China in WTO may shake Southeast Asia

China in WTO may shake Southeast Asia

KUALA LUMPUR (Reuters): China's graduation to World Trade Organization (WTO) membership may prove a double-edged development for its southern neighbors and could stir problems for ethnic Chinese living in southeast Asia.

Kunio Yoshihara, a professor of Japan's Kyoto University in residence at the Institute of Malaysian and International Studies, said on Friday China's WTO accession posed dangers to the region but added the threat should not be overdone.

"In the countries such as Malaysia and Indonesia where the integration of Chinese to their societies has been difficult for religious and other reasons, the rise of China as an economic force will create problems," Yoshihara said during a public lecture at Putrajaya, Malaysia's administrative capital on the outskirts of Kuala Lumpur.

China is in the final stages of negotiating entry to the WTO and is expected to become a member next year, if not this year.

"Chinese re-entry into the world market will raise the relative importance of ethnic Chinese businessmen in southeast Asia," he said.

Chinese language and culture would grow in importance along with China's rising economic and political power, he added.

"More ethnic Chinese will become re-Sinocised, which may create difficult political problems in the southeast Asian countries where Chinese remain an ethnic problem."

Ethnic Chinese make up 30 percent of Malaysia's population, where an affirmative action policy intended to boost the wealth of majority Malays was implemented after bloody race riots in 1969.

Chinese in Indonesia represent some three percent of the population, though resentment at their wealth has meant they are often the target of racial prejudice and attacks during riots.

As far as trade issues were concerned, Yoshihara drew a mixed picture of gains and losses for southeast Asian nations, setting the benefits of greater market access for the region's primary products against the northern giant's lure for foreign investors.

For Malaysia, this would mean increased exports of oil and gas, fruit, palm oil, canned foods and petrochemicals, he said.

Foreign companies seeking long-term investment projects in an environment free from endemic bribery and corruption would also favor places like Malaysia over China.

But Malaysia's electronics and electrical manufacturing capacity, centered in the northern state of Penang and responsible for nearly 60 percent of exports last year, could feel the pinch.

Yoshihara said Penang may be successful in retaining existing foreign company investment from the United States, Japan and elsewhere but may struggle for new money.

"When the U.S. economy booms again, probably (companies) won't come back to Malaysia, probably they will go to China," he said.