China’s Economic Statecraft in Southeast Asia

Abstract

China’s economic power in the region derives from four interconnected elements, namely the use of commercial actors (in the form of state-owned enterprises) for strategic objectives, transnational Chinese entrepreneurs (in the form of private-owned enterprises), the overseas ethnic Chinese communities, and the dynamics of economic regionalism.3 However, the power asymmetry and overdependence on China have caused a certain degree of concern in Southeast Asia. Structurally, the power asymmetry limits the foreign policy options and strategic maneuverability of weaker states. The Belt and Road Initiative (BRI) and Lancang-Mekong Cooperation (LMC) are used here to illustrate China’s evolving regional economic diplomacy. This diplomacy refers to the art of transforming the external environment into sources of national growth and deploying economic leverage for strategic benefits through the combination of trade, investment and development assistance. Economic statecraft and institutional statecraft are the two main economic strategies employed by China.