China Surpasses US as Dominant External Power in Southeast Asia - Here’s What It Means for Global Markets
Beijing's economic offensive reshapes regional dynamics while Washington plays catch-up.
The Dragon's Gambit
China just executed a geopolitical power move that's got analysts scrambling. Infrastructure investments, trade partnerships, and strategic diplomacy created an unstoppable momentum across Southeast Asian markets.
Dollar Dominance Falters
Traditional US influence mechanisms are getting bypassed by Beijing's checkbook diplomacy. The Belt and Road Initiative's concrete results are outpacing American promises - and regional leaders are taking notice.
Investment Implications
Smart money's already repositioning. Commodity flows shifting eastward, supply chains realigning, and digital infrastructure contracts going Chinese. Meanwhile, Wall Street's still trying to figure out if this is a blip or a trend - typical legacy finance delay.
The new regional reality hits like a ton of bricks: when you build the ports, control the trade routes, and hold the purse strings, influence follows. US policymakers might want to check their playbook - it's looking dangerously outdated.
U.S. remains strong only in select defense ties
U.S. sway is firmest in long-time security partners like the Philippines and Singapore, where defense cooperation anchors the relationship. But across mainland Southeast Asia, the study finds Washington is increasingly viewed as peripheral to day-to-day economic priorities.
It attributes the drop to Trump-era tariffs, stricter visa policies, and an 83% reduction in foreign aid. The levies that began in April hurt economies across the region; even after July adjustments, Laos and Myanmar continued to face 40% duties, as earlier reported by Cryptopolitan.
Trump’s second term has also seen the dismantling of USAID alongside DEEP funding cuts and layoffs at organizations long seen as pillars of U.S. soft power in Asia, notably the U.S. Agency for Global Media, which oversees Voice of America and Radio Free Asia.
The study concludes that Beijing has expanded its reach through a mix of commerce, investment, and diplomacy in a region once led by Washington. At the same time, Southeast Asian governments are spreading risk by widening partnerships to avoid dependence on a single power.
“China leads the United States by a clear margin,” said Susannah Patton, Lowy’s deputy research director. “But we also demonstrate the importance of neighborhood relationships among Southeast Asian countries, which means that China has not drawn the region into an uncontested sphere of influence.”
U.S. pushes to rebuild trade ties with ASEAN
Separately on Wednesday, U.S. Trade Representative Jamieson Greer said the United States expects to finalize trade deals with more Southeast Asian countries in the coming months. He spoke in Kuala Lumpur at the start of talks with economic ministers from the Association of Southeast Asian Nations, where export-reliant members voiced concern over U.S. tariffs.
Most countries in the bloc are facing tariffs of 19% or 20%. Laos and Myanmar are subject to a 40% rate, whereas Singapore’s rate is 10%. Greer said negotiations on the levies have moved forward, with some agreements already announced and others to be completed “in the coming months or even weeks, for some.”
Washington has said it reached agreements with Indonesia and Vietnam on tariffs, though both countries say terms are still being finalized. Vietnam, the world’s sixth-largest exporter to the United States, risks losing $25 billion a year from the 20% tariff on its goods, according to United Nations Development Programme estimates.
U.S. Trade Representative Jamieson Greer said Washington welcomes ASEAN trade but wants it “balanced and reciprocal,” in his first meeting with the bloc.
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