China and the Pacific Rim

Dispute

China is a making a significant impact across the countries that lie to its Southeast across the Pacific Ocean; Indonesia and The Philippines are archipelagic, multi-island nations with big populations that have lagged behind many of their neighbours in growth terms, but are now showing signs of catching up. Naturally as a major partner of both countries China will have a significant role to play in their development and below I take a quick look at their relationships. I also look at two very different countries in the same region; Brunei and Papua New Guinea, and their relations with China.

The Philippines

The Philippines are tipped for big things; many investment firms believe the South East Asian country can be the next big manufacturing hotspot. Naturally the neighbouring Chinese are heavily involved in this process and since the 1990s have been busy building manufacturing plants on the islands. Chinese companies have invested across a wide range of sectors, including pharmaceuticals, paper and electronics, this upsurge in investment has been mirrored by a rise in trade between the two countries, China is the Philippines’ third biggest economic partner after Japan and the US, and is on track to become number one in the near future. However these strong economic ties have been overshadowed by the political row over the potentially lucrative and symbolic waters in the South China Sea, which are rich in fish and gas resources.

Indonesia

The South East Asian archipelago has been an investor darling for a number of years, this is thanks to steady growth, a more stable political scene and multiple business opportunities. The country has started exporting in earnest to not only its neighbours and to China, but also across the Pacific to South America. While still a small proportion of its total trade, this is a trend which is set to grow rapidly. A recent forum held in Indonesia to explore future relations between the two regions identified Latin American expertise in natural resource extraction and the successful running of state owned enterprises, and on the Indonesian (& ASEAN) side the potential to export consumer and industrial goods to the LATAM market as their respective strengths.

Chinese interest has been intense in its Southern neighbour, its natural resources, oil, rubber and coal, plus a large number of ethnic Chinese business people in the country have made it a hotspot for investment. Unfortunately Indonesia’s wealth of natural resources have meant heavy exploitation, in the form of widespread and unsustainable deforestation across the country.

Brunei

Trade between the small South East Asian nation and China has grown rapidly, Brunei is well known for its oil exports and a recent deal between CNOOC (China National Offshore Oil Cooperation) and Petroleum Brunei looks set to continue this trend. Total trade between the two nations topped $1.6 billion in 2012. Brunei has also looked for Chinese expertise in diversifying its economy away from dependence on oil.

Papua New Guinea

The impoverished Pacific state has traditionally looked to Australia for economic partnership, but the Port Moresby government has recently turned to the Chinese EXIM bank for the arrangement of a debt facility worth up to $2.9 billion, which will be used for infrastructure improvements, including roads and bridges, vital in a poor connected country. Some commentators have linked these funds to the country’s new found oil reserves, arguing that China is trying to gain influence in order to take a future slice of the action.



Categories: China Goes Global, Country Investment Analysis, Kula Ring Trade Blog

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