipton notes, however, this picture is itself becoming outdated. The nature of the industry is increasingly disaggregated, with component parts crossing borders at increasing intervals. Semi-conductors, for example, historically one of the mainstays of Southeast Asian economies, cross borders usually ten times before reaching the customer (Chan, 2010). The fluidity of the sector and the need for economies of scale in an industry that operates on the knife’s edge in terms of margins, thus presents all manner of competitive dynamics for both Southeast Asian economies and China. Tipton analyses these dynamics through a series of case studies, focusing on firms in Malaysia, China, and Singapore. Unlike other sectors, Tipton characterises the sector as one still dominated by extraregional competition, with both Southeast Asia and China plagued by the problem of market entry barriers and brand development. For Tipton, this presents opportunities for productive collaboration between China and ASEAN, especially in terms of trade agreements and trade corridors, increasing the potential for Asian companies to compete on a global stage. As Tipton also highlights, however, China and Southeast Asia still face a series of structural constraints in the development of the sector. Much of Asia still tends not to be an originator of ICT products or concepts. The “creative quota” still tends to be externally generated (with some notable exceptions), leaving both Southeast Asia and China with the problem of how to move up the value chain and capture the economic rewards of technological innovation. Unlike other chapters in this volume, Tipton’s analysis speaks to a series of problems that equally confront Southeast Asia and China, creating mutual interests and potential synergies for region-wide cooperation. China’s rise, in fact, might be a catalyst to realise these mutual interests and act on them. Finally, in Chapter 8, Fredoun Ahmadi-Esfahani addresses the agricultural biotechnology sector, the rise of the sector in China and the implications for Southeast Asia. Ahmadi-Esfahani suggests that the rise of the agricultural biotechnology sector in China has to be understood in an historical context. A long and at times torturous history of food shortages, famines, concerns over food security, and food privation among a massive rural peasantry, has ingrained in the Chinese psyche a desire to increase agricultural productivity and enhance food security. Indeed, these same precepts apply equally across Southeast Asia, where productivity in the agricultural sector has remained relatively low, a function of low capital intensity and lack of innovation in the methods of

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14 Introduction

cultivation. Agricultural biotechnology has thus been embraced as a possible medium to enhance sector productivity and sector returns. Unlike Europe where biotechnology applications in agricultural have often been greeted with suspicion or outright consumer hostility, attitudes in Asia have generally been more sanguine, if not positive, toward bio-engineering of food and food products. Not surprisingly, the sector has thus witnessed large increases year on year into research and development activities, the rapid development and cultivation of research capacity, and state promotion of the sector through subsidies. In Malaysia, Taiwan, Thailand, Viet Nam, and China the sector has thus been emerging relatively quickly, in part seen as a means of increasing returns to rural populations, in part meeting the growing food requirements of a still expanding population base and warding off dependency on food imports. Despite these efforts, however, the outcomes vary between countries. As Ahmadi-Esfahani notes, the agri-biotechnology sector in Asia “reveals not so much an integrated sector as a series of discrete sectors whose prospects and fortunes are as varied as the region.” Varying levels of capacity, not just in funding but importantly in the ability of countries in Southeast Asia to develop and retain sufficient knowledge capacity, is not leading to a level playing field but increasing disparities in the sector. In turn, the latitude for complementarities to emerge as these differences become more pronounced will likely diminish. As Ahmadi-Esfahani further notes, there is little evidence of regional coordination in the regulatory architecture that governs the sector. Lack of region-wide standardisation, codification, food labelling, safety and test protocols for bioengineered foods, for example, limits the prospects for trade in the sector or for regional consolidation. All these pose substantial hurdles for the emergence of a pan-Asian agri-biotechnology sector. In this context, Ahmadi-Esfahani suggests that the sheer size of the Chinese agri-biotechnology sector will increasingly come to dominate the sector, drawing in investment, knowledge capacity and making it a global leader in agri-biotechnology innovation. For Southeast Asia, the parameters of this looming competition are thus challenging. The lessons of this volume, then, are far from uniform in their conclusions about the rise of China and the implications for Southeast Asia. Rather, as each of the sectoral analyses demonstrate, China’s rise is neither an overwhelmingly positive development nor a negative one, but producing multifarious outcomes. Perhaps more importantly, the lesson of this volume is how malleable is China’s impact on ASEAN

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Darryl S.L. Jarvis and Anthony Welch 15

industries; much of it contingent on how ASEAN member states themselves engage with China and how they evolve and implement industrial and industry sector strategies to capture the evolving trends and market opportunities. Far from a linear and unidirectional relationship as some might have expected because of China’s often stated economic size, ASEAN is actually well placed to mould this in ways that can potentially serve ASEAN’s interests. The key, however, lies in the degree to which ASEAN is able to coordinate national policies and evolve a regional strategy to leverage off China’s new found interest in the region (see Jarvis, 2009). The coming decades are thus likely to be all-important for ASEAN and will potentially cement its longer-term relations with China. What the final contours of this relationship will be, of course, remains to be written.

References Chan, R. (2010) “Faster Customs Clarence for ‘Low Risk’ Firms”, The Straits Times, 26 June. Chang, S-D. (2008) “The Distribution and Occupations of Overseas Chinese”, Reid, A. (ed.) The Chinese Diaspora in the Pacific, pp. 33–51. Aldershot: Ashgate. Cheow, T-C. (2004) “China’s Rising Soft Power in Southeast Asia”, PacNet 19a, 3 May 2004. China Daily (2006) “China ASEAN Trade Expected to Reach 200 bn USD by 2008”, 30 October. Creaders.net! (2009) “China to Give Aid to ASEAN Countries”, 13 April. Fackler, M. (2004) “Japan will Face Off with China”, Wall Street Journal, 21 October. Gill, B., Green, M., Tsuji, K. and Watts, W. (2009) Strategic Views on Asian Regionalism: Results and Analysis. Centre for Strategic and International Studies. www.csis. org/japan/asianarchitecture Farrell, D., Susan, L., Christian, F., Raphael, B., Moira, P. and Charles, A. (2008) Mapping Global Capital Markets: Fourth Annual Report, McKinsey Global Institute, McKinsey and Company, available at http://www.mckinsey.com/mgi/publications/ mapping_global/index.asp (12 February 2008). Jarvis, Darryl S.L. (2009) “ASEAN Investment Liberalization: Progress, Regress or Stumbling Bloc?”, in Julien Chaisse and Philippe Gugler (eds) Expansion of Trade and FDI in Asia: Strategic and Policy Challenges, pp. 138–185. Routledge: Routledge Contemporary Asia Series. Kawai, M. (2008) “Evolving Regional Financial Architecture in East Asia”, Research Policy Brief 25. Tokyo: Asian Development Bank Institute. Leese, D. (ed.) (2009) Brill’s Encyclopaedia of China. Brill: Leiden. Osborne, M. (2006) The Paramount Power: China and the Countries of Southeast Asia. Sydney: Lowy Institute for International Policy. Reid, A. (2008) “Introduction”, Reid, A. (ed.) The Chinese Diaspora in the Pacific, pp. xv–xxviii. Aldershot: Ashgate. Shambaugh, D. (ed.) (2005) Power Shift: China and Asia’s New Dynamics. Berkeley: University of California Press.

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Sheng, Lijun, (2003) “China-ASEAN Free Trade Area: Origins, Developments and Strategic Motivations”, Working Paper, Institute for Southeast Asian Studies, International Politics and Security Issues Series, Number 1. Suryadinata, L. (2003) “Patterns of Political Participation in Four ASEAN States: A Comparative Study”, Wang, L-C. and Wang, G. (eds) The Chinese Diaspora: Selected Essays (vol. 1), pp. 64–83. Singapore: Eastern Universities Press. Tucker, S. (2007) “Asia Seeks its Centre”, Financial Times, July. Vaughn, B. and Morrison, W. (2006) China-Southeast Asia Relations: Trends, Issues and Implications for the United States. Washington: Congressional Research Service. Wang, G. (2000) The Chinese Overseas. From Earthbound China to the Quest for Autonomy. Cambridge: Harvard University Press. Wang, G. (2005) “China and Southeast Asia: The Context of a New Beginning”, Shambaugh, D. (ed.) Power Shift. China and Asia’s New Dynamics, pp. 187–204. Berkeley: University of California Press. Wang, L-C. and Wang, G. (eds) (2003) The Chinese Diaspora: Selected Essays (vol. 1). Singapore: Eastern Universities Press. Welch, A. (2009a) “Internationalisation of Vietnamese Higher Education. Retrospect and Prospect”, Harman, G., Hayden, M. and Pham, T., Reforming Higher Education In Vietnam: Challenges And Priorities (in press). Amsterdam: Springer. Welch, A. (2009b) Malaysia, Higher Education in Southeast Asia: Blurring Borders, Changing Balance. London: Routledge. Whitney, C. and Shambaugh, D. (2008) Soft Power in Asia: Results of a 2008 Multinational Survey of Public Opinion. Chicago: Chicago Council on Global Affairs, and East Asia Institute. Zheng, Bijian (2003) Boao Forum.

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Rising China, US Influence, and Southeast Asia: Background, Status, and Outlook Robert Sutter

Introduction In the post-Cold War period, unprecedented Chinese diplomatic and international activism in an ever-widening web of bilateral and multilateral arrangements and organisations and China’s rising economic importance as a focal point of intra-Asian trade led to major advances in Chinese relations with the countries in Southeast Asia. Chinese activism and advances were more important among the Southeast Asian states than in any other area of Chinese foreign policy, with the possible exception of South Korea, where post-Cold War advances in Beijing-Seoul relations also were remarkably strong. They succeeded in putting in the background many of the historical, territorial, economic and other concerns Southeast Asian government officials and others in the region, including such outside powers as the United States and Japan, had over China’s rising power and influence. A variety of specialists and commentators highlighted an emerging shift in influence in Southeast Asia among outside powers, with China emerging as the regional leader, and the United States, Japan, and notably Taiwan losing ground in the face of Chinese advances. Japan had appeared to dominate much of the region economically in the late 1980s as a result of massive flows of Japanese aid and investment to the region, and the accompanying large trade volumes with Southeast Asian countries. The protracted Japanese economic stagnation beginning in the 1990s greatly weakened Japanese ability to follow through with earlier economic commitments, though the flow of aid and investment remained important. By contrast, China’s rapid economic growth posed a major opportunity as well as a challenge for a variety of Southeast Asian entrepreneurs, who in many cases realigned their economic plans in order to 18

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2

work more closely with China. Taiwan saw its importance as an investor and trading partner with Southeast Asian countries increasingly overshadowed by China’s rise. The Chinese authorities also applied much greater political pressure on Southeast Asian governments to refrain from the past practice of frequent ostensibly informal contacts between Southeast Asian and Taiwan leaders, with the result that Taiwan became politically isolated in the region. The United States often was distracted and preoccupied with other issues during the post-Cold War period. The War on Terrorism after 2001 saw US leaders focus on prodding Southeast Asian leaders to do more in support of US military campaigns and anti-terrorist efforts that were unpopular with local populations and elites. The United States was seen as inattentive to the primary concerns of many Southeast Asian governments that focused on economic development, trade and investment needed for effective nation building and governance. The United States government was also less inclined than China and other outside powers to interact closely with the Association of Southeast Asian Nations (ASEAN), the premier regional organisation, and other regional multilateral organisations that the Southeast Asian leaders saw as important for confidence building among sometimes competing regional and other governments, and as an indication of Southeast Asia’s international importance and prestige. Whether or not China is emerging as the leading power in Southeast Asia has prompted considerable debate among specialists. In contrast to the shifts in influence noted above that are cited by many commentators and specialists as an indication of an emerging China-centred order in Southeast Asia (Shambaugh, 2003; Kang, 2003; Kurlantzick, 2005; Marshall, 2006), this assessment associates with specialists who look closely at the evidence of China’s rising influence and find important limitations as well as strengths (Goh, 2006; Glosny, 2006). The view here also discerns that China’s rise has indeed weakened the relative influence of Japan and especially, Taiwan. However, realities of power and influence in the region have not challenged substantially the continued US leadership position as the preferred security guarantor and a preferred economic partner for most of the governments in Southeast Asia. These governments also are seen to welcome and encourage a continued strong US regional position as they manoeuver to insure their continued independence of action, which they believe could be challenged if China’s rise occurred without concurrent activism in the region by the United States and other outside powers (Sutter, 2005, 2006a).

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20 Rising China, US Influence, and Southeast Asia

China’s approach to the countries and regional organisations of Southeast Asia has not been uniformly smooth in the post-Cold War period. China’s rising military power and occasional resort to forceful rhetoric or military action concerning regional territorial disputes during the 1990s reminded Southeast Asian leaders of China’s past assertiveness against Southeast Asian governments and produced wariness about China’s intentions. China’s strong public opposition in the latter 1990s to US military alliances and other strategic relations in Asia, including Southeast Asia, also were broadly unwelcomed by governments in Southeast Asia that continued to encourage the United States and other powers to remain active in the region as China’s influence rose. More recently, the Chinese leadership’s emphasis on an accommodating approach stressing mutual benefit focused on peace and development has won widespread support amid China’s rapidly growing economic, political and military interaction with all the members of ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar [Burma], the Philippines, Singapore, Thailand, and Viet Nam) and with regional organisations affiliated with ASEAN and other organisations (Womack, 2004; Cheung, 2001; Ba, 2003). Chinese trade with Southeast Asian countries grew in the 1990s at an annual rate double the impressive rate of growth of the Southeast Asian and Chinese economies. This was accompanied by an ever-widening array of high-level official contacts. In 1997, ASEAN and China set up an umbrella organisation, the ASEAN-China Joint Cooperation Committee, to oversee already established ASEAN-Chinese political, economic, security, and science-technology exchanges. Chinese President Jiang Zemin led a delegation to ASEAN’s 30th anniversary celebration and informal summit, and signed the first ASEAN-Chinese joint statement in December 1997 (Zemin, 1997). At the time, both China and ASEAN were preoccupied with efforts to deal with the consequences of the Asian economic crisis. Beijing’s careful responses to the crisis, including its pledges to maintain economic growth, eschew devaluation of the Chinese currency, support IMF rescue efforts, and provide supplementary support of $1 billion to Thailand, were well received in the region. Of course, it was widely known that the first two Chinese measures were mainly for Chinese domestic purposes; and that Chinese support for IMF funding and for Thailand actually cost Beijing little (Xinhua, 1998; Kyodo, 1998). Beijing was generally discreet in reaction to anti-Chinese violence that swept Indonesia in the late 1990s. It was sharply critical of Taiwan’s

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Evolution of Chinese policy and practice

efforts to use offers of economic aid in the wake of the economic crisis to foster high-level government contacts in the region, but the Chinese authorities stopped well short of taking significant retaliatory measures against the Southeast Asian governments involved. The underlying issues in Chinese relations with Southeast Asia in the post-Cold War period remained focused on economic competition for markets and foreign investment, territorial disputes in the South China Sea, and concerns over regional security, especially the implications of China’s military modernisation. Many government officials in ASEAN cooperated with China in the 1990s in promoting “Asian values” as a counterpoint to US-backed efforts to foster greater support for international human rights; but they were also privately concerned about China’s support for and widespread interaction with the repressive regime in Myanmar and also occasionally voiced concerns about the extensive Chinese involvement with the authoritarian Hun Sen regime in Cambodia. ASEAN leaders also continued to support the US-Japan alliance and the US military presence in Asia, despite strong Chinese criticism of these during the 1990s until mid-2001 (Sutter, 2000: 114). The pattern of Chinese involvement in Southeast Asia was consistent with the broad goals and practices of Chinese leaders’ post-Cold War policies throughout China’s rim. Seeking to secure China’s periphery and expand advantageous economic, political and military contacts, Chinese leaders made substantial gains in Southeast Asia. Isolated by the West and Japan after the Tiananmen Incident of 1989, China redoubled efforts to sustain and improve ties with developing neighbouring states and others in the third world (Ba, 2003: 632). It accommodated international pressure leading to a peace settlement in Cambodia in 1991, and in the process shifted Chinese support from the reviled and discredited Khmer Rouge to its former adversary, Cambodian strongman Hun Sen, who had been sharply criticised by China in the past. Later in the decade, the Sino-Cambodia relationship had evolved to the point that Hun Sen’s regime had closer ties with China than any other Southeast Asian state, as Chinese military, economic, and political support appeared both generous and without major conditions. Beijing leaders also solidified China’s position as the main international backer of the military regime that grabbed power in Myanmar after aborted elections in 1988. China provided military equipment, training, and economic and political assistance to the internationally isolated regime (Chanda, 2002; Sutter, 2003). Though many remained suspicious of Chinese intentions in Cambodia, Myanmar, and elsewhere in the region, Southeast Asian governments

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Robert Sutter 21

generally welcomed markedly increased relations with China, as Chinese economic, political and military power and influence grew in the 1990s. Southeast Asian leaders were positively impressed by Chinese leaders’ more active and accommodating stance to Southeast Asia, evident in the late 1990s and into the next decade. Southeast Asian leaders remained pragmatic in seeking an appropriate balance with other powers in the region (Yee and Storey, 2002; Roy, 2002). US influence in Southeast Asia declined following the withdrawal of US forces from the Philippines in 1992, and episodic and inconsistent US attention to the region followed for several years. The September 11, 2001 terrorist attack on America saw US leaders focus renewed attention on Southeast as a second front in the war on terrorism. Japan had been the dominant outside economic power in Southeast Asia but its position declined in the post-Cold War period as economic weakness sapped Japanese influence in Southeast Asia. The European Union remained interested in the region largely for economic reasons, but this interest fell in tandem with the economic downturn in Southeast Asia caused by the Asian economic crisis of 1997–1998. Russia exerted little influence, though Russian arms were relatively cheap and capable, and therefore attractive to some Southeast Asian buyers. As a power with rising capabilities and ambitions, India grew in prominence and took initiatives regarding Myanmar, Viet Nam, and ASEAN more broadly, and in securing sea lines of communications in Southeast Asia (Roy, 2002: 4). Chinese officials tended to be accommodating and diplomatic in most interactions with Southeast Asia during the post-Cold War period, but they showed a hard edge over territorial disputes with Southeast Asian countries in the early 1990s that worked against improving ASEAN-China relations. Chinese officials at this time also appeared very wary of multilateral discussions on these and related issues, presumably suspicious that these forums would put China at a disadvantage on territorial and other sensitive questions. Chinese military-backed expansion of territorial control in disputed islets in the South China Sea came in tandem with the aggressive Chinese military reaction to the Taiwan president’s visit to the United States in 1995, prompting US military countermeasures that were welcomed by many leaders in Southeast Asia. In 1995, ASEAN showed unusual unity in confronting China diplomatically over its military-backed expansion in disputed areas of the South China Sea, and some in ASEAN, notably Singapore and the Philippines, took steps to solidify security ties with the United States in the perceived uncertain environment caused by China’s expansion (Ba, 2003: 633; Roy, 2002).

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22 Rising China, US Influence, and Southeast Asia

Greater Chinese flexibility on territorial disputes and the management of relations with Southeast Asia was evident by 1997 when Chinese officials employed their “new security concept” (NSC) initially in an ASEAN setting. By this time, Chinese leaders were showing more flexibility in dealing with territorial issues with many neighbours, and were more willing to participate in multilateral forums that focused on these and other regional concerns. Chinese leaders from that time onward were also very active in diplomatic, economic and military contacts to reassure Southeast Asian neighbours and others that the image of the “China Threat” was an illusion. The image had been prominent in Southeast Asia as a result of Chinese assertiveness in the South China Sea and Taiwan up to the mid-1990s, and China’s overall military and economic expansion (Ba, 2003). The shift toward greater moderation in 1997 did not include US policy, however. Chinese moves in Southeast Asia for many years explicitly targeted the United States and US interests. Official Chinese media and comment by Chinese leaders portrayed Chinese initiatives as part of a broader international struggle against the “hegemonism”, “power politics”, and “cold war thinking” of the United States, whose leaders were consistently portrayed as taking initiatives in Southeast Asia and elsewhere along China’s periphery with a design to “contain” and “hold back” the rise of China’s power and influence in this and other world areas. Thus, in Southeast Asia, the moderating effect of China’s new security concept was offset by the strident Chinese opposition to American power, influence and policies. The NSC was often juxtaposed to the US efforts to revitalise the alliance relationship with NATO and Japan, seen by Chinese leaders as evidence of “cold war thinking” adverse to Southeast Asian interests and global peace and development. To many leaders in Southeast Asia, Chinese rhetoric seemed to be calling on them to make a choice between Chinese and US approaches – a choice they were loath to make. The net effect of the Chinese anti-US rhetoric was to complicate and hold back Chinese influence in the area (Finkelstein, 1999; Roy, 2002). Taiwan’s efforts to expand diplomatic and economic influence in the region ran up against repeated and strenuous Chinese complaints and pressure on Southeast Asian governments, though in the 1990s the pressure was not as intense as that applied to the US or Japan over Taiwan. For a decade after Lee Teng-hui initiated his “informal diplomacy” with a visit to Singapore in 1989, Taiwan’s president and other senior leaders travelled informally many times to the region to visit their Southeast Asian counterparts, and some senior Southeast Asian leaders

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Robert Sutter 23

even ventured to Taiwan. As China became more influential in Southeast Asia, it used that influence to increasingly restrict Southeast Asian interactions with Taiwan officials, as well as to curb Southeast Asian interaction with the Dalai Lama and activities in Southeast Asia by the Chineseoutlawed Falungong movement (Thayer, 2001; Breckon, 2003). Other targets of Chinese pressure in Southeast Asia in the post-Cold War period included Japan. Chinese officials and comment were especially critical of Japanese security cooperation with the United States and its alleged negative impact on Southeast Asia (Funabashi, 2002; Tian, 2002). The sharp shift toward moderation in Chinese policy with the United States during the George W. Bush administration beginning by mid-2001 was clearly evident in China’s approach toward Southeast Asia, as in other areas of China’s foreign policy, once again demonstrating the strong influence China’s relations with the US superpower continued to have on China’s foreign relations. The previous strident Chinese rhetoric and strong diplomatic and other pressures regarding the United States were greatly reduced, much to the satisfaction of Southeast Asian governments that generally did not wish to choose between the United States and China and sought to moderate great power contention seen to work against regional interests (Breckon, 2002). There was also a fall off in Chinese criticism of Japan and its security cooperation with the United States dealing with Southeast Asia. Nonetheless, Chinese policy and behaviour continued to work, albeit much more subtly, to build Chinese influence at the expense of the United States and other powers in Southeast Asia. This was seen in active Chinese efforts to foster an ever-growing variety of Asia-only economic, political, and security forums that took pains to exclude the United States. When a US-backed high-level security forum, inaugurated in Singapore in 2002 and sponsored by the Institute for International and Strategic Studies, proved popular with regional leaders, China sent only low-level functionaries while devoting high-level attention to promoting a new Asia only security dialogue that excluded the United States. Greater Chinese flexibility and willingness to engage in negotiations with the various claimants to South China Sea territories also saw Chinese officials endeavour to use the discussions with ASEAN members about a code of conduct over the disputed claims in the South China Sea as a means to restrict US naval exercises in the area. The multilateral US “Cobra Gold” military exercise saw China conduct its own military exercise in apparent competition. China also manoeuvered in its Free Trade Agreement initiative with ASEAN not

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24 Rising China, US Influence, and Southeast Asia

only to shore up China’s position relative to the United States, but also to place in a negative light trade initiatives from Japan, South Korea, and India, under-girding China’s leading position in the region in this area (Sutter, 2005: 197). Moreover, as Chinese influence in the region grew, Chinese officials were prepared to use their increased leverage firmly and forcefully regarding certain issues. Heading the list was Taiwan. By the start of the new century, Chinese officials were in a position to block almost all visits by Taiwan’s president to Southeast Asia and no head of state or government in Southeast Asia visited Taiwan – a sharp turnabout from the highpoint of Taiwan’s informal diplomacy in the 1990s. It was increasingly difficult for lower ranking Taiwan leaders to travel in the region and meet with Southeast Asian counterparts. Chinese influence also kept the Dalai Lama in general isolation from regional leaders and Chinese leaders went all out to press Southeast Asian governments to work with Chinese authorities against the Falungong movement banned in China in 1999 (Thayer, 2001; Breckon, 2003).

Recent developments and assessing China’s influence in Southeast Asia A highlight in Chinese diplomacy in Southeast Asia over the past year came with the whirl wind of events surrounding the visit of Chinese Prime Minister Wen Jiabao to Malaysia on December 11–15, 2005. Following the 11th ASEAN summit that took place in the Malaysian capital, Kuala Lumpur, Wen participated in the 9th ASEAN plus China meeting, the 9th ASEAN Plus Three (China, Japan, South Korea) meeting, and the inaugural East Asian Summit (EAS) that formally involved leaders of the ASEAN Plus Three along with those from India, Australia, and New Zealand, with Russia’s President Vladimir Putin also participating. Wen held a bilateral summit with his Malaysian counterpart, and had formal meetings with most heads of the visiting delegations with the notable exception of Japanese Prime Minister Junichiro Koizumi. Differences with Japan were behind China’s decision not to hold the meeting of Chinese, Japanese and South Korea leaders that usually accompanies the ASEAN Plus Three summit (Sutter, 2006c). The Chinese government had many reasons to be satisfied with the results of the meetings, but the sessions also illustrated some of the limitations and shortcomings in China’s actual influence in Southeast Asia after many years of growing trade, “win-win” diplomacy, and regional integration. Though not addressed often in formal meetings involving

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Robert Sutter 25

Chinese and Southeast Asian leaders, recent media and scholarly assessments put some emphasis on the fact that the actual behaviour of Southeast Asian governments shows that China’s rise and regional activism was accompanied by varying degrees of wariness on the part of China’s neighbours. This in combination with keen awareness of salient negative implications of Chinese development for Southeast Asian governments and their people posed serious and continuing obstacles to the emergence of any sort of China-centred order in Southeast Asia. Addressing the ASEAN-China meeting on December 12, Prime Minister Wen put forward initiatives to advance Chinese relations with the premier regional group in Southeast Asia. They involved promises to forge a stronger bond of friendship, to put in place a framework for relations, to build the ASEAN-China Free Trade Agreement, to identify areas of cooperation, and to vigorously promote personnel exchanges. His speech on the same day to the ASEAN Plus Three summit called for accelerating the development and conducting feasibility studies of an East Asia Free Trade Area; expanding the Chiang Mai Initiative and developing a framework for regional financial cooperation; closer cooperation regarding energy use; and greater efforts to manage health emergencies and major natural disasters. Emphasising the positives for Southeast Asia in burgeoning trade relations with China, Wen also stressed that in the past five years China has provided “nearly 3 billion US dollars in economic assistance and concessional credit to ASEAN countries”, and that “of the 10 billion dollars of concessional loans and preferential export buyers credit China would offer to developing countries in the next three years, about one third will be provided to ASEAN countries”. The Chinese leader explicitly disavowed a Chinese leadership role in regional organisations in deference to ASEAN, asserting “ASEAN is the organiser and main driving force for 10+3 cooperation … China will continue to support ASEAN in playing the leading role”. The Chinese prime minister’s remarks at the East Asian Summit on December 14 hailed the inaugural leaders’ meeting, emphasised China’s opposition to a “closed, exclusive” regional grouping, favoured openness to the non-East Asian participants in the meeting, and urged strengthened contacts with “the United States, the European Union, and other countries”. He stressed China’s importance as the world’s third largest trader and Asia’s largest importer, and noted percentage increases in the investment of Chinese companies in Asia. He assured the assembled leaders that China would pursue “peaceful” development, would “never seek domination in East Asia”, and “will not develop at the expense of others”. Official Chinese media echoed these themes, and stressed that the EAS

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26 Rising China, US Influence, and Southeast Asia

and ASEAN Plus Three are expected to coexist and “complement each other”. Prime Minister Wen’s bilateral meetings with participants in the EAS generally were full of positive rhetoric, with the notable exception of Japan. Typical of the positive were Philippine President Arroyo’s remarks upon meeting with Wen on December 11 that Chinese-Philippine relations have entered “a golden period”. By contrast, official Chinese media made clear that the Chinese embargo on interactions with Prime Minister Koizumi remained firm despite the emphasis on affability and regional cooperation at the Malaysian meetings. They even highlighted Wen’s refusal to acknowledge Prime Minister Koizumi’s request to borrow Wen’s pen in order to sign the EAS declaration at a public ceremony on December 14 as a deliberate “snub”. Wen later explained the reasons for China’s stance against Japan at the press conference following the signing ceremony. An editorial in China Daily at the start of the Kuala Lumpur meetings went further, accusing Japan of seeking a “leader” role in Asia that it judged was unwarranted given Tokyo’s lack of “credibility”.

Assessing economic relations Subsequent commentaries in official Chinese media highlighted the positive in assessing developments in China-Southeast Asian economic relations in the previous year. A lengthy assessment in China Daily on January 9, 2006 that evaluated the progress of China-Southeast Asian economic ties in the context of progress toward implementing the ASEAN-China Free Trade Agreement stressed the following highpoints (Sutter, 2006b): • 2005 ASEAN-China trade was valued at over $120 billion. • ASEAN states had a trade surplus with China in 2005 of over $16 billion. • Chinese investment in Southeast Asia “in recent years” has “witnessed an annual average growth rate of 60%”. In 2006, the Chinese government will provide loans of “up to $5 billion” on favourable terms to support Chinese enterprises investment in ASEAN. • The first expressway linking China and ASEAN (a 179-kilometer expressway between Nanning, the capital of Guangxi Province, and Viet Nam) opened at the turn of the year. A large port project in southern China for trade from ASEAN, a major road project linking Yunnan Province with Southeast Asia, as well as three separate

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28 Rising China, US Influence, and Southeast Asia

Chinese media disclosed that July 2005 marked the first phase of the ASEAN-China Free Trade Agreement (FTA) under which tariffs on 7,000 goods were lowered to 20%. The ASEAN-China FTA is scheduled to be fully implemented in six years, with tariffs further lowered to 12% in 2007, 5% in 2009, and 0% in 2012. Chinese officials saw the FTA giving an important boost in ASEAN-China trade, with the Chinese director of the ASEAN-China Business Council predicting in January 2006 that the level of trade would reach $200 billion by 2010. Separate Chinese commentaries focused on the benefits that countries such as Thailand, Malaysia, the Philippines, and Indonesia derived from economic relations with China over the past year. Chinese officials disclosed that Thailand benefited from the Early Harvest Program in the ASEAN-China Free Trade Agreement, running a surplus of $220 million in trade with China involving fruits and vegetables in 2005. They said that Thailand and China planned to establish soon a China-Thailand “Closer Economic Partnership Agreement (CEPA)”, that was proposed by the Chinese premier to his Thai counterpart during ASEAN-China meetings in Kuala Lumpur in December. The agreement with Thailand will represent the first CEPA with a sovereign country. It follows similar agreements China has enacted with its two special administrative regions of Hong Kong and Macao, offering them more preferential trade and investment terms. Malaysia also is considering a CEPA with China, according to Chinese media. Meanwhile, Chinese media accounts disclosed that the Philippines trade surplus with China continued to grow, reaching $4 billion in a total trade valued at $13 billion in 2004, and that IndonesiaChina trade grew 40% in 2005. Disclosures of some of the limitations in Chinese economic relations with Southeast Asia came from non-Chinese reporting or from closer reading of Chinese material. A report of a three-year investigation of Southeast Asian developments by the Stanley Foundation that was published at the turn of the year concluded that Southeast Asians’ motivations for increased trade with China often were “defensive”, as “they view it as an opportunity to recoup some of the trade and investment the region has lost” to China. This loss of trade and investment was seen to have been exacerbated by the end of textile quotas for WTO members in 2005. The study went on to forecast “significant economic dislocation” in Southeast Asia as a result of closer economic integration with China, citing “early experience” showing that “Chinese goods may overwhelm

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Chinese rail links to Laos, Viet Nam, and other Southeast Asian destinations are being built.

indigenous Southeast Asian markets”, prompting some analysts to forecast that Southeast Asia “could lose as much as $400 billion to China over the next 15 years” (The Stanley Foundation, 2005). A key reason for such gloomy assessments was the marked decline in foreign direct investment (FDI) to Southeast Asia as China continues to receive the lion’s share of FDI going to the developing countries. China received $64 billion of FDI in 2004 and $60 billion in 2005. Though Chinese commentaries point to large percentage increases in Chinese investment in Southeast Asia and planned loans to encourage foreign investment in the area, a close reading of Chinese statements and official commentary shows that the actual amounts of such investment are small and do not come close to offsetting the investment that leaves Southeast Asia for China. Thus, a China Daily report on January 16, 2006 disclosed that while Philippine entrepreneurs in 2004 invested almost $700 million in China, Chinese investment in the Philippines was miniscule, with the total Chinese investment through 2003 amounting to less than $20 million. Such figures were generally consistent with trends in global investment involving China, according to official Chinese figures. The Chinese figures belied frequent non-Chinese media accounts that often grossly exaggerate the amount of Chinese investment going abroad. Thus, Chinese officials disclosed in official Chinese media on January 24, 2006 that while China in 2005 received $60 billion in FDI, “China’s outward direct investment totalled US$6.9 billion in 2005”; the comparable figures for 2004 where China received $64 billion in FDI and China invested $3.6 billion abroad. In an assessment based on official Chinese and other data, a Singapore scholar in 2006 underlined China’s weak investment profile in Southeast Asia. By the end of 2004 accumulated investment by Chinese companies in ASEAN was $1.17 billion (compared with $38.22 billion of ASEAN investment in China). US investment in Southeast Asia stood at $85.4 billion. From 1995 to 2003, Chinese investment in ASEAN comprised 0.29% of total foreign investment in ASEAN, compared with 28.83% for the EU, 16.47% for the United States, and 12.9% for Japan. In 2004, China invested $3 billion in Asia but of that total $2.6 billion went to Hong Kong, while Indonesia received $62 million and Singapore $48 million (Sheng, 2006: 1). For a variety of reasons, China does not provide figures giving a clear and comprehensive depiction of China’s foreign assistance. Chinese officials and official commentary do frequently highlight the importance of Chinese foreign assistance in facilitating good economic relations and

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Robert Sutter 29

offsetting difficulties Southeast Asian states may have in adjusting to economic globalisation and particularly China’s economic growth and competitiveness. Typically, official Chinese media disclosed on January 7, 2006 that China granted over the past year $33 million and loaned $800 to support infrastructure projects in Indonesia. Other commentary emphasised that China plays a particularly important role in providing assistance to the poor and politically authoritarian Southeast Asian governments near China: Myanmar, Laos, and Cambodia. Nonetheless, a closer look at Chinese aid to Laos, published in February 2006 by China Development Brief, found that while Chinese aid built prominent projects, the actual amount of Chinese aid going to the aid-dependent country was relatively small (about $200 million from 1988 to 2004). Using Lao government data for 2001–2002, the study showed that Laos received $198 million from donor countries and $130 million from the Asian Development Bank and the World Bank. Japan was the largest individual donor at $100 million while China provided $20 million during that period. China’s low profile relative to Japan, the United States and other aid providers in Southeast Asia is consistent with other data released by the Chinese government. It shows that China’s total foreign aid for 2002 was $602.77 million, for 2003 it was $630.36 million, and for 2004 it was $731.20 million (Saunders, 2006: 14). Since a third of Chinese foreign aid is said to be earmarked for North Korea, and China has made numerous aid pledges in African and Latin American countries in recent years, China seems in no position to compete with Japan, the United States and other international aid providers in Southeast Asia (Sheng, 2006: 2). Limitations in China’s aid to Southeast Asia seemed on display during the China-hosted international donors’ conference in Beijing, January 17–18, 2006 to provide assistance specifically to China and other “high-risk” Asian countries including many of China’s Southeast Asian neighbours, notably Cambodia, Indonesia, Laos, and Viet Nam. The meeting was sponsored by China, the European Union, and the World Bank, and followed a January 12–13 conference in Tokyo hosted by Japan and the World Health Organisation where experts from 22 nations discussed prevention and responses to the epidemic. The Tokyo meeting was attended by specialists from Taiwan but Taiwan delegates were excluded from the Beijing meeting. Official Chinese media seemed very pleased with the results of the Beijing donors’ meeting, which saw pledges of almost $2 billion to assist China and other affected countries. The World Bank and the Asian Development Bank each pledged about $500 million, the United States

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30 Rising China, US Influence, and Southeast Asia

pledged over $300 million, and Japan over $150 million. China presumably will gain a proportional share of this international support, helping to pay for the extensive prevention measures undertaken in the large country. Though hosting the meeting, the Chinese government made little effort to play a leading role as an international donor. It pledged $10 million at the conference, and thereby appeared to assure that the Beijing meeting will provide significant net material aid for China. Such small actual donations from China were consistent with the continued emphasis of Chinese officials as seen in year-end wrap-ups by official Chinese media that China “remains a developing country”, has “tens of millions of poverty-stricken people”, and will “suffer from a low per-capita GDP for a very long time”. As a result, “the Chinese government can only provide assistance within its capability”, according to Chinese officials. Against the background, China Daily on January 19, 2005 reported that China’s actual contribution “in cash and kind” to the 2004 Tsunami disaster was worth $22 million. This small amount contrasted with many reports and estimates in the previous year of much larger Chinese donations to the Tsunami disaster as China endeavoured to keep up with the widespread international support valued at several billions of dollars, provided by Japan and the United States and including pledges of several hundreds of millions of dollars each from such middle powers as Germany, Australia, and even Norway. A closer look at burgeoning Chinese-Southeast Asian trade also shows some limitations on Chinese influence. The trade levels are growing fast but are only now approaching the level of US and Japanese trade with the region. With few exceptions, China’s trade with individual Southeast Asian countries represents only a small percentage of those countries’ foreign trade (Glosny, 2006: 42). The majority of China’s trade with ASEAN is processing trade, where a commodity crosses borders, sometimes several times, before completion. This leads to double counting which inflates ASEAN-China trade figures (some estimates say by 30%). Also, the majority of ASEAN-Chinese trade is conducted by foreign companies. They use intra-industry trade to produce goods for export to other developed parts of Asia, the United States, and the European Union. China plays a role in the processing of these products, but the value added by China and the significance of the Chinese input remain small. Meanwhile, a large portion of ASEAN-China trade – especially China’s trade with Singapore, China’s largest trading partner in Southeast Asia, is entrepot trade, destined mainly for markets beyond Southeast Asia (Sheng, 2006: 2). As far as Chinese companies interacting with Southeast Asia are concerned, they find it difficult to compete in ASEAN markets, especially

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Robert Sutter 31

32 Rising China, US Influence, and Southeast Asia

Assessing political, other influence Meanwhile, the limited influence China gains in Southeast Asia through exercises like Prime Minister Wen Jiaobao’s meetings in Malaysia in December 2005 and other prominent endeavours was also evident in a variety of in-depth assessments underlining continued wariness and hedging among many key Southeast Asian states that are reluctant to come under China’s sway. According to these studies, most Southeast Asian governments hold serious reservations about China’s role, particularly regarding such security issues as the South China Sea; and that despite differences with US policy; most Southeast Asian governments want the United States to continue to provide a security umbrella for the region. Long-term reservations over Chinese intentions have seen governments in Singapore and the Philippines engage China constructively but emphasise close security cooperation with the United States. The predominantly Islamic countries of Indonesia and Malaysia oppose major aspects of the US War on Terrorism, but seek improved military and other relations with United States, while they engage more closely with China. For geographic, historical and other reasons, countries along China’s land border have fewer options to oppose China openly, but Thailand has kept its options open by markedly improving military ties with the United States, and Viet Nam has moved forward with military ties with the United States in 2005–2006. ASEAN, meanwhile, has worked assiduously in recent years to reach out to the United States, Japan, India, the European Union, and other powers, providing a favourable strategic context as it seeks to engage rising China in constructive regional arrangements (Glosny, 2006; Sheng, 2006; Goh, 2006). Southeast Asian wariness of China’s leadership in the region was seen in the widely reported tug-of-war that occurred behind the scenes over the role and composition of the East Asian Summit. China supported the original Malaysian initiative in 2004 that envisaged an exclusive East Asian group, and it proposed Beijing as the site for the second summit in 2006. China had supported Asian groupings excluding the United States and other non-Asian powers in the past, and it

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against the multinational corporations operating there. They lack capital and experience, and with the exception of enterprises in the less developed bordering provinces in Yunnan and Guangxi that provide only a very small portion of ASEAN-China trade, they lack a strong incentive to interact with ASEAN when more lucrative opportunities are available at home or in other foreign areas (Sheng, 2006: 3).

continued to support the Shanghai Cooperation Organisation (SCO) as an exclusive regional body dealing with Central Asia. In 2005, it backed efforts by that body to exclude US and other US-related military involvement in the region. In a graphic demonstration of Chinese hard power, thousands of Chinese armed forces also teamed up with Russian armed forces in a large military exercise in August that was under the auspices of the SCO though it was conducted along China’s East coast, signalling Chinese power and firmness to Japan, Taiwan, and the United States. An exclusive East Asian summit with China playing a leading role was resisted by Singapore, Indonesia and others, who were backed by Japan. In the end, they succeeded in opening the East Asian summit to India, Australia, New Zealand, and Russia, all of whom were happy to play active roles that implicitly diluted China’s influence. The broadly representative East Asian summit left the door open to US participation. ASEAN also asserted its leadership as the EAS convener, with the second summit in 2006 now slated for Manila, not Beijing. Official Chinese comment reacted graciously with strong rhetorical support for ASEAN and its leading role, while accusing Japan of unwarranted leadership ambitions in Asia. The dizzying array of official Chinese meetings and interactions with Southeast Asian leaders in bilateral and multilateral settings often is contrasted with less active US official interaction with the region. Southeast Asian officials and commentators seem to ignore or play down substantial increases in the past few years in US diplomatic, economic, and especially military initiatives with a wide range of Southeast Asian governments. The advances in US-Southeast Asian military relations are generally handled in a low-keyed way, in contrast with the publicity surrounding China-Southeast Asian contacts. The Southeast Asian government complaints about alleged US “distraction” and “inattentiveness” in contrast with China’s activism seem to be out-of-date and old news; but they do have the effect of prompting even more US efforts to be positively attentive to them, and this presumably is a goal of the Southeast Asian governments (Jackson, 2006). With few exceptions like Myanmar and Cambodia, Chinese defence relations with ASEAN are still very limited and focus on reassuring Southeast Asia that China is not a threat. They seem likely to remain limited as many Southeast Asian security officers continue to be wary of China’s intentions and determined not to jeopardise or undermine what they view as important and growing defence ties with the United States. The Southeast Asian balance between the United States and

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Robert Sutter 33

China on defence issues is graphically on display each year at the US-backed Shangri-La Dialogue in Singapore, where the high-level attendance by ASEAN participants comes despite China’s obvious disapproval of the meeting (Sheng, 2006). Commentators and scholars in China and abroad have highlighted the rising appeal of China’s soft power in Southeast Asia. This often is contrasted with the decline in the US government’s image in the region as a result of the widely unpopular US war in Iraq and other controversial elements in the Bush administration foreign policy. Chinese cultural, language, and ethnic linkages are developing. About 15,000 Southeast Asian students were studying in China in 2004. Hundreds of thousands of Chinese tourists travelled to the region each year. Leading officials in Thailand and the Philippines publicly highlight their Chinese ancestry (Kurlantzick, 2006). However, China’s appeal remains limited among five main culture/ religions (Islam, Buddhism, Hinduism, Western-Christian, and ChineseConfucian) in Southeast Asia. The appeal of Chinese ideology and political system is strong among some Southeast Asians but lacking among others. The consequences of Chinese development and competitiveness alienates Southeast Asians concerned with environmental protection (e.g. regarding the Mekong River) and Southeast Asian labourers in enterprises unable to compete with Chinese counterparts and losing foreign investment that is gravitating to China. China’s interchange with Southeast Asia remains heavily dependent on the Chinese administration. China has little of the extensive nongovernment connections in business, education, religious organisations, and cultural exchanges built over the years by individuals from the United States, among others. US businesses are extensively involved in the region, with Singapore as a major hub of US international business activity. There are many more than 15,000 Southeast Asian students studying in the United States, even with enhanced visa restrictions after 2001. US religious and secular NGOs deal with a range of humanitarian, health, environmental, human rights and other issues in Southeast Asia (Sheng, 2006: 5).

Conclusion and outlook for China’s leadership On balance, it seems clear that it is easy to exaggerate the significance of rising Chinese prominence in Southeast Asia. China’s approach to the region has developed with some twists and turns over the past 15 years. It has several objectives, mostly focused on sustaining a

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34 Rising China, US Influence, and Southeast Asia

regional environment conducive to Chinese development and political stability. It reflects increased Chinese confidence in dealing with Southeast Asian officials, but also a continued Chinese wariness and defensiveness regarding US, Japanese and other actions; it shows a keen awareness that China is far from leading the region and is unlikely to be in that position for the foreseeable future, if ever. Media commentary and government officials continue to emphasise the positive in China-Southeast Asian relations. However, careful analysis shows adverse consequences for China-Southeast Asian relations flowing from the recent Chinese advances in economic competitiveness and trade; continued wariness of Chinese intentions by many Southeast Asian governments; limited attraction in Southeast Asia regarding Chinese government institutions and practices; and continued strong limitations in China’s role as an investor, aid provider, and defence partner. “China can’t dominate Asia; there are too many governments in Asia.” This response by a senior Chinese official to my question during an interview in Beijing in May 2006 reflects some of the realities of power in Asia that make Chinese leadership or dominance in Southeast Asia and other parts of the region unlikely under foreseeable circumstances. The findings of this writer’s private discussions with Chinese and other Asian government officials about China’s rise, the balance of influence in Asia, and Asian regional dynamics contradict much media and other public discourse in the United States and some parts of Asia that depict a rising and powerful China coming to the leading position in Asia at a time of US decline in the region. In contrast to these media and other commentaries, which focus on Chinese strengths and US weaknesses, government officials in Asia in private conversations and interviews show an equal awareness of Chinese weaknesses and US strengths in the region. They are also aware of how the many independent-minded governments in Asia “hedge” in reaction to China’s rise. These governments work quietly among themselves and with the United States to insure that their independence and freedom of action will not be negatively affected as China rises in prominence in the region. Such actions reinforce US leadership in Asia as China rises (US China Economic Security Review, 2006). Readers of this article can choose to adopt the one-sided view of those US media and other commentators who predict China’s dominance and US decline in Asia. US policymakers and opinion leaders tended to do the same thing in the late 1970s when the United States was indeed weak and divided after the defeat in Viet Nam and prevailing US media and other predictions said the rising power, the Soviet Union, would dominate Asia.

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Robert Sutter 35

The same kind of pattern prevailed in the late 1980s when respected US media and commentators said that Japan would dominate Asia as US influence in the region declined. Of course, those earlier predictions were dead wrong; they focused on the strengths of the rising powers, the USSR and Japan, and did not adequately consider their weaknesses; and they focused on the weaknesses of the United States and did not adequately consider its strengths. A more sensible path, in my view, is for readers of this article to assess carefully the more balanced and well calibrated views of Asian government officials and other observers who try to look beyond the headlines in China-Southeast Asian relations. While media, vocal nongovernment elites, and public opinion matter in some Asian countries, at the end of the day it is the government officials who make the foreign policy decisions. There are few failed states in Asia; most governments are strong and are expected by their constituents to lead. My research trip in spring-summer 2006 involved dozens of public seminars and workshops dealing with China’s rise and US leadership in Asia that were attended by several hundred non-government specialists and elites in 21 cities of eight Asian countries; and in-depth interviews and consultations on these subjects with 75 diplomats and government specialists in those countries. The trip followed my past interchanges with Asian government officials, including a similarly extensive research trip to the region in May–June 2004 (Sutter, 2006d). The main findings of this work are: • China is rising in influence in Asia, the part of the world where China always has exerted greatest influence; but China also has major limitations and weaknesses and has a long way to go to compete for regional leadership. • The power and interests of the United States and most Asian governments work against China ever achieving dominance in Asia. • The US image in Asia has declined in recent years and US foreign policy continues to be widely criticised. However, US ability and willingness to serve as Asia’s security guarantor and its vital economic partner remain strong and provide a solid foundation for continued US leadership in the region. Overall US influence in the region has not declined, according to every Asian official interviewed in 2006. • Most Asian governments manoeuver and hedge against China’s rise, and they find a strong US presence in Asia fundamentally important and reassuring.

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36 Rising China, US Influence, and Southeast Asia

Robert Sutter 37

Asia’s China Debate (2003) Honolulu: Asia-Pacific Center for Security Studies. Ba, A. (2003) “China and ASEAN: Renavigating Relations for the 21st Century”, Asian Survey 43(4): 622–647. Breckon, L. (2002) “Beijing Pushes ‘Asia for Asians’”, Comparative Connections, October 2002. Breckon, L. (2003) “Focus is Elsewhere But Bonds Continue to Grow”, Comparative Connections, April 2003. Chanda, N. (2002) “China and Cambodia”, Asia-Pacific Review 9(2): 1–11. Cheung, J.Y.S. (1999) “Sino-ASEAN Relations in the 1990s”, Contemporary Southeast Asia 21(2): 176–202. Cheung, J.Y.S. (2001) “Sino-ASEAN Relations in the Early 21st Century”, Contemporary Southeast Asia 23(3): 420–452. “China-Southeast Asia Relations: Trends, Issues, and Implications for the United States”, Washington DC: The Library of Congress, Congressional Research Service Report 97-553F, 20 May 1997. Finkelstein, D. (1999) China’s New Security Concept. Alexandria, Va.: The CNA Corporation (April 1999). Fouse, “Japan’s China Debate”, in Asia’s China Debate. Funabashi, Y. (2002) “New Geopolitics Rages over Various Parts of Asia”, Asahi Shimbun, 15 January 2002. Available at: www.taiwansecurity.org Goh, E. (2006) “Meeting the China Challenge: The US in Southeast Asian Regional Security Strategies”, Washington, D.C.: East-West Center Washington Policy Studies, 16. Glosny, M. (2006) “Heading toward a Win-Win Future? Recent Developments in China’s Policy Toward Southeast Asia”, Asian Security 2(1): 24–57. Kang, D. (2003) “Getting Asia Wrong: The Need for New Analytical Frameworks”, International Security 27(4): 57–85. Kurlantzick, J. (2005) “How China is Changing Global Diplomacy”, New Republic, 27 June. Kurlantzick, J. (2006) “China’s Charm: Implications of China’s Soft Power”, Washington, D.C. Carnegie Endowment Policy Brief 47 (June 2006). Kyodo (1998) “Kyodo Reports on PRC Media Coverage of Indonesia Crisis”, 22 May 1998 carried by FBIS (internet version). Liaowang Dongfang Weekly (2004) “China’s Policy in the South China Sea”, 12 January. Available at: http://newsxinhuanet.com/mil/2004-01/12/content_ 1270457.htm. Marshall, T. (2006) “China Poised to Dominate in Influence in Asia”, Boston Globe, 13 August 2006. Reuters (1998) “China Says Actively Funding IMF Indonesia Plan”, 17 March (internet version). Richardson, S. (2001) “Sino-Cambodian Relations: Trends and Prospects”, Conference Paper, Washington DC, 1 June. Roy, D. (2002) “China and Southeast Asia”, Honolulu: Asia-Pacific Center for Security Studies, 1(4). Saunders, P. (2006) China’s Global Activism: Strategy, Drivers, and Tools, p. 14. Washington, D.C.: National Defense University Press Institute for National Strategic Studies Occasional Paper 4 (June 2006).

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References

Shambaugh, D. (2003) “China Engages Asia: Reshaping the Regional Order”, 29(3): 64–99. Sheng, L. (2006) “China in Southeast Asia: The Limits of Power”, Japan Focus 1. Available at: http://japanfocus.org/products/topdf/2184. Sutter, R. (2000) Chinese Policy Priorities and Their Implications for the United States, p. 114. Maryland: Rowman and Littlefield. Sutter, R. (2003) “Chinese Policy Priorities”, in Bert, W. The United States, China, and Southeast Asian Security, pp. 114–115. London: Palgrave. Sutter, R. (2005) “China’s Regional Strategy and Why It May Not be Good for America”, in Shambaugh, D. (ed.) Power Shift, p. 297. Berkeley: University of California. Sutter, R. (2006a) “China’s Rise in Asia: Promises and Peril; China Rising: Power and Motivation in Chinese Foreign Policy”, Foreign Affairs, March–April, pp. 199–204. Sutter, R. (2006b) “China’s Rise and US Influence in Asia”, p. 21. Washington D.C.: East-West Center Washington Policy Studies. Sutter, R. (2006c) “China-Southeast Asia Relations: Emphasizing the Positive; Continued Wariness”, Comparative Connections 67–73. Sutter, R. (2006d) “China-Southeast Asian Relations: Progress with Limitations”, Comparative Connections 75–81. Tian, P. (2002) “Nationalism: China and Japan”, Foreign Affairs Journal 63: 63–83. “Testimony of Karl Jackson before the US”, China Economic and Security Review Commission, 3 August 2006. Available at: www.uscc.gov. Thayer, C. (2001) “Regional Rivalries and Bilateral Irritants”, Comparative Connections April 2001. Available at: http://www.csis.org/pacfor. The Stanley Foundation (2005) US Policy in Southeast Asia: Fortifying the Foundation, pp. 13–17. Muscatine, Iowa. US China Economic and Security Review Commission, 3 August 2006. Available at: www.uscc.gov. Womack, B. (2004) “China and Southeast Asia: Asymmetry, Leadership and Normalcy”, Pacific Affairs 76(3): 529–548. Xinhua (1998), “News Analysis Views ASEAN Challenges”, 21 July, carried by FBIS (internet version). Yee, H. and Storey, I. (2002) The China Threat: Perceptions, Myths, and Reality. London: Routledge. Zemin, J. (1997) “Speech at East Asian Summit”, Xinhua, 15 December, carried by Foreign Broadcast Information Service (FBIS) (internet version).

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The Dragon, The Tiger Cubs and Higher Education: Competitive and Cooperative China-ASEAN Relations in the GATS Era Anthony Welch

Introduction Higher education is universally acknowledged as a key pillar in constructing the new knowledge economies of the twenty-first century. Each country wishes to deploy its higher education resources to its greatest advantages – to increase national competitiveness, enhance its economic growth rates, and raise its prestige internationally. Yet this occurs at the same time as nations worldwide struggle to reconcile the conflicting demands of an endlessly increasing demand for higher education, and an increasing limit on state capacity – itself partly a product of global economic re-structuring. This combination of aspiration, ambition, and constraint often leads to heightened pressures on higher educational institutions (HEIs) to diversify their income sources, including the marketing of their “product” to international students. Clearly, some nations are better placed than others to take advantage of what is becoming a growing global market for higher education, conservatively estimated some years ago at US$30+ billion annually (APEC, 2001), and perhaps 1.4 million international students by 2010 (McBurnie and Ziguras, 2001), a figure that has in fact already been doubled. At the same time, no single state possesses the resources to gain an advantage in all areas, or to attain complete international leadership. This is all the more the case, as massification of higher education becomes more widespread, including in Asia – but often can still not meet ever-increasing demand. Moreover, the increasing globalisation of higher education continues to breach national boundaries – creating new challenges but also opening up prospects for new alliances, often regional. Hence, higher education policies become a mix of competition and cooperation. This analysis addresses such 39

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3

competitive and cooperative strategies in higher education between China and ASEAN, in particular the three ASEAN member nations of Singapore, Malaysia, and Viet Nam. Examples of regional trade agreements with an educational component, Asia-Pacific consortia in higher education, and cross-border institutional collaborations, are given in each case. A brief taxonomy of cross-border educational relations is developed, and policy implications summarised, based on the case studies. The worldwide rise in cross-border trade in educational services occurs against a background of the global transformation of economies, whereby the countries of the North are now characterised by the increasing dominance of service sector exports, relative to total GDP. Education is now increasingly recognised as one of these services, (rather than its earlier rationale as primarily educational and cultural), and is being exported vigorously by a growing number of states. In some states it forms a major component of total service sector trade, most notably in Australia. Other countries, often within the same region, are major nett importers of educational services, and pay a high price for that dependence. A further key issue is the complex relationship between national sovereignty and the promotion of cross-border trade in educational services. What is perceived as a barrier to trade by a major exporter of educational services, for example, may be seen as a legitimate defence of national identity, or local control over funding and standards, by the country which is the recipient of such services. The Asia-Pacific region, one of the most dynamic and diverse worldwide, including the two giants of China and India, provides a fascinating site for the analysis of the growing cross-border trade in educational services.

The setting China-ASEAN relations are already substantial and growing. ASEANChina trade grew from US$39.5 billion in 2000 to US$139.9 billion by 2006, or 10% of total ASEAN trade (ASEAN, 2009c). It grew by 20.4% annually over the decade 1991–2000, and has continued to rise, growing by more than 30% in the first quarter of 2003, a rate only outstripped by that with Russia, New Zealand and Australia (ASEAN, 2003b). China’s exports to ASEAN grew from US$4.1 billion in 1991 to US$17.3 billion in 2000, a rise of 422%. Over the same period, imports from ASEAN grew even more, from US$3.8 billion to US$22.2 billion, representing growth of 584% (ASEAN, 2001: 1). By 2008, ASEAN exports to China had risen to US$107.1 billion, while ASEAN imports from China totalled

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40 The Dragon, The Tiger Cubs and Higher Education

Anthony Welch 41 Tables 3.1a and 3.1b

ASEAN’s share of China’s trade, 1991–2006 % Exports

1991 2000 2006

5.7 6.9 na

% Imports 6.0 9.9 11.4

(ASEAN, 2001; Vaughan and Morrison, 2006)

3.1b

CHINA’s share of ASEAN trade, 1991–2006 % Exports

% Imports

2.2 3.1 8.7

1.9 5.2 11.5

1991 2000 2006 (ASEAN, 2001, 2009a)

US$85.6 billion. ASEAN’s share of China’s foreign merchandise trade grew from 5.8% to 8.3% over the same period. ASEAN is now China’s fifth largest trading partner, while China’s share of ASEAN’s trade grew from 2.1% in 1994, to 3.9% in 2000 (ASEAN, 2001), and to 11.3% in 2008 (ASEAN, 2009b). While the regional economic crisis of the late 1990s profoundly retarded several ASEAN members’ economic growth, and global economic growth was subdued for a time thereafter, overall economic growth in ASEAN was a healthy 4.4% in 2002, and about the same rate in 2003 (ASEAN, 2003b). The Global Financial Crisis (GFC) of 2008–2009 crimped economic growth rates of ASEAN nations more than that of China, which still grew at a healthy 8% in 2009. China’s accession to WTO status in late 2001, after years of complex negotiations, was based on rather comprehensive liberalisation commitments, and should yield substantial trade measures, including in the service sector, that will open up new market opportunities, and expand existing ones. Nonetheless some ASEAN members report concerns with barriers to trade such as “unpredictable laws”, “uncertain standards”, and “restrictions on trading activities” (Tham, 2001: 63). Others, such as the Philippines see potential for its many professionals, many of whom speak English, to work in China’s booming economy (Palanca, 2001). Simulations show that bi-lateral China ASEAN trade is likely to grow, if offset to

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3.1a

ASEAN-China trade growth, 1991–2006

42 The Dragon, The Tiger Cubs and Higher Education

some degree by a reduction in trade with other partners. Trade in services, including in education, is seen as remaining a modest component of overall China-ASEAN trade. Overall, and notwithstanding some difficulties, Asian regionalism is on the rise (ADB, 2008b).

China and ASEAN finally signed an agreement to cut barriers to trade in services in January 2007, following earlier agreements on merchandise trade in July 2005 (China Daily, 2007). An FTA between China and ASEAN, that came into effect in January 2010 created a regional economy with a total population of 1.7 billion, a regional GDP of at least US$6 trillion, and total trade estimated at US$4.5 trillion. (If Japan, which declared its accession to the ASEAN Treaty of Amity and Cooperation [TAC] in Tokyo in December 2003, after China and India endorsed it at the Denpasar ASEAN meeting in October, were to be added to this group, creating an East Asian FTA, as Singapore’s Prime Minister Goh again recently suggested, the total capacity would be enormously expanded. The combined population of such a community would then be two billion, with a total GDP of several additional trillion). The removal of trade barriers would have the capacity to increase existing levels of trade substantially, particularly in the service sector, notably educational services. Given the increasing globalisation of higher education, especially in English, but in the future perhaps increasingly in Chinese, and given too the significant English and Chinese-speaking Chinese diasporas in Singapore and Malaysia (see below for details), the potential for increasing regional trade in higher education services, and for more partnerships between universities in China and ASEAN, is great. China’s formal signing of the TAC commits it to the three pillars of cooperation: political and security; economic; and socio-cultural. Key strategic partnerships, and enhanced economic and cultural cooperation, between China and ASEAN are major outcomes to be expected, as well perhaps as a greater sense of community among ASEAN members and China. ASEAN is likely to become a greater focus of China’s investment strategies, including key investments and partnerships in higher education, especially as trade liberalisation measures are further implemented within China and ASEAN. Trade and investment facilitation measures, to promote trade in services between China and ASEAN is specifically listed in paragraph 14.1 of the Report of the Expert Group on Forging Closer ASEAN China Economic Relations (2001), and various sectors are listed as ongoing areas of development in the Database on

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The potential

Cooperation Progressing in the ASEAN+3, and ASEAN+1 Cooperation Frameworks (2008). Current efforts are directed towards a road map sketching how ASEAN economic integration (notably including key service industries such as tourism) is to be achieved by 2010, including an FTA with China. Interestingly, part of the pressure stems from the pace of integration among other regional trading blocs. As Indonesian Trade Minister Suwandi argued in early 2004 “We need to achieve this fast and smoothly because now the world has been divided into regional blocs – in Africa, in Latin America, and the European Union is expanding with an additional 10 members in May” (Japan Times, 2004). Data on the breakdown of ASEAN-China trade in services is notably lacking, however, including the lack of detailed information on trade in educational services. This is something that further research should attempt to address. An attempt to partially redress this omission is made below, where sufficient evidence is provided to sketch the growth of the trade in educational services in higher education, worldwide, and within the region. The implications of this rise for China-ASEAN relations are sketched in the final section of this paper.

Implications of China’s entry into WTO China’s accession to the WTO poses new challenges and opportunities within the region, and for ASEAN members in particular. Its accession increased the openness of the Chinese economy, something that necessitates further re-structuring in numerous sectors of its economy, with a consequent growth in internal efficiency. As will be seen below, this certainly includes the higher education sector, where domestic criticism is now both more open, and more commonly voiced, of the relatively low levels of internal efficiency within its universities (see below). China’s willingness to open its education sector to external competition supports the overall assessment of the OECD: With accession to the WTO, China will be a more powerful driver of growth, and that momentum could, in turn be harnessed by the ASEAN countries. Market opportunities for both regions will be created by China’s liberalization and … restructuring. Those market opportunities will also mean more import competition for domestic enterprises in ASEAN (OECD, 2000: 24). This is all the more the case for countries that have a significant Chinese minority, and for those, such as Singapore, where Chinese (Mandarin)

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Anthony Welch 43

44 The Dragon, The Tiger Cubs and Higher Education

Rise in service sector trade Service sector trade is rising fast worldwide, including with China, where services currently represent about one-third of total GDP (World Bank, 2005; OECD, 2003c). From 1990–2000, growth in services output worldwide, grew at an annual rate of 2.9%, double that of agriculture (1.4%). This is all the more the case for developing countries, where for example, growth in commercial services trade grew by an annual 9.0% from 1990–2000, compared with 5.5% for developed nations. The World Bank’s estimate is that liberalisation of services in developing countries could add some US$6 trillion by 2015; four times that which would accrue from the liberalisation of trade in goods. By 1997, it is estimated that global trade in services had reached a total of US$1.295 trillion, around 25% of the overall figure for global trade in commodities (Robertson et al., 2002: 479). Fifty-five countries have made commitments under the Global Agreement on Trade in Services (GATS). A majority of these are developing countries. Interestingly, however, despite the explosive rise in crossborder trade in education, only three proposals deal with education, one of them being China. Asia saw strong growth in service sector trade relative to other world regions over the decade 1990–2000, with an annual rate increase of 9%. Developing Asia’s rate of growth was even higher at 11% for the same period, while that of China was 18%, Malaysia 14%, and Singapore 8%. (Hong Kong growth was an annual rate of 9% for the decade.) This compares with a worldwide rate of just 6% for the period (WTO, 2002: 12). Of leading individual exporters and importers over the same period, the combined figure for Hong Kong and China was a total of 5.2% of total world trade in commercial services (WTO, 2002: 13–14). Current ASEAN commitments are to the free flow of services: “… remove substantially all restrictions on trade in services by 2015”, although it should be noted that this is within ASEAN (ASEAN, 2008: 10).

GATS and trade in educational services The rise of what is now often termed trade in educational services has paralleled the overall rise in service sector trade. In itself this transition

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is widely spoken. At the same time, however, as is argued below in the section on the challenge of internationalisation for Chinese universities, China’s unwavering orientation towards the USA as the source for all innovations in higher education may restrict this potential for regional cooperation.

is noteworthy, representing a shift from an earlier era, when “governments and international bodies … promoted student mobility mainly for cultural and educational reasons” (OECD, 2002: 98). While these reasons are still pertinent, at the individual student, host university, state, and international levels, the growth of a global fee-paying market for international students is a striking development, that in itself contributes to the rising tide of service sector trade. Earlier estimate of total income generated by international students in 1998 (including their associated living costs) at a minimum of US$30 billion worldwide, or some 3% of the total value of service sector exports (OECD, 2002: 99), have been massively expanded. While earnings figures are notoriously difficult to calculate accurately, especially comparatively, Table 3.2 gives an indication of the striking increase in income derived from international students, by key host countries, over the past two decades. The data in Table 3.2 underline that, while the education component is now a significant element in overall service sector trade, it is much much more so for some countries than others. Australian exports of educational services, for example, have now risen to be a larger export earner than some traditional agricultural commodities, for example: in the year 2000, earnings from higher education added an estimated at least US$2.15 billion to the Australian economy (OECD, 2002: 99), and by 2008, an estimated US$8.0 billion. Such exports now account for almost 12% of Australia’s total service sector exports. As for Canada, this makes education exports one of the largest industry sectors in the country (OECD, 2002: 100; DFAITE, 2009). In New Zealand, by the early 1990s, earnings from international student fees had already outgrown those from its wine industry, while by 1996, US exports of educational services earned a total US$8.2 billion, producing a trade surplus in the sector of some US$7 billion (Robertson et al., 2002: 479). In 2000, the US earned a total of US$10.28 billion from international students (OECD, 2002: 99), rising to US$15.5 billion in 2008. Trade in educational services can take various forms, and GATS has developed fourfold taxonomy, as follows (see Table 3.3). Within the region, both Australia and more recently New Zealand, have been spectacularly successful in developing the scale of international enrolments in their universities (the latter on a much smaller scale). Overall, Australia, for example, increased its international enrolments in higher education by almost 350% over the 1990s, and well over 1,000% from 1980–2000 (Welch, 2002). Over the period 2000–2006, international enrolments rose by 75% in Australia, 57% in Canada, 48% in the UK and 23% in the USA (OECD, 2008a: 366). In Australia, such

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Anthony Welch 45

1989 US$ billions Australia Canada UK USA

0.584 0.530 2.214 4.575

1997

% of total service exports 6.6 3.0 4.5 4.4

2000

US$ billions

% of total service exports

US$ billions

2.190 0.595 4.080 8.346

11.8 1.9 4.3 3.5

2.155 0.796 3.758 10.280

2008

% of total service exports 11.8 2.1 3.2 3.5

US$ billions 8.0 3.1 11.2 15.5

(OECD, 2002: 99; DFAIT, 2009; IIE, 2009; UNCTAD, 2008)

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Total service sector trade 2006, US$ billions 33,088 59,332 229,600 418,848

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46

Table 3.2 Export earnings from international students (higher education), selected major providers, 1989–2008, and percentage of total national service sector trade

Anthony Welch 47 Modes of provision of cross-border educational services

Mode

Explanation

Examples

Size & Potential

1 Cross-border supply

The service, rather than the person, crosses the border

– Distance education – Education Software – Virtual education (including corporate training)

Small, but growing swiftly, with considerable growth potential, esp. via ICT

2 Consumption The consumer abroad moves to the country of the supplier

Students who study in another country.

Currently, the largest share of international education.

3 Commercial presence

The provider uses or establishes facilities in a second country

– Local university, or satellite campus – Private providers, including language and IT

Growing phenomenon, with strong likelihood of growth

4 Presence of natural persons

Persons travelling Professors, teachers, Given rising to a second country educational professional to provide a service consultants mobility, also likely to grow strongly.

(Adapted from OECD, 2002: 92)

enrolments were initially almost entirely composed of mode 2 form; however what is termed “offshore” enrolments, comprising both Modes 1 and 3, is now the most swiftly rising category, both because of lower overall costs to the student, and less interruption to career and family. Some of these students may spend some time in the host country (Mode 1), while staff from host country universities now often travel to teach for intensive periods in the students’ home country (Mode 4). The share of Australian enrolments that were “offshore” rose from 24% to 37% of the total, between 1996 and 2001 (OECD, 2002: 103–104). Corporate universities such as those run by Motorola, or Microsoft, some of which have licensing arrangements with conventional universities, as well as Phoenix university (whose enrolments now total over 100,000 across several countries), are now attracting more and more enrolments, particularly in the area of professional development.

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Table 3.3

48 The Dragon, The Tiger Cubs and Higher Education

There are a number of qualifications regarding this rising phenomenon that should be borne in mind, however:

As with other forms of trade, some nations and regions gain while others lose. This works in several major ways. Firstly, the trade is very unequal, as evident in the earnings listed above, with the most developed nations of the North able to exploit their advanced infrastructure (high quality universities with well-qualified staff, research infrastructure, well-stocked libraries etc) to export educational services to the South, often the Asia-Pacific region. Of the total of 2.9 million international students in 2008, over 1.43 million, or 49% originated from AsiaOceania. Sometimes, this unequal flow has been categorised as a form of neo-colonialism – less brutal, but just as unequal as the older forms. Clearly however, the status of an overseas degree, from a major overseas university, whether Oxbridge, the University of Tokyo, MIT, or the University of Sydney, continues to carry significant cachet. Overall, it has been estimated that OECD nations host 85% of all international enrolments worldwide (OECD, 2002: 95), with six countries accounting for 75% of all international students in OECD (see Table 3.4). Overall, the number of international students in higher education has doubled over the past 20 years in OECD countries and, in the late 1990s, was growing almost twice as fast as domestic enrolments (9% annually, over the period 1995–1999, compared with 5.5% for domestic enrolments). This loss of much of the substantial educational investment by third world nations in developing their young talent is often exacerbated by

Table 3.4 International students in OECD countries, by number and percent, 1999 and 2006 Country

No. of students 1999

% of total OECD 1999

No. of students 2006

% of total OECD 2006

USA UK Germany France Australia Japan

451,934 232,538 178,195 130,952 99,014 56,552

31% 15% 12% 9% 7% 4%

572,509 300,056 260,314 237,587 166,954 117,903

20.0% 11.3% 8.9% 8.5% 6.3% 4.4%

(Compiled from OECD, 2002: 94; OECD, 2008a: 353; UNESCO, 2006: 130–132. NB. Definitions of foreign students have changed)

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North South inequalities

“brain-drain” effects, especially when many of the most developed nations have recently refined their migration programmes to “cherrypick” for certain skills. It is now the case, for example, that international students comprise the largest single category of applicants for Permanent Residence in Australia. Canada, too, has revised its points formula to give greater weight to those with tertiary qualifications, while Germany recently introduced a form of “Green Card” scheme, to attract highlyskilled workers, largely from the South. Partly in an effort to stem the tide, China introduced similar provisions in 2004. This loss of talent has long been a significant problem for China, where it is estimated that less than a third of students sent abroad to study, have returned. This haemorrhage represents a huge, ongoing loss of its best and brightest, notwithstanding rising return rates and current efforts to mobilise the Chinese diaspora more effectively (see Table 3.4). Another way of viewing the dominance of OECD nations in international student enrolments is evident in the following figure: Figure 3.1

Host countries for international students, 2001 Other non-OECD 7%

Other OECD 7%

Sweden 2%

Switzerland 2%

Italy 2% Austria 2%

US 28%

Belgium 2% Spain 2% Japan 4%

UK 14%

Australia 7% Germany 12%

France 9%

(OECD, 2003a: 275)

Dominance of English-speaking nations What is also evident from the above is the dominance of this “trade” by English-speaking nations, with the four main English-speaking countries accounting for 54% of all international enrolments (OECD, 2002: 94), and for some 70% of students from Asia/Oceania. Details of individual countries and totals for the four largest English-speaking host countries,

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Anthony Welch 49

50 The Dragon, The Tiger Cubs and Higher Education

together with changes in their relative share, appear in the following table.

Asia/ Oceania

USA 1995

USA 1999

UK 1995

UK 1999

49

44

7

11

Austr 1995

Austr 1999

12

13

Canada 1995 5

Canada Total 1999 share 1995 2

73

Total share 1999 70

(Adapted from OECD, 2002: 96)

While the relative share of total international student enrolments by English-speaking nations slipped somewhat from 73% in 1995 to 70% in 1999, most notably in the USA (OECD, 2008a: 358), the importance of English language as a basis for internationalisation of higher education remains a significant regional element, including in China (Yang, 2002). The implications of this will be considered below, but it is important to remember that, within the region, the number of Putonghua (Mandarin) speakers is equivalent to those who use English – each totalling around one billion (OECD, 2003b: 5). It may well be, indeed, that with the rise of greater China as an economic and cultural force in the world, including the recent spectacular rise of Confucius Institutes worldwide (numbering some 280 in 2009), Mandarin may become a more important medium in higher education, and this too is not without significance for regional collaboration with countries that have significant Chinese ethnic communities. Of the three considered in this analysis, perhaps the most notable is Singapore, which lays claim to both languages, and has the most sophisticated system of higher education. Regionalism Asia collectively accounts for more international students sent to major host countries of the North than anywhere else – 45% of all international students enrolled in OECD countries – with the largest single nation of origin being China (including Hong Kong) at 9% (OECD, 2002: 97). The implications of this, too, are significant for the analysis provided in this paper: the sheer scale of the Chinese system, and the limited domestic institutional capacity (notwithstanding considerable expansion, as detailed below), offers considerable scope for regional collaboration, as will be argued below. One effect of the regional financial crisis of the late 1990s was to suppress somewhat the proportion of

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Table 3.5 English-speaking countries’ share of international students, by origin, 1995 and 1999 (%)

students from Asia travelling to another country to study, but only temporarily – the number of Asian students studying abroad has recovered, and continues to grow. To some extent regionalism, in the form of geographical and/or cultural proximity, plays a role in the choice of destination of Asian students. (This is even more the case for international students from the Americas, and from Europe, each of which cohort overwhelmingly study within the region). The destination of students from the Asia-Oceania region is shown in the following table. Table 3.6 percent

Destinations of students from Asia-Oceania, 1995 and 1999, by

Destination 1995

Destination 1999

Student origin

Europe

EU

Americas

AsiaOceania

Europe

EU

Americas

AsiaOceania

AsiaOceania

25

23

54

21

30

28

47

23

(OECD, 2002: 97) NB. Data includes only OECD member nations but, as seen above, this accounts for the bulk of international enrolments.

What the above figures reveal is that although the US share has dropped somewhat, and the EU risen, the regional share of international enrolments has also grown, to a degree. That is, relatively more students from Asia-Oceania are now studying within their region. This has significant implications for regional collaboration. Overall regional patterns of concentration also reflect to a degree, the effects of regional mobility schemes such as ERASMUS/SOCRATES in the European Union (EU), and on a much smaller scale the influence of regional schemes such as APEC/ UMAP. The signing by China of the Treaty of Amity and Cooperation (TAC) with ASEAN at an ASEAN+3 summit in Bali in October 2003 (followed two months later by Japan), also provides scope to further enhance regional collaboration within higher education. Barriers or defences? As alluded to above, quite what constitutes a barrier to trade is by no means fully agreed. What is perceived as a trade barrier by a large provider, from a wealthy, highly-developed country, may well be seen as a defence of standards and quality, national integrity, or identity, by a developing country recipient. Intellectual property rights, too, may be considered to be of great importance to the overseas provider; but less significant to the recipient country. Such dissonances remind us

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Anthony Welch 51

too, that the related issue of quality in higher education can equally be a problematic term, in more than one sense. Certainly, quality assurance measures in higher education are fairly common among AsiaPacific countries (APEC, 2001). Indeed, virtually all such countries now have detailed programmes, legislation and regulations. Even domestically, however, they may at times be honoured as much in the breach than the observance, for a variety of reasons – inadequate state capacity, corruption and cronyism, and related issues (Welch, 2003; Tipton et al., 2003). Notwithstanding claims by APEC, which seem to have been uncritically accepted by some OECD researchers (2003c), a note of caution is in order here. If, as more detailed research in Southeast Asia has recently shown (Welch, 2007a and b; Tipton et al., 2003), state capacity to regulate domestic institutions for quality, notably including private sector HEIs, is often problematic, it might well be even more so for international providers, functioning under Mode 3 (Commercial Presence). There is certainly evidence, for example, that degree mills operate in the Asia-Pacific area, just as in other parts of the world – and that regulatory authorities and ministries in relevant countries are very concerned about how to control such entrepreneurial activities, and limit the damage they can inflict on legitimate institutions, and sometimes unwary students. Both the Malaysian, Vietnamese and virtually all other governments in the region, however, are still struggling with this problem (see below). The following section sketches principal developments shaping the economy and society of China, as also that of the ASEAN Three – Malaysia, Singapore, and Viet Nam.

China – the dragon abroad China’s rising economic, and political weight, is re-shaping the global economy, as well as cultural and international relations, all the more so in neighbouring ASEAN. From 1990–2000, its exports grew by 300% – from US$62.1 billion to US$249.2 billion (WTO, 2001a), and its foreign trade grew by 15% annually (ASEAN, 2001). China’s GDP growth has averaged 10% annually since 1990, the highest rate in the world. Its GDP for 2001 was estimated at US$1,150 billion and GNI per capita at US$3,950 in PPP terms (World Bank, 2005). From 1990–2000, the flow of foreign direct investment (FDI) into China grew more than tenfold – from US$3.5 billion to US$40.77 billion – while China also became the single largest recipient of FDI, worldwide. This represented a leap from about 10% of all FDI to developing countries to 17%, over the same

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52 The Dragon, The Tiger Cubs and Higher Education

period, particularly as FDI flows to ASEAN fell in the aftermath of the late 1990s regional currency crisis, from US$32.5 billion in 1997, to US$13.8 billion in 2000 (UNCTAD, 2001). While not continuous, this decline in FDI occurred again in 2002, falling to US$12.4 billion, although more evident in manufacturing than in the service sector (ASEAN, 2003b). While by 2008, FDI to ASEAN had risen US$59.4 billion (ASEAN, 2009a), China’s inflow had reached US$66 billion in 2004, US$72.4 billion in 2005, and by 2008, US$92.4 billion (China Daily, 2006; China Briefing, 2009). This trend of FDI flows moving to China is only likely to increase, as a result of its accession to WTO membership, and the progressive implementation of its wide-ranging commitments to market liberalisation measures, particularly over the first five years of the agreement. At the same time, however, China’s economic growth has entailed both significant re-structuring of industries, with an attendant, and at times openly contested, end to the “iron rice bowl”. The painful process of restructuring has, inter alia, exacerbated regional inequalities significantly, posing significant social and political problems domestically. Indeed, each of these problems could deepen over coming years – profound existing inequalities of wealth are likely to worsen, and industry failures rise, consequent upon increased competition from external providers, after joining WTO: China is facing increased regional disparity and growing gaps in the income level of different groups of the population. This is one of the most serious social problems arising from the development process. The acceleration of liberalisation and competition arising from China’s implementation of its WTO commitments may make these problems worse (ASEAN, 2001: 17). Nonetheless, China has generally managed the tensions of developing a Socialist Market Economy well, albeit without an overall master plan. Deng Xiao-Ping characterised the process as rather like crossing a river, by feeling for stones at every step (Tipton et al., 2003: 200). This strength, and a non-convertible currency, meant that the Asian financial crisis of the late 1990s, and the global financial crisis (GFC) of 2008–2009, affected China less severely; indeed, its capacity to sustain the value of the RMB, as also its actions to assist key neighbours, prevented a bad regional situation becoming even worse. Largely as a result, the subsequent priority attached to ASEAN-China links, now sustained by annual meetings, increased significantly. China’s investments in ASEAN have been relatively modest, rising from US$136 million in 1999 (less than

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Anthony Welch 53

1% of total FDI into ASEAN, although a much higher proportion than before the Asian financial crisis) (ASEAN, 2001: 13), to US$1.44 billion in 2008, or 2.4% of total ASEAN FDI (ASEAN, 2009a). While intensified competition, and surging imports, consequent upon WTO market liberalisation, forced some small and medium Chinese companies into bankruptcy, including critical challenges to service sector industries, it is not clear that this necessarily affected the Chinese higher education sector to the same extent. This is partly due to language issues, but it is also pertinent to be reminded that China has not exempted its (higher) education system from competition, under GATS. As seen in the following section, there are however significant internal pressures within the Chinese higher education system that make foreign universities more competitive, notably the competitive advantage of having a foreign degree – plus perhaps the associated foreign language and international work experience – within the Chinese job market.

The ASEAN Three – rise of the tiger cubs The three ASEAN member states selected in this analysis for a review of their relations with China in higher education are, as indicated above, Singapore, Malaysia, and Viet Nam. They differ widely, yet have some elements in common. Why choose these three? The three countries selected show differing levels of engagement in terms of their overall interaction with China, and range in their scope to extend bi-lateral relations in higher education. Each seeks to expand the scope, reach and quality of its higher education system, either via becoming a regional educational hub (Singapore and Malaysia), or adopting external reforms, including from China (Viet Nam). A second, related rationale is that each of the ASEAN Three has a significant Chinese diaspora, in every case an artefact of each country’s complex histories of Chinese engagement. While Viet Nam’s Chinese minority is by far the smallest, in each case the relevant Chinese community carries considerable weight within the national economy, as Table 3.7 underlines. A more recent analysis outlined a number of contours to this Chinese demographic: The relative wealth of the Chinese communities, their emphasis on education, their orientation towards commerce, and their tendency to live in urban areas, all mean that Chinese are over-represented in

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54 The Dragon, The Tiger Cubs and Higher Education

Anthony Welch 55 Size and role of overseas Chinese in ASEAN Three economies,

Country

Chinese population

Percent of total

Role in economy

Malaysia

5,400,000

29.0

61% of share capital, 60% of private sector managers

Singapore

2,079,000

77.0

81% of listed firms, by capitalisation

Viet Nam

1,000,000

1.5

Before 1975, 80% industry, 100% wholesale for foreign trade, 50% retail: 1986 Doi Moi 45% of registered private firms 1992.

(Department of Foreign Affairs and Trade (DFAT), (East Asia Analytical Unit), Overseas Chinese Business Networks in Asia. Canberra, DFAT, 1995: Ch. 3)

secondary and tertiary enrolments. It also means more specifically that they are over-represented in high technology areas such as the ICT sector, both as professionals and among the firms that are implementing ICT solutions. Nevertheless, the prejudices they still encounter, mean that Chinese are still under-represented in the government bureaucracy, and especially at the higher levels (Tipton et al., 2003: 14). Despite such ongoing discrimination in some Southeast Asian states (in the 1970s, Viet Nam passed anti-Chinese legislation, while Malaysia’s New Economic Policy (NEP) explicitly discriminated in favour of ethnic Malays), private capital still is disproportionately held in Chinese hands: … much of the private capital available for investment is in the hands of Chinese firms … (which) are known for their large cash balances, and for their reluctance to share details of their internal workings with outsiders. Often attributed to a Confucian emphasis on the family, these characteristics can also be seen as a strategy of defence in a potentially hostile environment (Hamilton, 1996; Tipton et al., 2003). Of note, too, are regional trading connections between the ASEAN Three, notably for example that Singapore replaced the Soviet Union

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Table 3.7 1990s

as Viet Nam’s principal trading partner in the 1990s, and is still (with Japan), the largest source of her imports. Malaysia is the fourth largest site for Singapore’s FDI (see below). The second rationale for the selection of these particular ASEAN Three member states, is their spread in terms of social, economic and educational indicators. The fact that they are at significantly different levels of economic and educational development, helps explain that each has different interests in China, including in the higher education sector, and that strategies of competition and cooperation may well differ. Something of the diversity within the ASEAN Three, with respect to conventional measures of development is captured in Table 3.8. 2007 growth rates represented a significant resurgence from 2001, when for example, growth rates for Malaysia were 0.32%, and for Singapore –2.37% (ASEAN, 2001).

Malaysia – Economy, society and trade with China Malaysia’s current population of just over 25 million comprises three principal elements: a 58% Malay and other indigenous majority, a substantial Chinese ethnic minority of 26%, and a much smaller Indian minority, of some 7%. While Islam is the religion of the majority, Buddhism, Daoism, Hinduism, Shamanistic and Sikhism are also practised. While Bahasa Melayu is the official language, English is widely spoken and acknowledged as a language of commerce and “knowledge” (see below), while several Chinese dialects are also spoken (Cantonese, Hokkien, Foochow, Hakka, Hainan), as well as Tamil, Punjabi, Telugu, Thai, Malayalam, and in East Malaysia, several indigenous languages. Malaysia’s post-colonial development was in large part shaped by its ethnic composition and history. From 1948, the new Federation of Malaya restricted citizenship to ethnic Malays, who subsequently dominated the “administocracy”. The subsequent expansion of the federation to include Sarawak, Sabah, and crucially, Singapore (75% Chinese) proved short-lived. Political rivalries ultimately led to the expulsion of Singapore from the federation in 1965. Violent race riots in 1969 were followed by the New Economic Policy (NEP), that both imposed quotas in education, employment and access to capital upon non-Malays, and introduced incentive schemes encouraging non-Malay employers to hire ethnic Malays. Although the NEP officially ended in 1991, the state continued to lead Malaysia’s development, and discriminate in favour of ethnic Malays (termed Bumiputras, or sons of the soil). Despite sustained

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56 The Dragon, The Tiger Cubs and Higher Education

Country

China Malaysia Singapore Viet Nam

ASEAN Three + China – Economic and educational indicators Population 2007 (millions)

1,200 27.2 4.6 85.2

HDI and Employment Adult FDI total Nett FDI % GDP Service sector rank in services literacy 2007 as % of growth growth rate (2005) (%, 2004) Rate (15+) (US$b) GDP (2007) (2007) (2007)

.777 (81) .877 (65) .922 (25) .733 (105)

– 55.1 76.3 24.7

93.3 91.9 94.4 90.3

121.4 –2.6 11.8 6.6

3.7 –1.4 7.3 9.3

11.9 6.3 7.7 8.5

Trade in services Balance, % of GDP (2006)

Gov’t. education spending as % of GDP (2006)

–0.3 –1.2 –2.1 –2.0 (est.)

3.5 5.4 3.1 –

12.6 10.0 7.8 8.7

(ADB, 2008a)

57

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Table 3.8

intervention, including scrapping the Bumiputra quota that required 30% of the stake in companies listed on the Malaysian stock exchange to be held by ethnic Malays, the professions are still dominated by nonMalays, while the income gap between Malays and non-Malays has also persisted – indeed also widened among Malays. A small group of around 100 families was still said to dominate the economy. While annual GDP growth of an impressive 8.5% was achieved during the early and mid-1990s, together with low inflation, and diminishing levels of external debt, the regional financial crisis of the late 1990s nonetheless hit Malaysia hard – although less so than neighbours such as Indonesia, or Thailand. Within a short space of time, around US$100 billion had been erased from the stock market, while the Ringgit and the stock market ultimately lost about half their value. Nonetheless, Malaysia continued to open its economy, cutting its import tariffs by almost half between 1993 and 2001 (ASEAN, 2001). Maintaining an annual GDP growth of 5.1% in 2008, in the face of the GFC, was underpinned by China trade, which grew by an average 25% per annum over the preceding decade (China Daily, 2009d). The fact that Malaysia was the first ASEAN country to recognise China, in 1974, proved particularly prescient, in light of China’s subsequent dramatic rise. The current agenda is a potentially contradictory mix of both stateguided development, and the extension of globalisation and marketbased economic re-structuring. The current big picture of Vision 2020, by which date Malaysia plans to reach developed status, is centred on the familiar knowledge economy. It entails special development of two key sectors – information and communications technologies (ICTs), including a Multimedia Super Corridor (MSC), development of which began in 1996; and education, most particularly higher education. FDI, at US$5.7 billion in 2008 (ASEAN, 2009a) remains substantial, but market based-policies threaten the privileged position of ethnic Malays. Hence the “electoral arithmetic” remains somewhat unstable (Tipton et al., 2003: 115), as was seen in the 2008 elections. For the rapid development of the country, there is a need to cultivate the totality of Malaysian talent; but this cuts directly across the interests of privileged Bumiputras. The technology to support leading edge communications, including virtual pedagogy in higher education, has developed rapidly in recent years. Of Malaysia’s 25 million inhabitants, more than eight million subscribed to a mobile phone service, and over two million to the internet. Annual growth for each is robust, but significant regional disparities persist. While plans and targets for Vision 2020 remain very

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58 The Dragon, The Tiger Cubs and Higher Education

ambitious, doubts remained about progress: “As yet, the vision has not become reality” (Tipton et al., 2003: 130). The MSC, critical to Malaysia’s goal of reaching parity with developed countries by 2020, involved major investments in such infrastructure as fibre-optic cables; time will tell however, as to longer-term results. Total GDP in 2002 was estimated at US$210 billion, in PPP terms, while growth was 4.2%, rising to 5.3% in 2005 (World Bank, 2005; Welch, 2009). Services comprised 48% of total GDP in 2001. GDP per capita fell from a high of US$4,766 in 1996 to US$3,257 in 1998, but recovered to US$3,914 in 2002 (ASEAN, 2009a). Trade between Malaysia and China reached US$53 billion in 2008, with Malaysia replacing Singapore as China’s largest trading partner (China Daily, 2009g). ASEAN statistics show that Malaysia’s exports to China increased from US$1.249 billion in 1993 to US$3.491 in 2001, but Chinese imports rose much more swiftly – from US$0.816 billion to US$5.12 over the same period (ASEAN, 2009a). This still represents however, a small proportion, with current exports to China being estimated at only 8.8% of total exports (China Daily, 2009i). Imports from China represent 6.0% of total Malaysian imports. Equally, principal destinations for Malaysian investments tend to be Singapore, US, Hong Kong and the UK, with China accounting for only about 2% of the total in 2000 (Tham, 2001). Nonetheless, Malaysia’s investments in China for the first half of 2009 rose to US$229 million from US$139 million for the equivalent period of 2007 (MITI Malaysia, 2009). While 950,000 Chinese tourists visited Malaysia in 2008, education too is a focus of increased trade (China Daily, 2009g, i), as is seen below.

Singapore – Economy, society and trade with China Somewhat like Malaysia, the small but vibrant, multi-ethnic Singapore, which only gained self-government from the UK in 1959, grew strongly for much of the 1980s and 1990s, under the strong, directed leadership of Lee Kuan Yew. With a size of just 648 square kilometres, a total population of just 4.6 million in 2009 (three quarters of whom are of Chinese ethnicity), and few natural resources, Singapore has always felt it had to rely on its own wits to succeed, principally the energy, skills and industry of its inhabitants. High state capacity has been deployed to create, inter alia, a sophisticated ICT platform, that leaves it well positioned to take advantage of service sector growth. Singapore’s service sector exports reached S$97.0 billion in 2006 (Singstat, 2007a). Singapore exhibits many features of a highly developed economy. Its workforce of 1.5 million is comparatively well educated, and its GDP of

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US$120.7 billion in 2001 (rising to US$182 billion in 2008) yielded a GNI in PPP terms higher than that of New Zealand, and not much below that of Australia, Hong Kong, or Japan (ASEAN, 2003b; OECD, 2003c; World Factbook, 2009a). By 2008, the service sector comprised 72% of total GDP (World Factbook, 2009a). Singapore is not merely a poly-ethnic state, but it also possesses a highly international environment: a striking feature of its workforce of some 1.5 million, is the high proportion of international employees: 29% in 2000 (Yap, 2003: 368). Of these, fewer than one in five were professionals however, and only 13% held degrees. It should be pointed out that this figure excludes those who have been granted residence, a significant number of whom, by contrast, are highly skilled. 43.5% of foreign-born workers resident in Singapore between 1991 and 2000 held a degree (Yap, 2003: 375). One estimate showed that they were responsible for almost 37% of total GDP growth over the 1990s (Yap, 2003: 370). Illegal migration is also an issue, including from China. Some 200,000 Singaporeans also work abroad, although details about their destinations are incomplete (see below). Singapore has invested heavily in ICT, with impressive results. Among other things, the establishment of a widespread, sophisticated ICT infrastructure means that it is well placed to take advantage of the developing architecture that supports distance and online learning and teaching. Its National Information Technology Plan (NITP) dating from the mid1980s, already heralded its plan to gain a competitive advantage through advanced ICT infrastructure. Internationalisation of the Singaporean economy, and privatisation of its telecommunications industry followed. By 1998, it had the world’s highest penetration and teledensity rate for an emerging economy, with a decade-long history of 100% ISDN service (Tipton et al., 2003: 23). In 2001, the telephone density reached almost 120 per 100 people, three times that of Malaysia, and 22 times that of Viet Nam. The almost US$3 billion FDI that has resulted from this statedirected initiative, has boosted local service sector growth, and made Singapore into a regional telecommunications hub. Education, too has been a focus of investment, with spending on education representing 3.7% of GDP (OECD, 2003c; World Factbook, 2009a). (This compares, for example, with 3.5% for Japan, and 4.7% for Australia). Including its well-supported universities, this gives Singapore a firm educational base, and, like Malaysia, but with greater prospects of success, Singapore is fast becoming a regional educational hub. For the first time, for example, Singapore held major expos in India, in January of 2004. This ambition contends to a degree, with the persistence of significant unmet demand in higher education, and a correspondingly large volume of study abroad, and offshore enrolments by Singaporeans.

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60 The Dragon, The Tiger Cubs and Higher Education

Singapore’s economy was a model of growth for more than two decades, averaging 8.3% growth in real terms throughout the 1980s, for example. Already by 1990, its per capita GDP was only outstripped by Brunei and Japan, in Asia. While GDP per capita was US$25,127 in 1996, this had fallen to US$20,611 in 1999, and remained at about that level, for some time, with 2002 figures of US$20,511 (ASEAN, 2009a). By 2008, however, it had reached US$51,600 (Worldfactbook, 2009). An unemployment rate of 10% in 1970, was brought down to 2.5% by 1980, and reduced even further, to 1.3% by 1990 (Selvaratnam, 1994: 13). Post-2000, however, the Singaporean economy experienced greater difficulties, in the wake of an international economic downturn. The downturn in Singapore was dramatic – from, a GDP growth rate of 9.9% in 2000, economic growth fell abruptly in 2001 to –2.37%, rising again to 2.25% in 2002. Most of the decline was however in manufacturing (which declined by 9.3%), while the service sector still managed to grow by 1.5%. Nonetheless, that was a sharp fall from service sector growth rates of 6.3% in year 2000. Unemployment rose to 4.5%, and by the end of 2001 as many as 25,000 workers were retrenched, including the highly skilled. This led to some gloomy internal assessments that Singapore was among the hardest hit Asian countries in the current worldwide economic downturn. Among other consequences, were cuts in public sector salaries (as in Hong Kong over the same period). After rising sharply for the years 2004–2007, the GFC led to a further fall in growth rates, to 1.1% in 2008. The economy contracted during the second half of 2008, and again in the first quarter of 2009, the latter falling by 11.5% year on year (World Factbook, 2009a; Nanyang 100, 2009a). Some trends were more positive: FDI more than tripled over the decade 1995–2005, from US$93 billion to US$311 billion (Singstat, 2007b: 1). The situation regarding trade with China, however, reveals a different story. China is Singapore’s seventh largest trading partner, its fourth largest export destination (if Hong Kong is included, it would be easily the largest), and third largest source of imports (World Factbook, 2009a). Bi-lateral trade rose by an average of 15% per annum over the 1990s. Given the significance of China as a trading partner for Singapore, it is no surprise to find that some 5,000 Singaporeans live and work in China, mostly in Shanghai. Moreover, China is Singapore’s largest recipient of foreign direct investment, accounting for 13% of Singapore’s overall FDI, Table 3.9 reveals. Overall, Singapore’s trading position in relation to China has remained positive. Exports to China rose from US$1.903 billion to US$16.140 billion from 1993–2001, while imports rose rather more modestly, from US$2.403

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62 The Dragon, The Tiger Cubs and Higher Education

Country (and rank)

1997

1998

1999

2000

2001

2003

2007

China (1)

10,477

12,186

14,296

15,710

16,542

19,816

39,294

8,908

8,610

8,517

9,754

10,413

13,592

21,159

Malaysia (4) USA (7)

2,905

3,064

4,197

6,187

6,580

8,058

13,508

UK (8)

7,678

3,276

3,387

4,903

5,768

7,354

31,210

177,949 209,650

230,060

257,314

301,157

625,799

Total Investment Abroad

158,566

(Singinvest, 1997–2001; Nanyang 100, 2009b)

billion to US$9.983 billion (ASEAN, 2009a). By 2005, Singapore’s exports to China of US$16.5 billion were balanced by imports from China of US$16.6 billion (Suite 101, 2006). In the context of a growing ASEANChina trade in services, Singapore is developing a reputation as a “destination of study” for Chinese students seeking to study abroad (ASEAN, 2001: 13), while growth in tourism has been strong in both directions. Nonetheless, as a small country, the proportion of Singaporean tourists to the total visiting China remains small, around 4%.

Viet Nam – Economy, society and trade with China Of the ASEAN Three, Viet Nam’s relationship with China has historically been the most problematic. Long a tributary state of China, the fact that the two are now officially sisters in socialism, and that each faces the dilemma of straddling the tensions between a socialist polity, and a developing market economy, has done much to paper over the historical cracks in their relationship. While Viet Nam’s long resistance to Chinese incursions helped define its strong sense of nationalism, it has also long emulated many aspects of Chinese culture, and now often sees China as a model for development. The traditional Confucian system of learning and selection for civil service was directly modelled on the Chinese, for example, and effectively persisted within the separate and parallel system of “native” administration established by the French colonial regime, until the 1920s (Tipton et al., 2003: 214; Welch, 2010a). Effectively under the heel of colonialism, or fighting for its independence for at least 100 years, Viet Nam has only been free of both since around 1990. As late as 1979, Viet Nam was involved in a

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Table 3.9 Singapore’s sites of foreign direct investment, 1997–2007, in SG$ millions

war of resistance to China, while contested efforts to depose the Khmer Rouge in Cambodia, and establish a friendlier regime, persisted until around 1990. China’s antipathy, re-fired by differences over Cambodia, meant that it was Vietnamese isolation, and a non-convertible currency, that provided a degree of shelter to Viet Nam during the regional financial crisis of the late 1990s. Nonetheless, FDI fell precipitously, and growth slowed. The resumption of diplomatic relations by the USA in 1995 precipitated significant, albeit interrupted, investment by US firms. FDI strengthened in the post-SARS environment. In 2001, some 400 US firms were estimated to have been registered in Viet Nam, by which time a bi-lateral Trade Agreement had just been concluded between the two states (Tipton et al., 2003). While Viet Nam’s aspiration for WTO membership matched that of China, its progress proved no less tortuous, and was only completed in early 2007. The GFC precipitated a fall of 29% in FDI to Viet Nam for the first five months of 2009, to US$2.8 billion (ASEAN, 2009e). The role of the Communist Party remains important, state capacity varies, and corruption remains a long-standing problem (Welch, 2007a, 2010a). Bickering between competing ministries is a long-standing problem, that weakens overall efficiency, including in education. Public dissent is not encouraged, although significant differences are voiced within the political regime, and society. North-South differences also persist, including in terms of both entrepreneurship and orientation to international affairs. Despite significant success in reducing poverty over the 1990s, overall Viet Nam has not managed the tensions inherent in developing a socialist market economy as successfully as its more powerful neighbour, whose success it closely observes. “A Senior official intimated that Hanoi is currently observing political and social changes in China as a model for Viet Nam to follow” (Cheow, 2004). In addition, the fact that an estimated 300,000 Vietnamese live in China (Nguyen, 2002: 403), creates further potential for increasing trade in services. Viet Nam’s total GDP rose from US$183 billion in 2002, to US$242 billion in 2008, with GDP per capital rising from US$2,250 to US$2,800, in PPP terms (World Factbook, 2009). Services occupy 39% of total GDP, slightly outweighing the proportion from industrial production. For countries bordering China, such as Viet Nam, the significance of its two-way trade (reaching over US$20 billion in two way terms in 2008) is all the more important, particularly since its GDP per capita remains well below the ASEAN average. However, while the ASEAN average per capita GDP fell in response to the Asian financial crisis of the late 1990s, from a level of US$1,504 in 1996, that of Viet Nam rose – from

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Anthony Welch 63

US$337 in 1996 to US$439 in 2002 (ASEAN statistics, not in PPP terms). Notwithstanding historical difficulties, China and Viet Nam signed a Trade Agreement as long ago as 1992, and bi-lateral trade has grown steadily – for example, from US$691 million in 1995 to over US$1,400 million in 2000. For 2007, Vietnamese exports to China of US$1,795 billion were significantly outweighed by the value of Chinese imports at US$6,314 billion (Statistics of Vietnam International Trade Organization, 2009). By 2008, China was the third largest destination for Vietnamese exports and by far its largest source of imports (World Factbook, 2009b). This flow of goods and services has had a more significant effect on Viet Nam’s economy than on China’s – according to the Vietnamese Ministry of Trade, bi-lateral trade represented some 10% of Viet Nam’s total trade turnover, but only 0.4% of China’s (Phuong, 2001: 134). This only represents the “official” trade, however: informal trade and smuggling are both significant, and rising. Regrettably, ASEAN reports reveal no data on the trade in services (Phuong, 2001). Figures from the Vietnamese Ministry of Trade appear to reveal significant volatility in both exports to, and imports from, China (but the accuracy of social and economic data is undermined by the lack of overall standards for its collection). Given the sustained high rates of growth evident in both countries, however, the potential for trade to grow is great. Viet Nam’s main growth sectors are agriculture and manufacturing, but service sector growth exhibits real potential, especially its developing tourism industry. With the exception of 1999, the Vietnamese economy grew by more than 6.5% each year to 2003 (ASEAN, 2009a), and has remained healthy since, notwithstanding the GFC: the growth rate for 2003 was 7.3%, which the World Bank estimated as second only to China’s 7.8% (Cheow, 2004), and for 2005 was 7.5% (World Bank, 2005). GDP growth rate for 2008 was 6.2% (World Factbook, 2009b). Exports, which grew by 16.7% in 2003, reaching US$14.9 billion in the first nine months of that year, totalled US$62.7 billion for 2008, while imports totalled US$75.4 billion (World Factbook, 2009b). Recognising that in the post-WTO accession climate, the service sector market in China is set to grow vigorously, Viet Nam has argued that priority should be given to selected service sectors, such as tourism, which have significant growth potential. No additional cooperation is foreseen in the area of educational services, however. Just as with China, the national slogan today is “regional and international integration”, and Viet Nam’s accession to ASEAN membership in 1995 was followed by its hosting of the 5th Asia Europe Meeting in 2004, and of the APEC Summit in Ha Noi in 2006. The time is ripe for further integration of the neighbouring economies, including further collaboration in higher education.

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64 The Dragon, The Tiger Cubs and Higher Education

Anthony Welch 65

Competitive challenges to Chinese higher education The scale of the Chinese higher education system is perhaps only matched by the size of the challenges that it currently confronts. With a population of around 1.3 billion, and an unquenchable thirst for higher education, the system faces real problems simply meeting domestic demand. In turn, ever-rising demand is placing government funds under greater pressure, to which it is finding it more difficult to respond. Quality is another challenge, with many universities slow to change from traditional patterns that are less and less appropriate in the modern era (Li, 2004). Equality of access and participation is yet a further problem, since both quality and quantity are very unevenly distributed across China, (as are other services). Maintaining local identity while responding to the challenge of internationalisation in higher education is a major dilemma for China (Zhang and Xu, 2000; Yang and Welch, 2001), that regional cooperation has the capacity to help address. Hong Kong (whose universities are very different to those described below), has performed something of this internationalisation function for years (Yang, 2002). Its universities have long had a significant record of internationalisation: of staff, albeit less so with students (Postiglione, 2005; Welch, 1997, 2004; Welch and Cai, 2010). The following section outlines these challenges and assesses their implications for regional cooperation. Quantity – Meeting the demand for higher education While the explosive enrolment growth of 20–35% in the years 1999–2004 (see Table 3.10), was not sustainable over the longer term, substantial expansion has continued. Nonetheless, supply is nonetheless still unable to fulfil demand. When rates of participation for higher education in OECD countries averaged 40%, and in some countries reached 50% (OECD, 2003c: 259), the equivalent rate in China is only about 20%, and very unequally distributed. Government plans for this rate to rise to 15% by 2015 were achieved years before the target date; nonetheless, competition for university places remains fierce, particularly for the elite

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The above section sketched the contours and developments in each of the national economies, including service sector trade where possible, and indicated the extent of trade between each of the tiger cubs and China. The following section focuses more directly on the higher education systems of China, followed by that of each of the tiger cubs. Attention is paid to current levels of trade in education services, and forms of educational collaboration.

66 The Dragon, The Tiger Cubs and Higher Education

Table 3.10

Number of public HEIs and enrolments, 1990–2006

Year

Number of institutions

New students

1990 1995 1998 1999 2000 2001 2002 2003 2004 2005 2006

1,075 1,054 1,022 1,071 1,041 1,225 1,396 1,552 1,731 1,792 1,867

609,000 926,000 1,084,000 1,597,000 2,206,072 2,682,800 3,205,800 3,821,700 4,473,400 5,044,600 5,460,500

Graduates 614,000 805,000 930,000 848,000 949,767 1,036,300 1,337,300 1,877,500 2,391,200 3,068,000 3,774,700

Student enrolments

Percent increase

1,206,300 2,906,000 3,409,000 4,134,000 5,560,900 7,190,700 9,033,600 11,085,600 13,335,000 15,617,800 17,388,400

– 140.9% 17.3% 21.2% 34.5% 29.3% 25.6% 22.7% 20.3% 17.1% 11.3%

(Partly adapted from Yang and Ngok, 2004. 1990 to 1999 figures from China Statistical Yearbook 2000, Beijing, National Bureau of Statistics and Education Data http://www.edu.cn/jiao_yu_fa_zhan_498/ Later data from http://www.moe.edu.cn/edoas/website18/level2.jsp?tablename=1068

The relentless pressure for more places has strained state budgets significantly, and, as indicated below, led to some devolution of finances to the regional and local levels. One source indicated that state funding actually declined from 93.5% in 1990 to 50% in 2002 (Mok et al., 2009), a trend commonly lamented by university presidents. The proliferation of private Minban, or “People’s” universities, in recent years, is also related – in 2002, some 133 degree-granting institutions existed, with a total enrolment of 311,200 students, or in the order of 4.3% of regular public sector enrolments. Another 1,202 non-degree awarding Minban existed, with enrolments totalling 1,403,500. This had grown from a total of 85 Minban, only two of which were four-year HEIs that could award degrees, in 2001 (Huang, 2003a). By 2004, this had risen to 344 institutions and 540,000 enrolments (Mok et al., 2009: 507). By 2006, Minban enrolments had grown to 1.34 million, or 6.6% of enrolments, to which should be added another 1.47 million enrolled in Er Ji (second tier) institutions (7.3% of total enrolments) (Hayhoe and Lin, 2008: 6). The Law on

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university sector, and many talented individuals miss out. Others study courses in which they have little or no interest, simply because they were fortunate to gain a place at all. Striking evidence of the substantial growth in student numbers and graduations is provided in the following table:

Anthony Welch 67

Quality This element is related to the last, since as indicated above, the relentless pressure to squeeze more students into Chinese universities was not paralleled by an equivalent rise in numbers of institutions, or staff, or other resources. Indeed, rather the reverse, since the pressure has been to consolidate institutions, via mergers and amalgamations. The concerted pressures have resulted in a number of problems: sharply declining staff-student ratios being just one, as the following table reveals. Table 3.11 Year 1985 1990 1995 1998 2000 2001 2002 2003 2004 2005 2006

Changes in staff-student ratios, Chinese universities, 1985–2006 Student enrolment 1,703,000 2,063,000 2,906,000 3,409,000 5,560,900 7,190,700 9,033,600 11,085,600 13,335,000 15,617,800 17,388,400

FTE academic staff 344,000 395,000 401,000 407,000 462,772 531,900 618,400 724,700 858,400 965,800 1,076,000

Staff-student ratio 4.95 5.22 7.24 8.38 12.02 13.52 19.1 17.0 16.22 16.85 17.93

1985, 1990 data http://www.edu.cn/20010101/22284.shtml (Basic Statistics on Education). 1995 data http://www.edu.cn/jiao_yu_fa_zhan_498/1998–2006 data http://www.moe.edu.cn/edoas/website18/level2.jsp?tablename=1068 *Staff-student ratio from years 1998–2006 are adjusted figures, that take into account the teaching and supervision of graduate students and students in adult education.

World Bank data show the proportion of GDP spent on education as a whole in China to be still below 3% per year (World Bank, 2005), and some have raised doubts as to the feasibility of plans to raise it to 4% (Mok et al., 2009; Shen and Du, 2000). Together with the tidal wave of enrolments over the last decade, this resource-squeeze effectively exerts a downward pressure on quality, which is directly at odds with the expressed desire by both government, and Chinese universities, to attain

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Private Education Promotion, that became operational in September 2003, underpinned the legal rights and interests of the schools, students and staff. It enshrined equal footing for Minban, as well as a reasonable return on investment: “private-school investors can get a reasonable repayment after deducting schooling costs and reserving development funds and other expenses” (WENR, 2003).

international levels of performance and attainment. (Despite this, it must be said that China’s persistent drive to increase its representation in major international citation indexes, is having an effect: using the measure of papers listed in Science Citation Index (SCI), China is now ranked third (after the USA and UK) (Welch, 2009; OECD, 2008b), while in 2008, China overtook the USA as leading contributor to Engineering Index (EI) (Cao, 2009a). Recent OECD data reveals a mixed picture – R&D spending increased by around 19% annually over the past decade, but while China now has the second largest number of researchers worldwide, their density is still low relative to OECD averages. Patent applications, which are doubling every two years, now account for 3% of the worldwide total, while its share of the world’s publications rose from 2.0% to 6.5% over the decade 1995–2004. Overall, however, imbalances, inadequacies and inefficiencies continue to constrain maximal development of innovation. A particular problem is the comparatively modest proportion that Chinese universities contribute to overall scientific innovation (OECD, 2008b). While relentless pressure is maintained to emulate the achievements of universities abroad, most particularly via more publications in English in these key scientific citation indexes – SCI, EI and Index to Scientific and Technical Proceedings (ISTP) – the international trend towards pressuring institutions to diversify their income sources nonetheless diverts energy away from the achievement of such targets. Moreover, if the argument is accepted that equality is a vital component of quality (Welch, 2000b), then this too provides a brake on the quality of the Chinese system. Institutions in the major and more developed cities, such as Beijing, Shanghai, Tianjin, Hangzhou and Guangzhou, are far more able to take advantage of reforms, thereby widening the gaps between themselves and their poorer or regional cousins. Equally, students from the less developed regions, or poorer provinces, are often denied the benefits of their peers in the major cities and coastal regions (Welch, 2010b). As elsewhere (Welch, 2004b), aging of the profession is also a particular problem, with almost 90% of PhD supervisors (a special honour, reserved for only a proportion of full professors) at MoE supervised universities being over the age of 56 (Zhang and Xu, 2000: 106). Indeed, the sheer enrolment demographics is itself posing a problem – the spectacular leap in both enrolments and graduations since 1999, is leading to what has been termed a “Professor Crunch”, particularly in the regions other than the booming eastern provinces (Xinhua News Agency, 2004). At the same time, significant resources are being concentrated on the designated “Project 211” universities. This scheme, operating since 1995, has seen something like 100 universities across the country receive a significant

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68 The Dragon, The Tiger Cubs and Higher Education

injection of additional resources, in an effort to fast-track the development of an internationally competitive, and internationalised, network of top Chinese universities. (Once again, however, the more prestigious universities are awarded a much greater proportion of funds under this scheme than lesser institutions). Although the total of “Project 211” universities constitutes only some 10% of all HEIs, their enrolments at bachelors, masters and doctoral level comprise 32%, 69%, 84% of the national total respectively, while 72% of government-funded research programmes are carried out within designated 211 universities. Within 211 universities, 87% of teaching staff hold doctoral degrees, while 96% of state key labs and 85% of state key disciplines are sited in such universities. The more recent Project 985 has concentrated even more resources on a smaller number of selected key universities – some US$4 billion in around 40 top-tier institutions, most notably those such as Peking, Tsinghua, and Fudan. Efficiency Levels of internal efficiency within Chinese universities are not always high. Overall quality assurance systems are lacking, partly owing to the fact that administration of HEIs is split between several ministries (although this is currently changing). Internal administration is large and cumbersome. As in some other countries of Asia, modest levels of remuneration mean that significant “moonlighting” by academic staff occurs, with a consequent diversion of effort and efficiency from their home institution towards second or third jobs, or small business enterprises (Shen, 2000; cf. Welch, 2003). Attention is often re-directed towards such issues as housing, and accoutrements, rather than to the demands of the job (Yang, 2005b). Despite the high ratios of administrators to academic staff, there are numerous complaints that, too often, internal decisions are made on grounds of hierarchy (including often of administrative staff over academic staff), that may have little to do with efficient use of limited teaching and research time, and associated resources. Notwithstanding recent national campaigns, spreading corruption is a deepening problem (Mok et al., 2009). Characterised by one analyst as a “malignant tumour” (Yang, 2005b), it embraces areas such as entry scores, the award and administration of research grants, use of bribes and embezzlement to fund overseas study, English language testing fraud, plagiarism, the misuse of power, and a promotion system that often works more on patronage and guanxi (a cultural system based on relationship networks) than performance (Shen, 2000; Zhang, 2007; SCMP, 2005; Yang, 2005b; China Daily, 2009g; Mok et al., 2009).

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70 The Dragon, The Tiger Cubs and Higher Education

Administrative reforms are often slow to be implemented, and widely resisted, provoking former Premier Zhu Rongzhi to remark, in a widely reported criticism, that universities were more like state-owned enterprises, than state-owned enterprises.

Notwithstanding significant devolution of authority over the past 15 years or so from the Ministry to provincial governments, notably in the 1993 reforms and the 1998 Higher Education law, academic autonomy is still restricted to a degree within China (Li, 2000). Even using the term autonomy in the Chinese sense demands some explanation – it is not uncommon to distinguish zhizhiquan (autonomy as independence in the political sense), from zhizhuquan (autonomy as mastery of the self). The former, used to refer to the autonomous status of China’s ethnic regions, also refers to the western sense of academic freedom (Zhong and Hayhoe, 2001). It is still a very delicate issue in China. Although provincial authorities have now been given more authority, for example over admissions policies, and are also now more responsible for institutional finances, institutional autonomy is also limited by the aforesaid dominance of non-academic staff over issues of teaching and research, and associated issues of resources. Despite the introduction of the President’s Responsibility System under the new law of 1998, criticisms persist by numbers of academics, of remaining state controls over universities, including approvals for new fields of study, stipulation of the curriculum, and course content (Shen, 2000). At the same time, Chinese universities are becoming part of a worldwide push for more performance data, justified under the name of accountability (Yang, 2005a; Welch, 2004a), but which also takes much time away from teaching and research functions, thereby in effect limiting academic autonomy. The practice of steering from a distance is also hitching Chinese universities, like those in other countries, to national economic agendas, ever more closely. In addition, the culture of academic freedom is not well entrenched in China, or even always well understood, either by university administrators, ministry officials, or at times, academics themselves (Shen, 2000; Qi and Chen, 2000). Finance In keeping with the difficulties alluded to above of declining central government support for the public sector, including higher education, and difficulties in simply accommodating the demand, measures to diversify funding sources have been introduced. Indeed, there seems

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Autonomy

little choice, with the proportion of education funds to GNP falling from 2.21% in 1990 to 1.73% in 1997 (Shen and Du, 2000), although as seen in Table 3.8, this had risen to 3.5% by 2006. Funding diversification measures include enhanced local responsibility for funding (via taxes); increased fees (with some provision of scholarships for indigent scholars); donations; and an increase in university entrepreneurial activities, either as spin-offs from university research, via start-up companies, or via strategic partnerships with industry, including technology transfer. (There are ongoing criticisms, however, that at times the fruits of such start-ups fail to flow to the institutions, but are limited to a handful of staff, who are either associated with the original research, or in influential positions). The transformation of higher education funding has meant that in many institutions, student fees are a major source of income; perhaps as much as 15% of public institutional budgets, and as much as 90% of private institutions (Minban). Some reports indicate total earnings by the Minban sector to have been as high as 300 billion yen (US$36 billion) over the decade to 2003 (WENR, 2003). Tuition fees now often account for over 50% of many students” direct educational expenditures (Qi and Chen, 2000). Paralleling developments in East and South East Asia (Welch, 2003, 2004a, 2009, 2011; Tipton et al., 2003), the introduction of fee-based extension courses into Chinese universities, at evenings and weekends (often with lower entry standards), has been a common resort, justified in large part on financial grounds. The effects on equity are seen in estimates that over the past two decades, tuition fees in higher education increased by 30-fold; an average tuition fee of 200 yuan per student in 1986 to about 6,000 yuan in 2006. In effect, a student would need to pay around 7,000 yuan per year for higher education, or about 35 times the annual wage of a farmer (Mok et al., 2009). In this context, it is no surprise that parents increasingly lament the rising costs of higher education, with one recent survey indicating that 70% of Heilongjiang parents found it difficult to bear such costs (China Daily, 2009i). Internationalisation – Cooperation and/or competition Regional internationalisation has the capacity to respond to some of these challenges, at least in part. It can reduce the costs to the state, although not always to the individual student. In some respects it also has the capacity to reduce the oft-expressed concerns by Chinese academics that internationalisation and westernisation are in fact conflated, by offering more localised responses to the debate over internationalisation versus indigenisation (Zhang and Xu, 2000; Yang, 2000; Welch,

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Anthony Welch 71

2000a). Such regional responses are not entirely new – as indicated above, for years, Hong Kong had acted as an important bridge between China and the rest of the world, including in higher education (Yang, 2002). The effectiveness of regional strategies however, is limited in practice by at least three specific elements. One is the unshakeable conviction of most university administrators, and most students, that the US system represents the sole source of institutional reforms, and quality higher education. Although often based on very inadequate information, in practice it restricts internationalisation options. A second lies to some extent within the control of the Ministry of Education, who formally invite “foreign experts” to Chinese universities, and the China Scholarship Council, who in 2005, for example, announced a scheme to send 5,000 scholars abroad each year, for research or to gain doctoral degrees (China Daily, 2005). The third is that of brain-drain, where, for example, it has been estimated that of the total of 930,000 Chinese students who travelled abroad to study since 1978 (many sent and subsidised by the state), only about 230,000 have returned (China Daily, 2006; Cao, 2004; Zweig, 2005; Welch and Zhang, 2005, 2008; Zhang and Li, 2002). By 2010, the number of Chinese studying abroad is forecast to reach 200,000 (China Daily, 2006), but the return-rate is rising, as more opportunities open up in a dynamic China. Zhang cites figures showing that of a purported 40,000+ Chinese students studying abroad in 2000 (2,800 of whom were supported by the government, 3,900 by their Danwei, or work unit, and some 32,000 self-supported), about half would return (Zhang, 2002: 187). By 2007, 140,000 Chinese students were studying abroad, with around 44,000 returning (Welch, 2009: 11). Certainly, return rates are higher than even a decade ago, and supports the thrust of ILO research, that inter alia, confirms, “… rapid economic Figure 3.2

Chinese students studying abroad and returning, 1997–2007

140000

Number

120000 100000 80000 60000 40000 20000 0 1997

1998

1999

2000

2001

2002 Year

2003

2004

2005

2006

2007

(Source: National Bureau of Statistics, 2008)

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72 The Dragon, The Tiger Cubs and Higher Education

growth makes a destination more attractive to both non-nationals and returning nationals” (ILO, 2003: 71). Here too, regional collaboration may offer at least a partial solution, and the Chinese government is now actively interested in deploying its sizable knowledge diaspora, in the service of national scientific and economic development (Cao, 2004, 2006; Zweig and Chen, 1995; Zweig, 2005; Welch, 2007c; Welch and Zhang, 2005, 2008a and b; Welch, 2009; Welch and Cai, 2010). It should be pointed out here, however, that Chinese statistics are not always collected in a consistent manner, often across different agencies and ministries. This is a particular problem with MoE statistics on study abroad, which often failed to account for the growing number of selfsupported (private) students abroad. Nonetheless, Table 3.12 reveals the numbers and return rates of Chinese students studying abroad in different categories. Table 3.12

Chinese students studying abroad, by category, 1997–2000

Year

Government supported

Danwei supported

Self-supported (and % of total)

Total

1,906 2,000 2,000 2,228

2,442 3,000 3,000 2,724

30,731 (87.6) 50,000 (90.9) 80,000 (94.1) 80,000 (94.1)

35,079 55,000 85,000 85,000

1997 1998 1999 2000

(Adapted from Zhang and Li, 2002)

Figures based on visas, as in Table 3.13, rather than MoE statistics, show self-financed students assuming a much larger proportion of the total number of Chinese students studying abroad, than in earlier years. The estimated total of Chinese students studying abroad in 2007 was 140,000, although this is probably conservative, while the same figures show 44,000 returnees (a return rate of 31.4%) (Cai, 2008; Welch and Cai, 2010; Welch, 2009). Importantly, trade in educational services is also expanding rapidly in the reverse direction. The significant and rising tide of international students, in 2002, with a record 85,829 international enrolments from 175 countries at Chinese universities, brought both an increase in direct cross-cultural exchange, and a welcome and much-needed boost to numerous institutions’ bottom lines. This total rose to 110,844 enrolments from a total of 178 countries in 2004, and now totals more than 220,000. Based on assumed average annual tuition fees of US$3,000 per student, plus

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Anthony Welch 73

at least a further US$2,000 for accommodation, this would total US$1 billion, without allowing for associated, additional expenses (although it should be pointed out that by no means all students enrol for an entire year). It must be said, however, that both source countries and income, are very unequally distributed, with perhaps 60% or more of students sourced from East Asia (South Korea and Japan), and most of the enrolments occurring in larger and more well-known institutions and regions. Beijing enrolled the most foreign students, followed by the municipalities of Shanghai and Tianjin; other significant provinces included Jiangsu, Liaoning, Shandong, Jilin Guangdong, and Heilongjiang (Beijing Morning Post, 2004). Of all international enrolments, 93% (or almost 80,000) were self-supporting. The Ministry of Education is reportedly developing regulations to help provide work-study opportunities, such as part-time jobs. Underlining the point regarding the regional character of internationalisation (listed above), 77% of all international enrolments in Chinese universities in 2002 were from Asia (especially Japan and South Korea), 10% each from the Americas and Europe, 2% from Africa and 1% from Oceania. South Korea, Japan, the United States, Indonesia and Viet Nam were the top five sending nations, accounting for more than half of all overseas students in China. While it is not possible to draw long-term inferences from a relatively short-time series, Table 3.13 reveals healthy and rising enrolments in Chinese universities, including from Malaysia, Singapore and especially Viet Nam. China is also generous with scholarships, having provided 5,362 scholarships to overseas students from 148 countries to study at its universities in 2000, and 5,841 from 155 countries in 2001 (China Education Yearbook, Table 3.13

ASEAN students in Chinese universities, 2000–2006

ASEAN students

2000

2001

2002

2003

2004

2005

2006

– Indonesia – Malaysia – Singapore – Thailand – Viet Nam – Philippines

1,947 < 500 854 667 647 –

1,697 632 < 500 860 1,170 –

2,900 840 583 1,737 2,300 638

2,563 841 551 1,554 3,487 602

3,750 1,241 929 2,371 4,382 1,375

4,616 1,589 1,322 3,594 5,842 2,176

5,652 1,743 1,392 5,522 7,310 1,512

ASEAN total

4,610

4,854

na

na

na

na

na

Total International

52,150

61,869

85,829

77,715

110,844

141,087

162,695

ASEAN % of total

8.84%

7.85%











(China Education Yearbook 2001–2007) (NB. for statistical purposes a number of 495 was assigned for instances of

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