U.S.-China competition in Southeast Asia
As U.S.-China rivalry deepens, Southeast Asian leaders fear it could derail hopes for regional growth and stability.
In a nutshell
- ASEAN leaders warn that great power rivalry could hurt regional prosperity
- Southeast Asia resists picking sides but faces mounting external pressure
- The risk of proxy conflict looms, and full de-escalation remains unlikely
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“This rivalry … challenges the peace and stability that underpins this drive for growth and prosperity,” Malaysian Prime Minister Anwar Ibrahim said in a recent speech, referring to the effects of the United States-China rivalry in Southeast Asia. Mr. Anwar’s comment – made while Malaysia was holding the annually rotating chairmanship of the Association of Southeast Asian Nations (ASEAN) – is just one of many. Several Southeast Asian leaders are now expressing concern that rising U.S.-China competition could undermine hopes for a so-called “Asian Century” as well as growth prospects for the region.
Southeast Asia is the world’s third-largest population center. The region is also the fifth-largest economy and its hub of sea lanes carries a significant portion of the world’s energy and trade. Worries that a new great power rivalry could hamper growth are not unfounded.
For years, Southeast Asian leaders have reiterated that in a multipolar world with many powers converging in the region, their agency matters and they would rather avoid choosing between the U.S. and China. The former is a longtime security provider and investor and the latter has emerged as the top trade and development partner over the course of the past two decades. As Vietnam’s Prime Minister Pham Minh Chinh once put it: “In case of competition, it must be healthy and equal … in a world full of turbulence, strategic competition and a great many choices, Vietnam picks no side.”
Yet, Southeast Asian officials have increasingly recognized that, in practice, both superpowers will use their leverage to influence the calculations of regional states. U.S. officials tried to pressure Malaysia to exclude China’s Huawei from 5G networks, while Beijing’s security gains in Cambodia saw the country cancel military drills with the United States. Nations that gained from the so-called “China+1” supply chain shifts, such as Vietnam, have come under growing scrutiny for serving as third-country workarounds rather than genuine economic intermediaries.
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These tensions have intensified with a new president in the White House. The first quarter of the administration of U.S. President Donald Trump has already seen visa restrictions imposed on Thai officials over the deportation of Uighurs to China. Singapore was singled out over potential chip redirection in powering Chinese artificial intelligence firm DeepSeek.
Chinese officials, for their part, have spent the past few months laying the groundwork for what they see as a window of opportunity to make gains among Southeast Asian states and Global South countries given the perceived uncertainty over the Trump administration’s second term in office. Just weeks after the U.S. election result had been finalized, a top Chinese diplomat told Southeast Asian states that amid the “trade bullying” that obstructs regional supply chains, “it is self-evident which choice truly aligns with the … countries and people in this region, and which force moves against the historical trend.”
Scenarios
More likely: Southeast Asian countries come under increasing pressure to align
Looking ahead, the first scenario, which is most likely, is a further intensification of U.S.-China competition in Southeast Asia. Under this scenario, both the U.S. and China are likely to continue pushing individual Southeast Asian states to align with their interests in strategically significant sectors, including defense, critical minerals, artificial intelligence, submarine cables and semiconductors.
Yet, as Singapore Prime Minister Lawrence Wong has pointed out, such sectoral derisking, which begins in areas like high technology, could easily spill over into broader economic interactions and lead to “a more fragmented and decoupled global economy” with “less trade, less investments, less diffusion of ideas” and a more challenging landscape for developing countries in the region to converge with the advanced world.
A more extreme version of this scenario would see an increasing tendency by Washington and Beijing to draw Southeast Asian states more clearly and comprehensively into their orbits. Indeed, one of Mr. Trump’s chief economic advisors told a conference last June that the world could be divided into three color-coded buckets in terms of geoeconomics: red (foes), green (friends) and yellow (non-aligned). For many in Southeast Asia, these characterizations evoke memories of the intense Cold War conflicts, marked by regional divisions and proxy wars in the area.
Less likely: A proxy war breaks out in Southeast Asia
The second scenario, which is less likely, is U.S.-China competition veering into actual conflict in Southeast Asia. The most probable trigger for the region is Sino-Philippine saber-rattling in the South China Sea. Philippine defense officials have already repeatedly said that possible Chinese actions such as the imposition of an air defense identification zone or the restriction of freedom of flights would trigger Manila and like-minded nations to “counteract” Beijing’s actions with prearranged “contingency measures.”
A future escalation of tensions could provoke a U.S. response under the U.S.-Philippine military alliance. The Philippines is set to chair ASEAN in 2026, placing the South China Sea at the center of the regional agenda. China’s rising aggression toward Taiwan is another point of concern. Although Taiwan is geographically further away from most of Southeast Asia as a flashpoint, one estimate forecasts that war could tank regional gross domestic product by over 20 percent and cost the global economy $10 trillion. The ripple effect would extend beyond economics, likely displacing or stranding hundreds of thousands of Southeast Asian migrant workers in Taiwan.
Least likely: U.S.-China competition eases
The third scenario, which is least likely, is U.S.-China competition diminishing significantly. This scenario is difficult to imagine under current circumstances given the state of ties between Washington and Beijing. But it is not impossible. Some Southeast Asian officials are concerned that a shift in U.S. foreign policy toward a more globally distributed approach, rather than an Asia-first strategy, could lead to reduced attention to Southeast Asia. This shift could see the U.S. more preoccupied with managing issues in regions like Europe, North America and the Middle East.
Such an approach would likely narrow Washington’s focus to just the closest U.S. partners like the Philippines and Singapore as well as a couple of so-called “swing states” like Indonesia and Vietnam. This could in turn strengthen China’s gravitational pull on the wider region, especially with smaller countries like Cambodia or Laos.
Another pathway could involve better relations between China and the U.S. through transactional deals, even if they fall well short of extremes like a long-feared G2 condominium. This could, at the very least, temporarily cool U.S.-China tensions or build on existing guardrails that facilitate coexistence and lessen the chance of overt conflict. Some Southeast Asian officials point out that more issue-based cooperation could at least defuse some of the growing tensions in U.S.-China ties, with a case in point being the shared interest in combating giant scam networks in the Mekong region.
Exactly which of these scenarios will play out will depend on several variables. In a speech at a recent key regional forum, ASEAN Secretary-General Kao Kim Hourn said that a confluence of disruptive forces, including geopolitical rivalries, demands “foresight, adaptability and decisive action.” The extent to which the countries of Southeast Asia can meet these demands will be a key factor in how they adjust and manage the various aspects of U.S.-China competition in the region in the coming years.
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