Asia's new peril 

(MENAFN - Khaleej Times) As Europe dithers and the US nervously watches its unemployment rate, a China-led Asian rise is accepted as the new reality.

Less noted is the anomaly of an Asia increasingly integrated with the Chinese economy and militarily more reliant on the US.

At a retreat in Hayman Island, Queensland, for Australian CEOs, a security expert noted that this is the first time in Australia's history that its major economic partner is not concurrently major strategic partner " initially the UK followed by the US.

China has become for Australia, as it has for many nations in Asia Pacific and indeed around the world, especially those engaged in commodity exports, its key engine of growth. Yet Australia has been one of the US's closest strategic and military allies, from World War II to Korea to Vietnam and Iraq. The planned stationing of 2500 US troops in Darwin, reflecting the Obama administration's tilt to the Pacific, is meant to consolidate these ties. The US and China are not belligerents, yet rivalry is growing. Being between the two is uncomfortable to say the least.

There are many hotspots, perhaps hottest of all the South China Sea, which Beijing has declared to be part of its "core interests" with Washington insisting on freedom of navigation. Besides competing claims to resources, there are disputes over nomenclature. The Vietnamese, for example, whose relations with China are among the tensest in the region, resent the name used by the West and perception of giving in to a Sino-centric perspective. The Vietnamese call it the Eastern Sea. In a recent confrontation between Chinese and Philippine vessels in the Scarborough Shoal area, Beijing claims it as part of its territorial waters in the South China Sea. Manila prefers the West Philippines Sea.

Many in the Asia Pacific region regard the concept of China's peaceful rise with skepticism. The Philippines has been a longstanding ally of the US, and even Vietnam, erstwhile enemy, increasingly looks to Washington for protection. Since the end of the Vietnam War in 1975, America's military presence in Southeast Asia has been, on balance, benign and welcome. At the same time, the region's economies have become increasingly dependent on China.

At 362.3 billion in 2011 China has recently overtaken Japan as ASEAN's third biggest trading partner, after the EU (567.2 billion) and the US (446.6 billion). However trade between China and ASEAN is growing faster: a 24 per cent recorded increase in 2011. Reflecting this growing relationship, in January 2010 China and ASEAN concluded a free trade agreement " CAFTA. In population terms, it's the world's biggest market and, in GDP, third biggest. The actual physical US military presence in terms of troops in the region is concentrated in Korea and Japan, with small numbers in Southeast Asia " the Philippines, 142; Singapore, 163; and Thailand, 142. However, US influence is being strengthened especially through the American naval Pacific Command. Main ties are with Australia, the Philippines and Singapore with upgraded military with Thailand, Vietnam, Malaysia, Indonesia and Brunei.

Japan's economic dependence on China, with China having surpassed the US since 2008 in becoming Japan's biggest trading partner at over 20 per cent and fastest growing destination for Japanese outward investment is deep. Exports to China " mainly capital and intermediate goods as China emerged as hub of Japan's global supply chain " is a rare dynamic force in an otherwise anemic economy. Japan has also multiple issues with China, including over territory, notably confrontation over the Diaoyu/Senkaku Islands in the East China Sea, and in economic matters, a recent example being China's ban on export of rare earths to Japan required for its high-tech manufacturing industry.

The situation in Asia Pacific is perilous and unsustainable. Under these conditions, it's highly unlikely that robust regional institutions will emerge in the near future. And the fact that much of China's economic prowess depends to a considerable extent on the big American market and investment opportunities put additional wrinkles on triangular US-Asia and China relations. With weak global governance and leadership, the Asia Pacific Region for all its economic success keeps floundering on uncertain seas.

Jean-Pierre Lehmann is Emeritus Professor of International Political Economy, IMD, Switzerland, founder of The Evian Group, Senior Fellow at the Fung Global Institute in Hong Kong, and visiting professor at Hong Kong University