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China Poised to Help Southeast Asia Recover from Pandemic, Experts Say

FILE - Roads are deserted during a lockdown due to the coronavirus outbreak, in Kuala Lumpur, Malaysia, June 1, 2021.

China is likely to help Southeast Asia recover from the economic shocks of COVID-19 because of its outsized growth and pivotal role in cross-border development, experts said following a regional summit.

China, which had a $15.4 trillion economy last year, is expected to sell more vaccines, restart infrastructure projects and open manufacturing supply chains for the region, according to economists.

The moves are liable to bolster China’s drive to enhance its economic and diplomatic influence across the region through efforts such as its Belt and Road Initiative and so-called “vaccine diplomacy,” making COVID vaccines available to developing countries.

As Western countries begin to recover from the financial effects of the pandemic, many of the 660 million people in Southeast Asia are still grappling with COVID-19 outbreaks and the effects of economic inactivity.

Help is coming, a Chinese spokesman suggested Monday ahead of the East Asia Summit meeting of senior officials, which convened by video conference Thursday in part to discuss post-pandemic recovery.

“Amid profound changes in regional and international landscapes, China hopes that through these senior officials' meetings, we will work with all parties to … advance post-epidemic sustainable development,” Chinese Ministry of Foreign Affairs spokesman Zhao Lijun told a news briefing.

The Chinese economy grew 2.3% last year, after strict lockdowns contained most of its coronavirus spread, even as other countries worldwide reported economic contractions. China reported the world’s first virus cases.

Officials in Beijing will probably invest abroad in energy transitions for steel, petrochemicals and other industries that aim to cut emissions, said Rajiv Biswas, Asia-Pacific chief economist at IHS Markit. The 10-country Association of Southeast Asian Nations has set a target of using renewable energy for 23% of consumption by 2025.

Projects started in Southeast Asia under China’s $1 trillion-plus Belt and Road Initiative should power back up as pandemic containment measures ease, he added. Some 15 Belt and Road projects worth a combined $2.4 billion were delayed or hit by financing glitches last year, the London-based Overseas Development Institute think tank said in February.

Around Southeast Asia, COVID-racked Malaysia has allowed Chinese companies to invest in real estate, ports and entertainment. Indonesia, which faces its own pandemic battles, has gotten help with a dam and a railway line.

“Probably for China, the main focus will be on restarting a lot of those, because some of those projects during the pandemic were put on hold because it was very difficult for people to move around so they couldn’t send their experts and so on,” said Biswas.

China may offer separate aid or investment packages country by country, he added.

In the Philippines, which has battled COVID-19 steadily for more than a year, China would at least consider “fast tracking” donations of its domestically produced vaccines, said Jonathan Ravelas, chief market strategist with Banco de Oro UniBank in Metro Manila.

“What will really reset the Philippines is more immunizations, so we can further open the economy,” he said. “The government has procured various vaccines and the first ones that eventually arrived were from China. Maybe they could offer more vaccines and probably some funding for some [infrastructure] projects.”

Benefits for China

Beijing’s economic aid helps it ease a decades-old dispute over sovereignty in the South China Sea, analysts said after a world arbitration court ruled in 2016 against the Chinese maritime claims. China has a military and technological lead in the resource-rich sea, chafing against rival claimants Brunei, Malaysia, the Philippines and Vietnam.

Meanwhile Chinese COVID-19 vaccines have been shipped to more than 80 countries, some for emergency use, in an effort that some Chinese analysts have contrasted to “the ‘me-first’ policies of the United States and the European Union.

The Belt and Road Initiative is also seen in Western countries as an effort to supplant the United States as the dominant power in the Indo-Pacific region. U.S. President Joe Biden and other G-7 leaders countered this month by announcing a Build Back Better World Partnership to address infrastructure needs in low- and middle-income countries.

Belt-and-Road projects give brisk business to major Chinese contractors while smoothing trade. China depends too on manufactured goods from Vietnam, a Southeast Asian manufacturing powerhouse that has weathered the pandemic without nationwide lockdowns.

“Vietnam produces inputs for Chinese, which assembles and sends off,” said Adam McCarty, chief economist with Mekong Economics in Hanoi. “They have to get the supply chain up and running again as quickly as possible without the supply bottlenecks.”

The senior officials exchanged views at the East Asia Summit event on regional and international developments including COVID-19 and the post-pandemic recovery. China and the Association of Southeast Asian Nations will hold another online forum for officials on June 29.