This first section provides an overview and analysis of the full Quantitative Report which follows.

Southeast Asia’s growing economic linkages with and dependence on China for investment have generated political opportunities and strategic concerns in equal measure. However, recent discussions have tended to focus on infrastructure projects, especially those associated with the Belt and Road Initiative (BRI). This narrow focus can be misleading, and an understanding of the fuller picture of Chinese investments in Southeast Asia is necessary for those seeking to understand its significance and impacts. The People’s Republic of China (PRC) is not a new player in this game, having had a longer history of providing investment and aid in this region, particularly in support of independence struggles and civil and regional conflicts during the Cold War. After 1990 and reflecting Beijing’s economic reform and internationalization strategy, Chinese investment in Southeast Asia picked up gradually across varied sectors. Prior to President Xi Jinping’s unveiling in 2013 of what has come to be called BRI, Southeast Asia had already seen a turning point in the growing significance of Chinese investments during the global financial crisis in 2008/9.

This report is part of a research project that examines China’s investment in Southeast Asia, aiming to provide a regionwide, multi-sectoral analysis that allows comparisons and facilitates policy calibration and focus. In this quantitative report, we present the baseline quantitative survey and analysis of key changes in Chinese investments in Southeast Asian economies over the most recent fifteen years, from 2005 to 2019, for which comparable data is available.

By “investment”, we refer to Chinese investment, project financing, and service provision in the region. The CGIT dataset that our report relies on captures the two key forms of Foreign Direct Investment (mergers and acquisitions, and greenfield investment), as well as other forms of cross-border investment flows associated with Chinese investments in Southeast Asia. Construction contracts, in particular, often accompany Chinese overseas investment and are a form of trade in services that can be even more significant than FDI.

1.1 Regionwide Trends

Foreign investments in Southeast Asia (SEA) originating from China grew twentyfold during this fifteen-year period. This trend is more marked when we define foreign investments as including both ownership acquisition of specific enterprises, and service provision (such as construction contracts).

A1. Selection of Datasets on Chinese Investments in Southeast Asia

This report surveys key changes in Chinese investments in SEA economies since the mid-2000s (following from the Chinese government’s 1999 “Going Global” strategy). To achieve this research objective, we examined various databases on Chinese overseas investments, including:

• • China Global Investment Tracker (CGIT) database;

• • ASEAN Statistical Yearbooks;

• • Foreign direct investment (FDI) data compiled by the World Bank;

• • FDI data compiled by the International Monetary Fund (IMF);

• • FDI data compiled by the Asian Development Bank;

• • Statistical Bulletin of China’s Outward FDI released by China’s Ministry of Commerce;

• • Data on China’s outward direct investment released by China’s Bureau of Statistics;

• • Global Chinese Official Finance Dataset, 2000–2014, Version 1.0; and

• • China Global Energy Finance database.

We eventually decided to use the CGIT database as the primary data source for this project for three reasons. First, unlike other datasets on Chinese investment which are either too aggregated or too segmented, CGIT provides up-to-date data on Chinese investments in each SEA country by industrial sector over a reasonably long period, from 2005 to 2019 (as at the time when data analysis first commenced in early 2020). This allowed us to examine the industry-specific trends and patterns of Chinese investments in every SEA country over the past fifteen years and to compare the features of Chinese investments across SEA countries. Section A of this Appendix explains how we selected and classified industrial sectors for this project. Second, the CGIT database includes two broad types of Chinese investments—transactions involving Chinese acquisition of asset ownership, and Chinese provision of services, in SEA countries. These two classifications enabled us to further disaggregate the relative spread of types of investments across SEA countries and industrial sectors. Third, the CGIT database provides additional information about investors and other transaction parties, facilitating our identification of specific Chinese investments that were of significance or particular interest. The CGIT database is a public dataset compiled and published by the American Enterprise Institute and the Heritage Foundation in the United States.

However, it is important to note that the CGIT database only tracks “large” investments worth at least US$100 million.

2.1 Overview of Chinese Investments in Southeast Asia, 2005–19

Absolute Scale

Overall, foreign investments in SEA originating from China exhibited a general upward trend between 2005 and 2019, rising approximately twentyfold during this fifteen-year period. This trend is evident across different datasets that use differing measures of foreign investments (see Figure 9). Foreign direct investment is a commonly used measure of cross-border investments that captures foreign acquisition—by both state-owned entities and private entities—of ownership of target enterprises in destination countries. Data from ASEAN’s Statistical Yearbooks show that Chinese FDI to SEA grew exponentially from just over US$500 million in 2005 to roughly US$10 billion in 2018, peaking at US$13.7 billion in 2017. A broader measure of foreign investments would take into account cross-border transactions that involve not only ownership acquisition but also service provision. The CGIT database adopts this broader measure of foreign investments to track “large” Chinese overseas investments (those that are worth at least US$100 million). According to the CGIT database, Chinese investments in SEA soared from US$1.3 billion in 2005 to nearly US$31 billion in 2019, peaking at US$33.5 billion in 2018. A closer look at the trend of Chinese investments in SEA reveals that Chinese investments in SEA experienced its first phase of rapid expansion between 2009 and 2011, right after the end of the global financial crisis, and a second phase of rapid increase between 2014 and 2017, following the official announcement of Beijing’s BRI. Indeed, the vast majority of very large (at least US$1 billion) Chinese investments came after the advent of the BRI in 2013 for all SEA countries except Vietnam and Myanmar (as indicated in red and pink on Figure 10). However, between 2018 and the time of writing (late 2021), this growth appears to be slowing down or even declining modestly.

Relative Importance

Despite the substantial surge in the absolute amounts of Chinese investments in SEA between 2005 and 2019, the relative importance of Chinese FDI—as compared to other sources of FDI in SEA—did not increase as significantly. While China’s share of total FDI in SEA more than doubled—from an average of 3 per cent in 2005–10 to an average of 7 per cent in 2011–18—China had yet to establish itself as a dominant foreign investor in SEA. Table 1 displays annual FDI flows into ASEAN from 2005 to 2018.

Chapter 5 puts the reconfiguration of Pacific Asia into global perspective in four respects. First, in contrast to the divergences that characterized the modern era, in this century there has been a multi-dimensional convergence between developed and developing countries. 2008 marked the first time since the nineteenth century that the production of the developing world was greater than that of the developed world. Second, the unipolar world order of the post-Cold War has shifted to a multinodal world order. Without a defining global power, the multinodal order has a “certainty vacuum” rather than a power vacuum, and it is best filled by partnerships rather than by alliances. Third, Pacific Asia has become a global powerhouse. In 2020 its GDP equaled that of the US and the EU combined, and it is integrated by global value chains. Fourth, China reaches beyond its region. Despite the headwinds of Covid-19, trade bottlenecks, and global tensions, China and Pacific Asia have arrived. If a bipolar configuration develops, it is likely to differ from the Cold War camps by being closer to a developed/developing country split, with less unity of leadership on either side.

Given China’s position in Pacific Asia, defining its regional centrality might seem a simple task. But centralities grander than merely geographical have been alleged and contested. Currently some maintain that China is the central kingdom because of its power. But it was conquered by the Mongols and the Manchus, and its present centrality is due more to its economic mass and connectivity than to its military. Others claim that hierarchy is natural to Asian culture, and China is the apex. But neighbors were often cynical about China’s moral stature, and China’s soft power is now at a low ebb. I argue that China was the center of regional attention in the premodern era, and that it has returned to center stage since 2008. The three basic reasons for China’s original centrality and its return were situational: presence, population, and production. The salience of all three disappeared with Western imperialism’s global presence, the devaluation of mere demography, and industrial production. Traditional and current centrality created asymmetric relationships between China and its neighbors, but the regional situations differ fundamentally.

Pacific Asia, comprised of Northeast Asia, Greater China, and Southeast Asia, has surpassed the combined production of the United States and Europe, and its intraregional economic cohesiveness exceeds that of either the EU or North America. Pacific Asia has emerged gradually and without major conflict, but it should be taken seriously as a region. China is primarily a regional power, but in a prosperous region deeply interconnected to the rest of the world. The United States tends to view China as a lone global competitor, but its global presence and strength rest on its centrality to Pacific Asia. Understanding China in its region is the first task of this book, followed by the challenge of rethinking the global order in terms of a multinodal matrix rather than a bipolar competition of great powers. This requires background on the evolution of the Pacific Asian configuration, including China’s premodern centrality as well as the splintering of the region by European colonialism. Rethinking is aided by commentaries from four of Asia’s leading thinkers about international relationships.