| |
Southeast Asia-China: Threats,
opportunities
By Eddie Leung
PETALING JAYA, Malaysia - For decades after the
World War II, China was seen as an exporter of communism
among Southeast Asian countries. Diplomatic relations
were strained as Southeast Asian governments suppressed
communist insurgents, many of which were ethnic Chinese.
Formal economic relations between China and Southeast
Asian countries were almost non-existent.
Since
global communist revolution subsided and China started
economic reforms, the situation has undergone a
staggering change. Chinese businessmen and tourists have
flooded Southeast Asian countries such as Malaysia,
Singapore and Thailand.
This flourishing trade
relationship is best exemplified by the seventh World
Chinese Entrepreneurs Convention (WCEC) held in Petaling
Jaya, Malaysia, from Sunday to Wednesday this week, in
which almost 1,000 representatives from China
participated, accounting for nearly one-third of the
total number of participants.
While the host was
keen on lavishing praises on the rapid development of
the Chinese economy, below the surface the feelings
toward China are much more ambivalent. Once again, China
is feared - this time not for exporting communism, but
rather deflation. With its cheap labor costs, increasing
productivity, and mastery of modern technology, China is
fast becoming the factory of the world. As manufacturing
industries in neighboring countries are "hollowing out",
even ethnic Chinese businessmen based in Southeast Asian
countries have felt the heat.
Indeed, this
ambivalent attitude was expressed in Malaysian Prime
Minister Mahathir Mohamad's opening address. Without
mentioning the less-than-pleasant memories of the 1960s,
Mahathir delivered a flattering account of China's
relationship with Southeast Asian countries: "We are
very near to China, but China never conquered us. We are
not afraid of China becoming a big military power and
gobbling us up, because this is not the tradition of
China."
However, Mahathir added that China at
the moment is certainly a threat to the economies of
Southeast Asian countries, as it has a cheap but highly
skilled workforce and could therefore attract more
foreign investment.
Malaysian and other
Southeast Asian businessmen are of course attracted to
China, but is the picture as rosy as it is often
painted? Many who have first-hand experience in
investing in China have the other side of the story.
The flop of the Singapore's pet project in
Suzhou, even with the blessing of both Beijing and
Singapore governments, is widely discussed in Southeast
Asian business circles. William Cheng Heng Jem (the Lion
Group), a Malaysian steel and motor-tires magnate, is
known to have suffered a huge loss in China in 1997.
In an interview with Asia Times Online, David
Chua, deputy secretary general of the Associated Chinese
Chambers of Commerce and Industry of Malaysia and one of
the organizers of WCEC, hinted at some of the
difficulties overseas businessmen are facing in China:
"Business practices in China are somewhat different.
Some business norms such as mutual trust and keeping
promises we have taken for granted may not be so in
China. We did not have adequate knowledge in this area
in the past.
"There is also a difference between
policies of the central and local governments regarding
taxation and charges. Foreign investors should be very
careful in establishing mutual understanding with the
local government before they proceed.
"Thirdly,
in China, there are still many national enterprises. As
private enterprises of smaller size, we have
difficulties in competing with them," Chua said.
Unlike their US counterparts, Southeast Asian
governments and businessmen are restrained in their
criticisms of China. Complaints of all sorts have been
made in private, but governments and business circles
are keen on maintaining a harmonious relationship with
China. Even tycoon William Cheng is returning to Nanjing
for motorcycle manufacturing despite the huge losses he
has suffered.
This is because at the end of the
day the Chinese market is too large to be ignored. "The
capacity of the Chinese market in absorbing product is
amazing. We don't have that kind of market here," said
one Malaysian delegate in the convention.
Said
Chua: "The rise of the Chinese economy is a trend we
have to accept. Unless China is dumping its products in
other markets or using unfair trade measures ... we have
no right to interfere in China's own business."
"Adjustment" is the approach Chua and other
Malaysian businessmen follow. "To survive this trend, we
have [to] adjust or else we'll be eliminated," he said.
Adjustment, however, is a painful process. Hong
Kong, a classic case of price-differential leveling, has
suffered a more than 60 percent depreciation of
real-estate prices and persistent deflation for more
than 36 months, while across the border, mainland cities
such as Shenzhen and Guangzhou are enjoying annual
growth of about 10 percent.
"Hong Kong is a case
we always bear in mind," Chua said.
The pain of
adjustment can also be translated in political pressure.
Commentators in the United States argue that China's
currency, the yuan, is deliberately undervalued to
facilitate Chinese exports.
Indeed, the yuan
exchange rate was debated in the WCEC seminar. One of
the seminar speakers, Dr Lin See Yan, former Bank Negara
deputy governor, said the exchange-rate issue is not on
China's priority list. The Chinese government has made a
wise decision in maintaining a stable exchange rate and
focusing on other more urgent matters.
Chua
echoed Lin's opinion. "There is no universal consensus
of what constitutes an appropriate exchange rate. There
are pros and cons on every level. The task of the
Chinese government is to find a balance point. How a
government chooses its economic strategy is a matter of
national sovereignty and should not be interfered [with]
by foreign comments. I trust the Beijing leaders will
make a wise decision on [their] own," he said.
To be fair, while the Chinese market is huge,
the ASEAN (Association of Southeast Asian Nations) Free
Trade Area is something China cannot afford to ignore
either. If Southeast Asian countries such as Indonesia,
with its 200 million population, begin economic and
social reform, the impact could be substantial.
Southeast Asian governments and business circles
are pinning their hopes on the maturing of the Chinese
economy, when production costs rise. As Mahathir said in
his opening speech, "This is only a transition period,
and over time production costs in China [will] rise and
it will become less attractive to investors.
"But more than that, as the Chinese people get
richer, they are going to need a lot of things. They are
going to need products from other countries, and China
will become a big market. And we should look at what we
can sell to China."
The "wealth effect" of the
Chinese economy has already benefited the tourism
industry of the Southeast Asian countries. It will
benefit other sectors of Southeast Asian economies as
time goes by.
But more important, history has
shown that no products from a single country can
dominate the market forever. "In our youth, British
brand names such as Austin and Rover were the obvious
choice for cars; in the '70s, we had Mercedes-Benz from
Germany; in the '80s, we saw Toyota and Honda from
Japan. It may now be China's turn, but this won't last
forever either," said Mew Jin Seng, vice president of
the Chinese Chamber of Commerce and Industry of Kuala
Lumpur and Selangor.
Will China be an exception
to the rule? We will have to wait and see.
(Copyright 2003 Asia Times Online Co, Ltd. All
rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
|
| |
|
|
 |
|
