United States President-elect Donald Trump’s pledge to dump or renegotiate the Trans-Pacific Partnership (TPP) on his first day in office is a gift for the Chinese in their drive to control the world economy.
China is now positioning itself as free trade’s new champion and seizing economic leadership of the Pacific Rim.
Under President Barack Obama the TPP was sold as a way to counter China’s rise, and its possible demise is now viewed in China as a US retreat from the region.
China was excluded from the TPP, which would have accounted for 40 per cent of world trade.
Chinese President Xi Jinping has seized the opportunity at the APEC summit last weekend and pushed his own free trade vision, the Regional Comprehensive Economic Partnership (RCEP).
It involves 16 countries including Australia and Japan, but excludes America.
Mr Xi is pushing to make it bigger and is leaving the door open to Latin American countries like Peru who are keen to benefit from the growing economies of Asia.
The move would be a massive boost for China’s plans to shift the existing US-dominated world economic order.
With billions of dollars on offer, China is trying to supplant the World Bank and the IMF with its Asia Infrastructure Investment Bank.
China picking off ASEAN countries one by one
In the last month Chinese cash diplomacy has been in full force.
Malaysian Prime Minister Najib Razak signed off on US$34 billion ($46 billion) in trade and investment agreements.
Xi Jinping has seized the potential demise of TPP as an opportunity to spruik his own free trade vision. (AP: Esteban Felix)
A couple of weeks earlier, Philippines President Rodrigo Duterte signed US$13 billion ($17 billion) in trade and aid deals.
Cambodia was already on side but to secure support Beijing offered 31 trade agreements and US$300 million ($406 million). Now attention is turning to Thailand, which since its military coup in 2014 is tilting towards China.
One by one China is picking off the ASEAN countries that were traditionally aligned to America and united against China’s territorial claims in the South China Sea.
China’s control in the South China Sea is as much about economics as it is national pride. About US$5 trillion ($6.7 trillion) — or half the world’s trade — moves through the waters of the South China Sea.
Controlling and regulating those waterways will give China enormous power in setting the economic rules of the game.
To achieve this China is breaking the template that has been in place since the end of Word War II — most Asian nations accepted American security guarantees and were then left to focus on economic growth, stability and prosperity.
In the new Chinese order the remaining ASEAN countries face a choice. If they want to benefit from China’s chequebook diplomacy then the cost might be to accept China’s claims over the South China Sea.
At the end of the day China hopes to cleave ASEAN from America’s grasp and make the United States strategic pivot back into Asia unworkable.
They are counting on Donald Trump as president advocating a more isolationist stance.