CHINA-ASEAN FIVE-CONNECTIVITY INDEX

By Chen Yiyuan, Zhai Kun

ASEAN is an important link along the “21st Century Maritime Silk Road” as well as a key cooperation partner in China’s Belt and Road Initiative. For more than three years since the Belt and Road was first proposed, ASEAN countries have enthusiastically participated in construction, helping the project achieve impressive progress.

To qualify progress of connectivity along the Belt and Road, the “Five-Connectivity Index Subject Group” was established at Peking University to spearhead calculation of the Five-Connectivity Index on the Belt and Road. Based on objective data of basic status and development trends of 64 involved countries, the index made specific and in-depth assessment of the relations of these countries with China in terms of policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bonds.

Table 1 presents the overall development of Five-Connectivity between China and 10 ASEAN countries from 2016 to 2017.

In general, Five-Connectivity Index between China and 10 ASEAN countries averaged 62.07 in 2016, higher than that of other countries along the route (52.4). This indicates that the overall level of connectivity between China and ASEAN countries is relatively high. In the national category, the analysis determined that ASEAN countries accounted for 5 of 11 countries with smooth link types in terms of “five connectivity” and none was of the weak link type.In particular, Singapore ranked 2nd with 79.19 and Indonesia 3rd with 77.24, closely following Russia.Thailand was sixth and captured the top spot in rankings of seven countries with good link types including Thailand, Indonesia and Vietnam. And Thailand is very likely to move up in the rankings of countries of the smooth link type. Myanmar was a country of potential links, and ranked 46th with the score of 47.48. Myanmar is most likely to leap up on the list of smooth link types in the near future.

Table 1

Table 2

Compared to data from 2015, ASEAN countries are developing steadily in connectivity. In 2016, the Five-Connectivity Index of every ASEAN country remained stable, with only some minor ranking changes.Vietnam and the Philippines dropped two places and Myanmar dropped three in the rankings. Laos grabbed fifth place with a rapid rise in the rankings.

Table 2 represents Five-Connectivity Index comparison between Southeast Asia and South Asia.

Healthy Overall Development in Policy Coordination

The index of 10 ASEAN countries averages 12.58 in policy coordination, higher than that of other countries (10.97) along the route. Among them, the index of seven countries is above the average, and the index of three countries is below, but very close to the average. This indicates that compared to other countries along the route, China and ASEAN countries are at relatively high levels in policy coordination.

China and ASEAN countries have maintained traditional friendly relations with strong mutual trust in politics. At the bilateral level, China has established diplomatic ties with countries throughout the region and set up embassies in the countries. Mutual trust between China and ASEAN countries is ever increasing in politics and strategy, and high-level visits are frequent. These mechanisms have become good channels of policy coordination. Bilateral mechanisms of communication and cooperation are many and diverse.

Moreover, the Belt and Road Initiative (BRI) has been deeply aligned with respective development strategies of ASEAN countries. The BRI is highly complementary to the “Two Corridors & One Ring”of Vietnam, the “Rectangular Strategy for Growth” of Cambodia and the “Global Maritime Axis” strategy of Indonesia. At the multilateral level, China has established a strategic partnership with ASEAN as a whole. “10+1” has designated five key cooperative fields, namely agriculture, telecommunications, HR development, mutual investment and development of the Mekong River Basin. The China-ASEAN relationship has become a dialogue partnership with the widest links, greatest achievements and the closest contact. In March 2016, the first Lancang-Mekong cooperation leaders’ meeting was held in Sanya, China’s Hainan Province, officially launching the Lancang-Mekong cooperation mechanism. More than half of the 45 early-harvest projects approved by the first leaders’ meeting are now under construction or in planning. Lancang-Mekong cooperation has also become an important platform for the BRI.

Broad Space for Facilities Connectivity

Facilities connectivity refers to interconnection of infrastructure to link different countries and regions, which is a top priority in BRI construction.The index of ASEAN countries averages 11.16 in terms of facilities connectivity, higher than the average of 10.42 of other countries along the route.The scores of Cambodia, the Philippines and Laos are relatively low.

Infrastructure is relatively undeveloped in ASEAN countries except for Singapore. Chinese enterprises have taken full advantage of their technology and production capabilities to actively assist the development of ASEAN countries in infrastructure by participating in project contracting and investment,as well as operations of ports, highways, railways,airports, bridges in ASEAN countries, which is boosting connectivity throughout the Southeast Asian region.

China and ASEAN countries have formed perfect mechanisms in telecommunications through platforms such as the meetings of telecommunication ministers and agreements like China-ASEAN Memorandum of Understanding on Cooperation in Information and Communications Technology and Beijing Declaration on ASEAN-China ICT Cooperative Partnership for Common Development.

China and neighboring ASEAN countries are energetically paving the way for BRI cooperation in other fields with a solid foundation and strong guarantees. Followed by the completion of a natural gas pipeline in 2013, China and Myanmar accelerated negotiations on construction of a crude oil pipeline in 2016. China has also conducted cooperation in energy development with Vietnam, Laos and Myanmar.

Rapid Development of Unimpeded Trade

Unimpeded Trade is the heart of the BRI, backed by the basic goal of promoting economic cooperation between the countries along the route as they deepen economic globalization. Presently, the index of ASEAN countries in general is higher compared to other countries along the route. The index of 10 ASEAN countries in unimpeded trade averages 12.36, higher than the average of 9.89 of other countries along the route. It fully reflects that achievements have been made in trade cooperation between China and ASEAN countries in recent years. In terms of unimpeded trade, Singapore ranked first and Malaysia third with scores of 18.53 and 15.79 respectively. However, the index level of unimpeded trade varies distinctly with a clear gap between each index.

The China-ASEAN Free Trade Area (CAFTA) is the largest free trade area among developing countries.After 25 years of development, trade volume between the two sides has increased from US$8 billion to US$472.2 billion, up 60 times over. China has been ASEAN’s largest trade partner for seven successive years. Meanwhile, ASEAN has been China’s third largest trade partner for five successive years. China and ASEAN countries are constantly striving for highlevel trade cooperation. The agreement on upgrading CAFTA signed by China and ASEAN which came into effect in July 2016 has deepened and broadened bilateral cooperation in economics and trade and elevated it to a new stage to liberalize and facilitate high-level trade and investment.

China and ASEAN countries have made a rapid and balanced development in mutual investment with the two-way investment totaling US$160 billion.China has become the largest investor in Cambodia,Laos, Myanmar and Indonesia and the third largest investor in Malaysia.

Relatively Smooth Financial Integration

The index of ASEAN countries in financial integration averages 13.09, higher than the average of other countries along the route (10.36). The overall level is relatively high. Seven countries rank among top 20 including Singapore, Malaysia, Thailand and others. However, Myanmar (6.81) and Timor-Leste(6.81) rank low. Seven countries including Singapore,Malaysia and Thailand performed well with high marks in financial integration. A major factor in this development is China:

In recent years, China signed currency exchange agreements with Malaysia, Indonesia, Thailand,Singapore and other Southeast Asian countries to widen the scope and scale of bilateral local currency exchange, expand pilot zones for local currency clearing in cross-border trade, reduce the risk of exchange rate in bilateral trade and investment and cut the cost of clearing. China has set up yuan clearing banks in Malaysia, Thailand and Singapore.Singapore has launched offshore yuan settlement services and replaced London as the offshore yuan settlement center after Hong Kong.

China proposed initiatives to establish the Asia Infrastructure Investment Band and Silk Road Fund to provide the area with financing and investment services to support facilities connectivity and international production capacity cooperation.Chinese financial institutions entered the financial markets of ASEAN countries and made a difference not only in countries with relatively developed markets like Singapore and Malaysia but also in countries like Cambodia, Laos and Myanmar in opening local financial markets. Chinese financial institutions have become a driving force in the development of the finance industry in the Southeast Asian region, serving local businesses and people as well as accelerating the development of local markets.

Since the establishment of China-ASEAN Interbank Consortium, the cooperation mechanism has been honed to become a results-oriented financial cooperative group that fosters in-depth communication and discussion. This mechanism has become an important platform for multilateral financial cooperation between China and ASEAN countries.

Deepened Development of People-to-people Bonds

The index of ASEAN countries averages 12.12 in people-to-people bonds, higher than the average of other countries along the route (10.76). The overall level is relatively high. In this area, Thailand ranks second with 16.67 after Russia (17.88) among the countries along the route.

Cooperation in education has become a highlight.Chinese universities have already offered the courses in foreign languages including all the languages of ASEAN countries. According to statistics, students participating in international exchanges between China and ASEAN countries now number 90,000.By 2020, exchange students from each side will surpass 100,000. Thirty Confucius Institutes and 30 Confucius Classes for elementary and middle schools have been set up in 10 ASEAN countries.

In recent years, the popularity of Chinese films and TV programs has been rising in Southeast Asia,prompting a sharp increase in exports of Chinese films and TV programs. When Chinese films and TV programs become hits in Southeast Asia, Chinese culture draws more attention from local people.

Tourism becomes an important channel for peopleto-people bonds. China and ASEAN have mutually become the biggest overseas tourist destination and source of tourists. In 2016, China was the biggest source of tourists of Thailand, Indonesia and Vietnam and the second biggest source of tourists of Singapore, Cambodia and Myanmar. Tourism generates considerable income for Southeast Asian countries and increases direct contact between the peoples, which enhances mutual understanding and cultural communication and lays a solid foundation for public support.