Nov. 21 (Bloomberg) -- China played down tensions with the U.S. and proposed funding to enhance maritime cooperation in Southeast Asia after President Barack Obama challenged its actions in the South China Sea at a summit of Asian leaders.
Assistant Foreign Minister Liu Zhenmin said China was committed to keeping sea lanes secure and called the U.S. “an important player in Asia ever since the second world war,” on Nov. 19 in Bali, Indonesia. China also chose not to criticize a U.S. agreement with Australia to bolster its military footprint in the region with the announcement that as many as 2,500 Marines will be stationed in the north of the country.
China is “soft-talking to prevent more members of the Association of Southeast Asian Nations from joining the Washington-led containment policy,” Willy Wo-Lap Lam, an adjunct history professor at the Chinese University of Hong Kong, said by e-mail. “Placatory gestures are being bolstered by dollar diplomacy: More developmental and infrastructure aid will be pouring into Asean countries, particularly those that have not fallen for America’s siren song.”
China is seeking to reassure countries in the region after its moves to assert sovereignty in waters that may contain oil and gas reserves provided Obama an opening to expand strategic ties in Asia. Over the course of a nine-day Asia-Pacific trip that began Nov. 11 in Hawaii, the president announced plans to advance regional trade talks that don’t include China and called on leaders of the world’s second largest economy to “play by the rules.”
‘Cordial And Frank’
Liu characterized talks between Chinese Premier Wen Jiabao and Obama on Nov. 19 as “very cordial and frank” and said China is ready to negotiate a legally binding conduct code in the South China Sea with Asean nations. Of the 10 member countries, Vietnam, the Philippines, Malaysia and Brunei have competing claims with China.
Asean may be ready with a draft code of conduct in the sea by July 2012, Philippine Foreign Affairs Secretary Albert del Rosario said today in Manila. The Philippines and Vietnam, which have awarded exploration contracts to Exxon Mobil Corp., Talisman Energy Inc. and Forum Energy Plc, reject China’s map of the sea as a basis for joint development.
The South China Sea contains oil reserves that may total as much as 213 billion barrels, according to Chinese studies cited in 2008 by the U.S. Energy Information Agency.
Obama, attending the East Asia summit for the first time, called it the “premier” arena to discuss maritime security concerns, a subject China has lobbied to keep out of international gatherings because it touches on territorial disputes. Sixteen of 18 leaders at the meeting mentioned maritime security and most of them backed Obama’s position, according to a U.S. official who briefed reporters aboard Air Force One after the meeting.
The Chinese came away from the meetings believing that a heavy-handed approach on the South China Sea would backfire, the official said.
White House National Security Adviser Tom Donilon said Nov. 18 that commerce is the main U.S. motive for weighing in on territorial disputes in the waters. He declined to note specific instances when trade was impeded.
“The United States interest here is in the freedom of flow in commerce,” he said. While the U.S. “doesn’t have a claim” in the territorial disputes, “we do believe that there should be developed a collaborative diplomatic process for the resolution of these claims.”
Obama has set a goal of doubling U.S. exports to $3.14 trillion a year by the end of 2014 and he said Asia is key to that goal. The U.S. this year has exported more to the Pacific Rim than to Europe, Commerce Department figures show.
During his Asia-Pacific trip, Obama has pushed China to allow its currency to trade more flexibly and the official China Central Television reported that Wen told the president in Bali that the government will increase the flexibility of fluctuations in its currency. Policy makers in China have pledged to shift the nation’s growth toward domestic demand and narrow its external surplus to help address lopsided flows of trade and investment.
The yuan is allowed to fluctuate 0.5 percent on either side of the daily fixing rate set by the central bank. China’s yuan has appreciated about 4 percent against the dollar this year, according to Bloomberg data, the best performance of 10 Asian currencies tracked by Bloomberg.
The 22nd U.S.-China Joint Commission on Commerce and Trade opened in the central Chinese city of Chengdu yesterday, with American officials saying beforehand they would push for China to take concrete action to protect intellectual property rights and buy more U.S. products.
China is Asean’s biggest trading partner, accounting for 11.6 percent of all commerce, compared with 9.7 percent for the U.S. in 2009, according to the latest available statistics. Liu said China had no interest in impeding trade.
“China believes that freedom of navigation has not been a factor in the South China Sea,” Liu told reporters after the meeting. “With the rapid development of economies in China and East Asian countries, the country and region attach more importance to freedom of navigation than anybody else.”
Liu also unveiled a 3 billion-yuan ($472 million) fund to develop a “maritime connection network” with Southeast Asian nations, he said.
China has used patrol boats to disrupt hydrocarbon survey activities in waters it claims, chasing away a ship working for Forum Energy off the Philippines in March and slicing cables of a survey vessel doing work for Vietnam in May.
“The Philippines will never be so naive that it would sacrifice its vested interests for an intangible and unreal promise from Washington to counterbalance China,” Li Hongmei, an editor with the official Xinhua News Agency, wrote today.
Secretary of State Hillary Clinton said Nov. 16 in Manila that the U.S. would boost the Philippines’s naval defenses and work to ensure there isn’t a “big thumb on the scale” that pushes development or strategic issues.
The U.S. presence “bolsters our ability to assert our sovereignty over certain areas,” Ricky Carandang, a spokesman for Philippines President Benigno Aquino, said Nov. 17.
The Philippines, a U.S. treaty ally, has called for China to adjust its sea claims according to the United Nations Law of the Sea. That would cost China rights to a large swathe of the waters now encompassed by its nine-dash map that extends hundreds of miles south from Hainan Island to the equatorial waters off the coast of Borneo.
“In circumstances when they are outnumbered diplomatically, and with the U.S. hovering on the sidelines like a school prefect, China usually goes back into its shell,” said Gary Li, an analyst with Exclusive Analysis Ltd., a London-based business advisory firm.
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