The next battleground in the U.S.-China power struggle

December 4, 2015
Chinese President Xi Jinping (L), Vietnam Communist Party General Secretary Nguyen Phu Trong (2nd L), Vietnamese Deputy Prime Minister Nguyen Xuan Phuc (2nd R) and Vietnamese Politburo member Dinh The Huynh raise a toast after witnessing a signing ceremony of a dozen of  bilateral agreements following their official talks at the VCP's Headquarters in Hanoi on November 5, 2015. REUTERS/Hoang Dinh Nam/Pool - RTX1UVMZ

Chinese President Xi Jinping (L), Vietnam Communist Party General Secretary Nguyen Phu Trong (2nd L), Vietnamese Deputy Prime Minister Nguyen Xuan Phuc (2nd R) and Vietnamese Politburo member Dinh The Huynh raise a toast after witnessing a signing ceremony of a dozen of bilateral agreements following their official talks at the VCP’s Headquarters in Hanoi on November 5, 2015. REUTERS/Hoang Dinh Nam

Great-power struggles often play out in proxy conflicts, hot or cold. And the intensifying rivalry between China and the United States is no different. Recently, this rivalry has begun to play out in India, in Latin America and very prominently, in Southeast Asia, which remains a crossroads of global trade and a critical focus of maritime security. Both the United States and China have significant, and varied, interests in the region, and in an eerie echo of the Cold War, attention is focusing again on Vietnam. But this time around, the loyalties are different, and China and the United States are working overtime to come out ahead.

Vietnam is an increasingly important commercial partner for China, to which it exports nearly $60 billion of goods annually. As light industrial manufacturing becomes less competitive in China, due to rising domestic wages, Vietnam offers an “offshoring” investment location close to home for displaced Chinese factories. Through offers of inexpensive infrastructure financing, trade and engineering collaboration, Chinese leaders are working to help Vietnam become a regional hub in the “Maritime Silk Road” component of Xi Jinping’s “One Belt, One Road” infrastructure initiative, which seeks to link up the Asian continent with trade routes heading to China.

But for this strategy to work for China, the two countries must improve their relations. Sino-Vietnamese tensions and distrust go back centuries, to alternate periods of Chinese domination over Vietnam and Vietnamese resistance to it. The two fought a ground war as recently as 1979, which Vietnam won. In early November, Xi Jinping paid a state visit to Vietnam, the first visit by a Chinese leader in a decade. This was both an effort to emphasize the commercial successes of their relationship and to help move beyond tensions brought on by what Vietnam sees as Chinese provocation over disputed territories in the South China Sea, which erupted in anti-China protests last year. This approach has been a go-to tactic of Beijing diplomacy in recent years: de-emphasize political tensions by keeping the focus on commercial progress and success.

Developments in U.S.-Vietnam relations over the last few years suggest that in this particular case, China’s commercial and financial strategy may not be enough. Hanoi and Washington have been drawing closer to each other in areas from trade and investment to military cooperation. Bilateral trade, while not quite at Chinese levels, is substantial at $35 billion annually. It is also increasing, as Vietnam begins more vigorous efforts to export goods to the United States, especially in the garment industry. What is more, Vietnam runs a surplus in its trade with the United States, as opposed to the deficit it runs with China, a fact not lost on Communist Party leadership in Hanoi, who are eager to expand a manufacturing relationship that provides a route out of poverty for millions of citizens.

Vietnam has also joined the Trans-Pacific Partnership, which excludes China, and has signed up to some of the more stringent policy demands of the agreement, especially concerning labor standards. This may signal a willingness by Hanoi to overlook some immediate commercial advantages, in the form of cheaper labor, in the interest of a closer overall economic relationship with the United States and the TPP countries more generally, possibly in the interest of balancing against China.

Washington is, for the moment anyway, very content to help Vietnam balance against China in the region. Defense Secretary Ash Carter has already visited Vietnam once this year, and may return on his next Asia tour. And earlier this year, Vietnamese Communist Party leader Nguyen Phu Trong visited Washington, the highest-level visit by a Vietnamese leader since the end of the Vietnam War.

This diplomatic back-and-forth is not simply sound and fury, though. Vietnam and the United States have a common interest in pushing back against China’s maritime territorial claims, and U.S. Navy muscle in contesting them has been quietly welcomed by Hanoi. President Barack Obama was originally expected to visit Hanoi on his recent tour of Southeast Asia, attending the APEC summit. But because the trip came so quickly on the heels of the Paris attacks, it was cut short as Obama returned to Washington to focus on the Middle East.

China and the United States are likely to continue competing for influence in Southeast Asia, and Vietnam’s critical geography in the region means it will remain the focus of this contest for some time to come. But both countries do well to remember that, in their history, the Vietnamese have cherished nothing quite so much as their independence and autonomy, and can be cajoled and pushed only so far by the whims of great powers. After all, between 1965 and 1979, Vietnam fought both the United States and China — and won both times.

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TPP will hurt China economically, but hopefully induce a change in the labor standards in China.

Vietnam is looking good economically.

Time to invest in Vietnam.

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