‘Asian alliance’: how China is forging a new power centre amid the trade war

China is already deepening ties with Southeast Asia and Middle East, and may even be paving way for a powerful new ‘Asian Union’, analysts say

China is pushing to forge a powerful new economic bloc with countries across Southeast Asia and the Middle East to counteract rising US protectionism, with some analysts suggesting a prototype for an “Asian Union” may be taking shape.

Premier Li Qiang attended the opening of a new forum bringing together leaders from China, the Association of Southeast Asian Nations (Asean) and the Gulf Cooperation Council (GCC) on Tuesday, where he remarked that the current global tensions offered an opportunity to bring the three sides closer together.

“Facing escalating geopolitical conflicts and confrontations, we can create long-term strategic opportunities by deepening mutual trust and strengthening solidarity,” Li said at the opening ceremony of the Asean-China-GCC Economic Forum held in Kuala Lumpur, the capital of Malaysia.

Earlier the same day, the three parties also held a summit where they signed a joint statement pledging to cooperate more closely on trade, supply chains, infrastructure and finance.

Asean comprises 10 nations from across Southeast Asia, while the GCC includes six Arab states bordering the Persian Gulf – namely, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

“These three parties make up a quarter of the world’s people and economy but only 5 per cent of global trade – showing huge potential for expansion,” Li said during his speech.

The new summit has the potential to create a new paradigm for multilateral collaboration in Asia, putting China in a stronger position to withstand US trade pressure, said Wang Huiyao, the founder and president of the Center for China and Globalization think tank in Beijing.

“Asean and China have now become a new and mutually reinforcing economic powerhouse. In my view, this effectively forms a ‘mini Asian alliance’,” Wang said. “Amid global uncertainties and the ongoing trade war, this provides China with a powerful new strategic lever.”

The inclusion of the Gulf states in the new forum would “further strengthen this alliance”, he added.

Su Yue, principal economist for China at the Economist Intelligence Unit, said the joint statement signalled China’s intention to support more infrastructure projects to enhance connectivity between the three regions.

“As trade tensions between China and the US deepen, Asean and the GCC countries are increasingly positioned as strategic connectors between the two major powers,” Su said. “China’s investment in these regions is expected to grow.”

But the Asean and GCC members may be wary of drawing too close to China, as they must also carefully manage their long-term relationships with the United States, especially as their trade surpluses with the US continue to grow, she added.

In the joint statement, China, Asean and the GCC also agreed to expand the use of local currencies in trade settlement and cross-border payments between the three regions.

“Amid rising tensions in China-US relations, China may be aiming to use the yuan more widely in trade,” Su said. “However, structural challenges remain, and while the US dollar may weaken, it is unlikely to be fully replaced.”

Also on Tuesday, French President Emmanuel Macron warned during a speech in Vietnam that the superpower politics being pursued by Beijing and Washington was creating risks for countries across Asia.

“The conflict between China and the United States of America is a geopolitical fact that casts a shadow of a risk of a much larger conflict in this important region,” Macron said.