Politics of Hedging in the Indo-Pacific

On Monday, while delivering the keynote address at the annual China Business Summit held in Auckland, New Zealand Prime Minister Chris Hipkins weighed in on the power dynamic in the Indo-Pacific. 

New Zealand’s estimation matters because it is a small country in Southern Pacific heavily dependent on trade with China for preserving its prosperity and yet one of the Five Eyes (along with the US, UK, Australia and Canada), the exclusive secretive security grouping of Anglo-Saxon countries. 

Hipkins’ speech came just three weeks after his return from Beijing on an official visit with a business delegation when he met with China’s President Xi Jinping. Meanwhile, Hipkins had just returned from the NATO Summit in Vilnius last week. New Zealand PMs have begun attending the NATO summits since last year as one of “IP4,” the alliance’s four Indo-Pacific partners (joining Australia, Japan and South Korea.)  

The Chinese readout of President Xi’s meeting with Hipkins in Beijing on June 27 attributed the following remarks to the latter: “He [Hipkins] said that New Zealand values its relations with China… (and) believes that bilateral relations should not be defined by differences, and it is important that the two sides have candid communication, mutual respect, and harmony without uniformity. New Zealand is willing and ready to maintain communication with China on helping island countries develop.” 

But at Auckland on Monday, he added caveats: “China’s rise and how it seeks to exert that influence is also a major driver of the increasing strategic competition, particularly in our wider home region, the Indo-Pacific. Our region is becoming more contested, less predictable, and less secure. And that poses challenges for small countries like New Zealand that are reliant on the stability and predictability of international rules for our prosperity and security.” (See China Daily report titled New Zealand PM calls for deepening economic, environmental cooperation with China.) 

What emerges is that the traditional security concepts of balancing and bandwagoning are insufficient for understanding how smaller states like New Zealand are responding to US–China rivalry. (See the USIP commentary New Zealand Draws Closer to NATO with a Wary Eye.)

This was also the leitmotif of the foreign and security policy choices exhibited by Southeast Asian countries at the ASEAN summit and related events in Jakarta in the weekend. The US Secretary of State Antony Blinken’s single-minded mission at Jakarta was to rally ASEAN members to the US banner. But ASEAN countries are choosing their own path, which is not to choose sides between the US and China. 

Even Singapore, the US’s closest ally in southeast Asia, has begun to differ. Foreign Minister Vivian Balakrishnan told reporters ahead of the ASEAN Regional Forum in Jakarta on Friday that the ASEAN countries do not want to be divided or vassal states, “or worse, an arena for proxy wars.” 

The US underestimates the strength and resilience of the cooperative relations that have been forged between ASEAN countries and China. Simply put, the diplomatic and political engagement between China and the ASEAN in Jakarta last week showed that there is a shared will to not let differences and disputes disrupt national or regional development. The trade volume between ASEAN and China touched $431.3 billion in the first half of this year, according to latest official data, an increase of 5.4 % compared with the same period last year. 

The meetings in Jakarta on Friday indicated that the ASEAN countries do not want the US to make the region another arena for its destructive power games. The completion of the second reading of the text for a Code of Conduct in the South China Sea, and the adoption of a guideline document for its early conclusion, sent out a clear signal that the ASEAN region will not allow any seeds of discord to take root. Of course, this momentum serves China’s interests while it undercuts the US attempts to create friction in ASEAN’s relations with China. 

Indonesian President Joko Widodo told regional foreign ministers who gathered in Jakarta on Friday that ASEAN should not become a proxy to any power. Interestingly, alluding to the Western attempts to split the ASEAN, Widodo underscored to the regional foreign ministers who were paying him a courtesy call on him (who included the QUAD foreign ministers) that the ASEAN is committed to strengthening its unity, solidarity and centrality in maintaining peace and stability in the region. “ASEAN cannot be a competition, it can’t be a proxy of any country, and international law should be respected consistently,” he said. 

In effect, the 18-nation East Asia Summit which was held during the ASEAN Summit, witnessed for the first time the concept of neutrality combining with the concept of ASEAN centrality and the ASEAN Outlook on the Indo-Pacific. 

Significantly, last Wednesday, ahead of the ASEAN summit, the foreign minister of Indonesia Retno Marsudi held a trilateral meeting with the Chinese CCP Central Committee’s foreign policy chief and Politburo member Wang Yi and her Russian counterpart Sergey Lavrov in Jakarta. The Chinese and Russian readouts (here and here) show a high level of satisfaction that the ASEAN is getting its act together, which strengthens the shift to a multipolar world order. To be sure, a key item for discussion would have been Indonesia’s BRICS membership. 

Indonesia will be a strategic asset for BRICS. Historically, hedging as a concept arose out of the dialectics of the traditional security concepts of balancing and bandwagoning. But Indonesia is creatively taking matters to a “post-hedging” security paradigm where states big and small are shifting to economic policy as the meaningful indicator of security alignment. Simply put, the Southeast Asian states want a stable geopolitical environment to focus on their economic development and do not want to be forced to “take sides” in any hegemonic rivalry. 

However, this transition won’t be smooth. The US is weaponising economic and technological connectivity making it a source of geopolitical power and vulnerability. If weaponised interdependence means that more economic and technological policies are perceived as zero-sum, the policy space for hedging shrinks, in principle. 

But then, a government might choose Chinese telecommunications providers purely based on cost, speed of rollout and superior quality, and disregard the West’s paranoia about network security risks. This is already happening in the Gulf region. The smaller nations’ motivation cannot be underestimated.

Besides, China has had a head start. The launch of RCEP and evolving investment flows look set to further strengthen the strong economic links between ASEAN and China. The ASEAN-China trade corridor stretching from the cold and dry steppes in northern China to the tropical jungles of Indonesia generates a diverse range of commercial activity, with each geography equipped with its own competitive advantage.

Thus, China’s Pearl River Delta, Thailand and Vietnam, for example, are all important manufacturing hubs, while Indonesia and Malaysia are rich in natural resources. Hong Kong and Singapore are international financial centres, and Shenzhen is shaping up to be Asia’s Silicon Valley. 

The potential economic impact will be huge. ASEAN trade to China is moving up the value chain. Looking to the future, green development and promoting innovation will be key areas of strategic focus. And these ambitions will be realised by investment. Equally, as the Chinese economy undergoes a tech-driven transformation, its homegrown innovations will be exported to other countries. ASEAN is a prime candidate.

Chinese companies are already building data centres and 5G networks across the ASEAN region. The Chinese ambassador to the ASEAN Hou Yanqi recently called the China-ASEAN common space the “epicentrum of growth” in the world economy. 

MK Bhadrakumar is a former diplomat. He was India’s ambassador to Uzbekistan and Turkey. The views are personal.