Made in China: Beijing woos Southeast Asia Defense Market

Defense cooperation between China and some Southeast Asian nations are edging ever as Beijing-backed Chinese firms ramp up arms transfers to the region. This is amidst calls for ASEAN to be less dependent on western suppliers. The US seems to be taking notice.

By Kelvin Wong, Yang Fang

Increasing Defense Trade

In recent years, China has complemented it already significant economic and political engagement of Southeast Asia with increased military cooperation, particularly in the area of defense trade. While China is no stranger to the Southeast Asian defense market, having sold equipment to regional states such as Myanmar and Thailand in the past two decades, Beijing seems to be making a serious push to sell arms to its Southeast Asian neighbors of late.

Like any other commodity on the international market, China’s arms are driven by a combination of demand and supply, albeit to a certain point. China has been known to leverage on arms sales to sweeten political ties with recipient nations, often at discounted prices or with generous loan repayment schemes. Some analysts have noted that such deals are targeted at nations of particular value to Beijing, such as a resource-rich nations, in hopes of securing access to energy and raw materials. Its current customers often tend to be seeking to diversify, or lack access, to alternative supply sources. Prestige may also be another driving factor, with the spread of Chinese-made arms raising Beijing’s profile internationally.

Sino-US Tussle for Regional Influence?

China’s efforts to market its defense goods in Southeast Asia have certainly not gone unnoticed. It seems have sparked a renewed drive by Washington to maintain its presence among key regional players. The US Department of Defense is processing – what was termed by defense market intelligence HIS Jane’s – a “complete capability package” for the Indonesian military in July this year in an apparent response to an Indonesia that was increasingly turning to Chinese suppliers. A month earlier, the two countries signed a wide-ranging agreement intended to integrate existing defense collaboration, following a rigorous evaluation of US-made aircraft in service with Indonesian armed forces by the US Air Force. These developments are a remarkable turnaround by Washington, considering that it was as recent as 1999-2006 when sales of lethal weaponry to Indonesia were banned. Closer defense ties with Jakarta may also be a hedge against an increasingly assertive China in the region.

The Sino-US tussle for influence in Southeast Asia is apparent over strategically-important nations as Indonesia. The interest in Indonesia is stimulated by a few factors, including its strategic position, which is home to increasingly important shipping lanes; the country’s huge resource base, in which oil exploration is largely undeveloped; and its rapidly expanding economy, which is expected to drive large-scale military modernization over the next decade and beyond. Indonesia has many important sea lanes which are of strategic importance to both external powers. Industrialized East Asian countries have to rely on these critical shipping lanes to conduct maritime trade and to import much of their energy resources and raw materials. China and the US my also want to protect freedom of navigation for their naval vessels in this part of waterways.

Granted, the range and volume of Chinese defense equipment is still relatively modest at this stage. But with Chinese-made hardware getting increasingly sophisticated while remaining affordable, coupled with generous repayment options and technology transfer options, it is likely that regional interest in what Chinese firms have to offer will increase in the future.

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