Southeast Asia: Trends in U.S. and Chinese Economic Engagement
Released: 2015-08-13T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: Both the United States and China seek to deepen their economic engagement with the 10 ASEAN members: Brunei Darussalam, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. ASEAN countries are seeking to further integrate their economies and create an economic community by the end of 2015. According to International Monetary Fund data, if ASEAN countries were a single nation, their collective 2014 GDP would represent the seventh largest economy in the world. In 2011, the President announced a renewed focus—known as the rebalance—on the Asia-Pacific region. The U.S. Department of State and U.S. Agency for International Development prepared a 5-year strategy for the rebalance.

GAO was asked to examine the United States' and China's economic engagement in the region. This report examines (1) what available data indicate about U.S. and Chinese trade and investment with ASEAN countries and (2) what actions the U.S. and Chinese governments have taken to further economic engagement with these countries. GAO analyzed publicly available economic data and Chinese government documents and reviewed documentation from 10 U.S. agencies. GAO also interviewed U.S. officials and private sector representatives.

Technical comments on a draft of this report from several agencies were incorporated by GAO where appropriate. GAO is not making any recommendations in this report.

section_title: What GAO Found
paragraphs: China has surpassed the United States in goods trade with Association of Southeast Asian Nations (ASEAN) countries and trades a similar amount of services, but U.S. investment exceeds reported Chinese investment. China surpassed the United States in goods trade with ASEAN countries in 2007. In 2014, China's total goods trade of $480 billion was more than twice the U.S. total goods trade of $220 billion. Although China is their largest outside trading partner, ASEAN countries trade more with each other. Limited available data indicate that in 2011, the United States and China each traded about $37 billion in services with ASEAN countries. From 2007 through 2012, U.S. foreign direct investment flows to ASEAN countries of $96 billion exceeded China's reported $23 billion.

The United States and China are furthering economic engagement with ASEAN countries in several ways.

Trade agreements. The United States has a free trade agreement (FTA) with one ASEAN country, Singapore, while China has an FTA with all 10 ASEAN countries. The United States and China are each party to separate regional trade agreement negotiations—the United States through the Trans-Pacific Partnership and China through the Regional Comprehensive Economic Partnership. China's existing FTAs do not address aspects of trade addressed in the U.S.-Singapore FTA, such as intellectual property, the environment, and labor rights.

Support for firms. From 2009 through 2014, U.S. agencies provided approximately $6 billion in financing for U.S. firms in ASEAN countries. China reports billions of dollars more in financing than the United States worldwide, but data on China's financing in Southeast Asia are unavailable.

Support for regional integration. In fiscal years 2009 through 2013, U.S. agencies provided $536 million in trade capacity building assistance to ASEAN countries. China has promised tens of billions of dollars for infrastructure development through new funds and multilateral institutions like the Asian Infrastructure Investment Bank, expected to begin operations in 2015.

section_title: Letter
paragraphs: Southeast Asia is a growing economic power. The 10 members of the  Association of Southeast Asian Nations (ASEAN) have a combined gross  domestic product (GDP) of about $2.5 trillion and population of about 620   Through ASEAN, these countries are seeking to further integrate  million.their economies and create an economic community by the end of 2015.

Both the United States and China have signaled a greater interest in  expanding their economic engagement in Southeast Asia through, for  example, proposed and expanded free trade agreements (FTA). In 2011,  the President announced a renewed focus, known as the rebalance, on  the Asia-Pacific region, including Southeast Asia. In 2014, in response to   the U.S. Department of State (State) and U.S.  a congressional mandate,Agency for International Development (USAID) issued a 5-year strategy  for the rebalance. The strategy seeks, among other things, to increase  economic growth and trade in the Asia-Pacific and to strengthen regional  organizations such as ASEAN. In 2013, China proposed an ASEAN- China cooperation framework designed to build political consensus on  deepening their relationship and focused on economic development and  mutual benefits.

You asked us to review the nature of the United States’ and China’s  economic engagement in Southeast Asia. This report examines (1) what  available data indicate about U.S. and Chinese trade and investment with  ASEAN countries and (2) what actions the U.S. and Chinese  governments have taken to further economic engagement with these  countries.

To examine the United States’ and China’s engagement with ASEAN  countries, we analyzed publicly available data on U.S. and Chinese trade  in goods, trade in services, and foreign direct investment. All dollar figures  in this report are in nominal terms unless otherwise specified. To  determine the extent to which U.S. and Chinese firms compete in ASEAN  countries, we analyzed data from the U.S. Department of Commerce  (Commerce), the World Bank, and the Asian Development Bank (ADB).  To identify actions that the U.S. and Chinese governments have taken to  further economic engagement, we reviewed U.S., Chinese, and ASEAN  trade agreements and documents and official Chinese statements. We  conducted fieldwork in two ASEAN countries, Indonesia and Vietnam,  and interviewed officials from U.S. and third-country agencies and private  sector representatives. government officials in the ASEAN countries we visited and in  Washington, D.C.; however, they were unable to accommodate our  requests for a meeting. To assess the reliability of data, where possible,  we cross-checked the data with other sources, evaluated the data for  internal consistency, and consulted with U.S. officials. We consider the  data we present to be reliable for our purposes and have noted caveats  as appropriate regarding the limitations in some data. See appendix I for  additional information about our scope and methodology.

We plan to issue a separate report with case studies of U.S. and Chinese economic  engagement in Indonesia and Vietnam.

We conducted this performance audit from April 2014 to August 2015 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Southeast Asian nations have growing populations and economies.  According to a 2014 study by the Asian Development Bank Institute, the  combined populations of ASEAN countries are projected to reach 700  million by 2030. This study also found that ASEAN countries’ collective  nominal GDP increased by an average of 5.7 percent annually from 1992  to 2013, despite the Asian financial crisis in 1997 and 1998 and the global  financial slowdown in 2008 and 2009. According to International Monetary  Fund (IMF) data, if ASEAN countries were a single nation, their collective  2014 GDP would represent the seventh largest economy in the world.  However, a study by the Economic Research Institute for ASEAN and  East Asia found that while the average poverty level in ASEAN countries  declined from about 45 percent in 1990 to about 16 percent in 2010,  about 95 million people in these countries in 2010 lived in poverty. In  addition, a study by the Institute of Southeast Asian Studies has  estimated that ASEAN countries would need about $600 billion from 2010  to 2020 to meet their infrastructure investment needs.

ASEAN countries are located astride key sea lanes between the Persian  Gulf and the economic centers of East Asia. The U.S. Energy Information  Administration, based on a 2011 United Nations (UN) Conference on  Trade and Development Review of Maritime Transport, estimated that  more than half of the world’s annual merchant fleet tonnage passed  through the Straits of Malacca, Sunda, and Lombok on to the South  China Sea in 2010 and that about 15 million barrels of oil passed through  the Strait of Malacca between Singapore and Indonesia each day in  2013. The South China Sea also has important fishing areas and is  thought to be rich in oil and natural gas reserves. Figure 1 shows the  names and locations of the ASEAN countries.
subsections: section_title: History of ASEAN
paragraphs: The leaders of Indonesia, Malaysia, the Philippines, Singapore, and  Thailand founded ASEAN in 1967 to accelerate economic growth, social  progress, and cultural development in the region through joint projects  and cooperation. In 1976, ASEAN countries agreed to the Treaty of Amity  and Cooperation in Southeast Asia, which called for peaceful resolution of  disputes and mutual respect for the independence, sovereignty, equality,  territorial integrity, and national identity of all nations. Also in 1976,  ASEAN established the ASEAN Secretariat, an administrative body with  representatives from each member nation, in Jakarta, Indonesia, to  provide greater efficiency in the coordination of ASEAN organizations and  more effective implementation of projects and activities. ASEAN’s  membership expanded to include Brunei in 1984, Vietnam in 1995, Laos  and Burma in 1997, and Cambodia in 1999.

ASEAN amended the Treaty of Amity and Cooperation in 1998 to permit  states outside Southeast Asia to accede to the treaty with the approval of  all 10 members. China acceded to the treaty in 2003. The United States  acceded to the treaty in July 2009 and the following year became the first  non-ASEAN country to establish a dedicated mission to ASEAN. In 2011,  the United States appointed its first resident Ambassador to ASEAN.  China established a mission to ASEAN in October 2012.

section_title: ASEAN Country Economies
paragraphs: Economic development in the first six ASEAN members—Brunei,  Indonesia, Malaysia, the Philippines, Singapore, and Thailand, known as  the ASEAN 6—is generally more advanced than in the newer members— Cambodia, Laos, Burma (Myanmar), and Vietnam, known as the CLMV  countries (see table 1). The business environment also varies significantly  across ASEAN countries. In Transparency International’s 2014 Corruption  Perceptions Index, which measures perceived levels of public sector  corruption among 175 countries and territories, ASEAN countries’  rankings ranged from 7 for Singapore to 156 for Cambodia and Burma.  The World Bank’s 2014 ease of doing business ranking of 189 economies  ranked Singapore at 1, as having the most business-friendly regulations,  and Burma at 177, the lowest ranked ASEAN country.

section_title: Governance of ASEAN
paragraphs: As stated in ASEAN’s Charter, ASEAN emphasizes noninterference in  the domestic matters of its members and respect for their sovereignty and  territorial integrity. According to U.S. officials, as well as officials at the  ASEAN missions of other countries, the primary mode of decision making  in ASEAN is consensus. Further, according to an ADB study, the  Secretariat does not direct ASEAN but instead plays a coordinating and  facilitating role. The Chair of ASEAN rotates annually among members;  Burma served as the 2014 Chair and Malaysia as the 2015 Chair.  Biannual ASEAN summit meetings are used to make decisions on key  issues, provide policy guidance, and set the objectives of ASEAN.

section_title: ASEAN Economic and Connectivity Initiatives
paragraphs: In 2003, ASEAN leaders adopted a plan to create an ASEAN Community  by 2015, comprising security, sociocultural, and economic communities.  According to the ASEAN Economic Community Blueprint (the Blueprint),  the ASEAN Economic Community will be a  single market and production base that includes the free flow of  goods, services, investment, capital, and skilled labor; highly competitive economic region that includes consumer protection  and regional cooperation for intellectual property rights; region of equitable economic development based on inclusive growth  and narrowing the development gap; and region fully integrated into the global economy that negotiates for  FTAs and trade facilitation.

ASEAN established a monitoring mechanism called the ASEAN  Economic Community scorecard to report the progress of implementing  various measures and to identify implementation gaps and challenges.  According to a 2013 ADB study of progress in achieving the ASEAN  Economic Community, a significant milestone of economic integration has  been the substantial progress in tariff liberalization, but removal of  nontariff barriers, such as import bans and subsidies, new import  procedures and requirements, and technical barriers, remain as major  impediments.

In 2010, ASEAN adopted the Master Plan on ASEAN Connectivity, which  envisioned enhancing intraregional connectivity to encourage trade,  investment, tourism, people-to-people exchanges, and development. The  plan identifies needed improvements to physical connectivity (e.g., roads,  rail, power supply, and port facilities); institutional connectivity (e.g.,  mutual recognition arrangements for movement of skilled labor in the  region and harmonization of rules, regulations, procedures, and  standards); and people-to-people connectivity (e.g., reducing visa  requirements and enhancing training opportunities and outreach).

section_title: U.S. Goals for Southeast Asia
paragraphs: In late 2011, the President announced that the United States would  rebalance its worldwide engagement to include a greater focus on the  Asia-Pacific region. In April 2014, pursuant to a mandate in the  Department of State, Foreign Operations and Related Programs   State and USAID provided Congress with a  Appropriations Act, 2014,strategy for the rebalance that states the following goals for the region:

Deepen U.S. security ties and alliances in the region to, among other  things, deter and defend against threats to the region and the United  States and resolve disputes peacefully.

Advance U.S. prosperity and inclusive economic growth in the region  through the expansion of U.S. exports and investment, increased  regional economic integration, and sustainable development.

Strengthen partnerships with China and emerging partners to, among  other things, promote trade and economic growth.

Shape an effective regional architecture of robust regional institutions  and multilateral agreements to strengthen regional stability and  economic growth.

Support sustainable development, democracy, and human rights by  advancing regional commitment to democratic development and  human rights and addressing health threats and climate change.

In addition, other U.S. agencies have stated goals specific to the region.  USAID’s Regional Development Mission for Asia seeks, for example, to  increase regional institutions’ ability to promote sustainable and inclusive  regional growth. The Secretary of Commerce has stated that the  economic dimension of the rebalance includes deepening trade and  investment ties with existing partners; working multilaterally to build both  the hard and soft infrastructure necessary for growth of emerging  partners; and building new mechanisms to establish a level playing field  for commerce across the region, such as the proposed Trans-Pacific  Partnership (TPP) FTA. TPP is currently being negotiated by the Office of  the United States Trade Representative (USTR). Other agencies also  work to promote U.S. economic engagement in Southeast Asia. (See  app. II for more information about selected U.S. entities’ roles and  responsibilities and areas of involvement in ASEAN countries.)

section_title: Chinese Goals for Southeast Asia
paragraphs: Chinese government leaders have stated goals regarding Southeast Asia  that emphasize regional connectivity as well as mutual benefit and  noninterference. For example, in 2013, Chinese President Xi Jinping  spoke of increasing engagement and rapport with China’s neighbors to  foster China’s development while benefitting countries on its periphery.  Chinese leaders also regularly refer to the Five Principles of Peaceful  Coexistence, originally espoused in a 1954 agreement between China  and India: mutual respect for sovereignty and territorial integrity, mutual  nonaggression, noninterference, equality and mutual benefit, and  peaceful coexistence. Moreover, at the 16th ASEAN-China Summit in  2013, Premier Li Keqiang proposed a framework for cooperation between  China and ASEAN, known as the 2 + 7 cooperation framework, with a  stated goal of deepening cooperation by focusing on economic  development and expanding mutual benefit.

China has also articulated policy regarding Southeast Asia in two  documents. China’s 2011-2015 Five Year Plan emphasizes developing  infrastructure and other connections with neighboring countries,  improving the quality of Chinese exports instead of export volume,  increasing China’s level of investment in other countries in mutually  beneficial ways, and increasing its influence in international economic and  financial institutions. A 2014 Chinese government white paper on foreign  aid states that China actively promotes cooperation between developing  nations while seeking mutually beneficial results and respecting other  countries’ development paths. assistance to ASEAN countries has focused on narrowing development  gaps within ASEAN by funding infrastructure construction, supporting  agricultural development, and providing technical training. (App. II  provides more information about selected Chinese agencies’ roles and  responsibilities and areas of involvement in Southeast Asia.)

According to the paper, China’s  China has claimed sovereignty over the islands of the South China Sea  and has illustrated its claims by marking a “nine dash line” on its maps  that encircles most of the South China Sea and its land features,  including the Paracels and Spratlys. The ASEAN countries of Vietnam,  Brunei, Malaysia, Indonesia, and the Philippines have competing claims  with China and with each other. China has also conducted dredging  operations to create new above-water features in the South China Sea,  raising tensions between China and ASEAN countries with interests in the  South China Sea.

Information Office of the State Council, The People’s Republic of China, China’s Foreign  Aid (2014), (Beijing, July 2014).

section_title: China Has Surpassed the United States in Trade in Goods with ASEAN Countries and Trades a Similar Amount of Services, but U.S. Investment Exceeds China’s
paragraphs: Chinese trade in goods with ASEAN countries has grown rapidly since  2001, surpassing U.S. trade in goods since 2007. Most of the goods that  the United States and China trade with ASEAN countries are for industrial  use. Although the United States and China are important trading partners  of ASEAN countries, trade among ASEAN countries exceeds their trade  with either the United States or China. Available data, though limited,  indicate that the total value of U.S. trade in services with ASEAN  countries is similar to the value of China’s but U.S. foreign direct  investment (FDI) in ASEAN countries has exceeded China’s FDI. U.S.  FDI was concentrated in four of the ASEAN 6 countries—Indonesia,  Malaysia, Singapore, and Thailand—and more Chinese FDI was in the  CLMV countries—Cambodia, Laos, Burma (Myanmar), and Vietnam.  While Chinese and U.S. firms compete in ASEAN countries, available  data indicate that U.S. firms compete more directly with firms from  Europe, South Korea, and Japan.
subsections: section_title: China’s Total Trade in Goods with ASEAN Countries Surpassed the United States’ in 2007, but Neither Predominates in the Region
paragraphs: Chinese trade in goods with ASEAN countries has surpassed U.S. trade  in goods and has grown as a share of China’s total trade in goods, while  U.S. trade in goods with ASEAN countries has declined as a share of  total U.S. trade in goods. Both U.S. and Chinese firms compete with  many other countries for the ASEAN market. U.S. and Chinese trade in  goods with ASEAN countries reflects these countries’ inclusion in global  supply chains.
subsections: section_title: Chinese Goods Trade with ASEAN Countries Has Grown More Rapidly Than U.S. Goods Trade
paragraphs: In 2014, China’s total goods trade with ASEAN countries was more than  double that of the United States: $480 billion for China and $220 billion for  the United States. In 1994 through 2014, Chinese total trade in goods  with ASEAN countries grew much more rapidly than U.S. total trade in  goods with ASEAN countries.

In 2007, China surpassed the United States in total goods trade with  ASEAN countries, and the gap has continued to grow.

Chinese imports from ASEAN countries surpassed U.S. imports from  ASEAN countries in 2008. In 2014, China imported $208 billion of  goods from ASEAN countries, and the United States imported $142  billion.

Chinese exports to ASEAN countries surpassed U.S. exports in 2005.

In 2014, China exported $272 billion of goods to ASEAN countries,  and the United States exported $79 billion.

After China acceded to the World Trade Organization (WTO) in 2001,  Chinese goods trade increased worldwide, and at a faster rate in ASEAN  countries. Chinese goods trade in ASEAN countries increased in nominal  terms every year except 2009. The United States has run a trade deficit  with ASEAN countries in every year from 1994 through 2014, while China  had a trade deficit or slight surplus with ASEAN countries from 1994  through 2011 before running a growing surplus from 2012 through 2014.  In 2014, China had a goods trade surplus of $64 billion with ASEAN  countries, while the United States had a goods trade deficit of $63 billion.

Figure 2 shows the growth of U.S. and Chinese trade in goods with  ASEAN countries from 1994 through 2014.

The relative importance of trade in goods with ASEAN countries since  1994 has increased for China but decreased for the United States. From  1994 through 2014, Chinese trade in goods with ASEAN countries rose  from 6.1 percent to 11.2 percent of total Chinese trade in goods. In  contrast, during the same period, U.S. trade in goods with ASEAN  countries fell from 7.2 percent to 5.5 percent of total U.S. trade in goods.

section_title: Most Goods That the United States and China Trade with ASEAN Countries Are for Industrial Use
paragraphs: Most of the goods that the United States and China trade with ASEAN  countries are goods for industrial use, reflecting ASEAN countries’  integration into the U.S. and Chinese global supply chains.

Total trade. U.S. and Chinese trade in industrial goods (capital and  intermediate goods) with ASEAN countries represented, respectively,  about 62 percent and 80 percent of their total trade with ASEAN  countries in 2014, down from 71 percent and 87 percent in 2007. In  2014, consumer goods represented 25 percent of the United States’  total trade with ASEAN countries and 14 percent of China’s. The  remaining goods were not classified according to these categories.

Imports. Goods for industrial use represented 59 percent of U.S.  imports from ASEAN countries and 88 percent of Chinese imports in  2014. Among industrial goods, microchips were the top U.S. and  Chinese import from ASEAN countries. Consumer goods represented  35 percent of U.S. imports from ASEAN countries and 7 percent of  Chinese imports in 2014.

Exports. Goods for industrial use represented 67 percent of U.S.  exports to ASEAN countries and 74 percent of Chinese exports to  ASEAN countries in 2014. Among industrial goods, microchips were  the top export to ASEAN countries from both the United States and  China. Consumer goods represented 8 percent of U.S. exports to  ASEAN countries and 20 percent of Chinese exports in 2014.

Figure 3 shows U.S. and Chinese trade in goods with ASEAN countries  by use in 2014.

For more information about the composition of goods trade by ASEAN  countries with the United States and China by type, see appendix III.

section_title: The United States and China Are Key Trading Partners of ASEAN Countries, but ASEAN Countries Trade Most among Themselves
paragraphs: ASEAN countries trade more with each other than with other trading  partners. China is the largest outside trading partner of ASEAN  countries, followed by the European Union (EU), Japan, and the United  States.

Exports. In 2013, ASEAN countries exported $330 billion in goods to  other ASEAN countries, $115 billion in goods to the United States,  and $153 billion in goods to China. The United States is the fifth  largest market for ASEAN countries’ goods exports, behind other  ASEAN countries, China, the EU, and Japan. From 2003 through  2013, the U.S. share of ASEAN exports fell from 15.4 percent to 9.1  percent, while China’s share of ASEAN exports increased from 6.4  percent to 12.2 percent.

Imports. In 2013, ASEAN countries imported $278 billion in goods  from other ASEAN countries, $92 billion from the United States, and  $198 billion from China. The United States is the fifth largest source of  ASEAN goods imports, behind other ASEAN countries, China, the  EU, and Japan. From 2003 through 2013, the United States’ share of  ASEAN imports fell from 13.0 percent to 7.6 percent, while China’s  share of ASEAN imports increased from 8.2 percent to 16.2 percent.

Figure 4 shows ASEAN countries’ exports and imports of goods, by  trading partner, in 2003, 2008, and 2013.

In 2011 through 2013, 7 of the 10 ASEAN countries exported more goods  to China than to the United States: only Cambodia, the Philippines, and  Vietnam exported more goods to the United States (see fig. 5). However,  while most individual ASEAN countries traded more goods with China  than with the United States, they exported the majority of their goods to  many other countries.

In 2011 through 2013, 9 of the 10 ASEAN countries imported more goods  from China than from the United States. Brunei was the only exception,  importing slightly more goods from the United States (see fig. 6).  Individual ASEAN countries imported goods from a diverse set of trading  partners.

The United States’ role relative to China’s in ASEAN countries’ goods and  services trade may be greater when the amount of intermediate inputs to  the traded goods and services is taken into account. For example,  because of the nature of global supply chains, a consumer phone from a  U.S. company may be assembled in China but incorporate components  from Germany, Japan, South Korea, and other countries. Although  components of a country’s exports may originate in other countries,  export data from the United Nations Commodity Trade database count  the full value of the export for only the exporting country. Data from the  Organisation of Economic Co-operation and Development (OECD) and  the WTO attempt to account for the value added to a finished export by  each contributing country. Data from the United Nations, WTO, and the  International Trade Centre, as well as our estimates, showed that ASEAN  countries imported more in total goods and services from China in 2009  than from the United States. However, OECD-WTO’s data show that  ASEAN countries imported $41 billion in value-added goods and services  from China in 2009 and $52 billion from the United States. This suggests  that Chinese exports contained a higher portion of components produced  elsewhere than did U.S. exports. Similarly, some components of the  goods and services that ASEAN countries exported to the United States  and China were produced outside ASEAN countries. Data from the  United Nations, WTO, and the International Trade Centre, as well as our  estimates, showed that ASEAN countries exported more in total goods  and services from China in 2009 than from the United States. However,  according to OECD-WTO data, ASEAN countries exported $86 billion in  value-added goods and services to the United States in 2009 and $47  billion to China.

section_title: Total U.S. Trade in Services with ASEAN Countries Is Similar to China’s, but Available Data Have Limitations
paragraphs: Although our analysis of U.S. and Chinese trade in services with ASEAN  countries represents broad estimates rather than precise values, these  data indicate that the United States and China traded approximately the  same total value of services in 2011. Our calculations, based on data  from the U.S. Bureau of Economic Analysis (BEA) and other sources,  indicate that the U.S. trade in services with ASEAN countries totaled  approximately $37 billion in 2011. According to UN, WTO, and  International Trade Centre estimates of Chinese trade in services for  2011, China’s trade in services with ASEAN countries also totaled  approximately $37 billion. In 2011, the United States exported more  services to ASEAN countries than it imported from them, and China  imported more services from ASEAN countries than it exported to them.

U.S. and Chinese imports. We calculated that the United States  imported approximately $14 billion in services from ASEAN countries  in 2011 and approximately $16 billion in 2012. In 2012, the top  categories for U.S. service imports from ASEAN countries were (1)  business, professional, and technical services (approximately $6  billion) and (2) travel and passenger fares (approximately $5.7 billion).  Estimates from the UN, the WTO, and the International Trade Centre  on Chinese trade in services for 2011 indicated that China imported  approximately $23 billion in services from ASEAN countries. China  does not publish data on its service imports from ASEAN countries by  category of service.

U.S. and Chinese exports. We calculated that the United States  exported approximately $23 billion in services to ASEAN countries in  2011 and approximately $25 billion in 2012. In 2012, the top  categories for U.S. service exports to ASEAN countries, totaling  approximately $15 billion, were (1) business, professional, and  technical services and (2) royalties and license fees. Estimates from  the UN, the WTO, and the International Trade Centre on Chinese  trade in services for 2011 indicated that China exported approximately  $13 billion in services to ASEAN countries. China does not publish  data on service exports to ASEAN countries by category of service.

Both U.S. and Chinese trade in services with ASEAN countries are small  in value compared with their goods trade. In 2011, total U.S.-ASEAN  services trade was 19 percent of the value of U.S.-ASEAN goods trade,  while the estimated total China-ASEAN services trade was 10 percent of  the value of China-ASEAN goods trade.

section_title: U.S. Investment in ASEAN Countries Exceeded Chinese Investment from 2007 through 2012, but Available Data Have Limitations
paragraphs: Data on FDI in ASEAN countries from the United States and China have  limitations, in that U.S. and Chinese FDI data may not accurately reflect  the countries to which U.S. and Chinese FDI ultimately flows. However,  available data show that from 2007 through 2012, U.S. FDI flows to  ASEAN countries totaled about $96 billion, exceeding China’s reported  FDI of about $23 billion. However, annual Chinese FDI flows increased  each year during this period, from $1 billion in 2007 to $6 billion in 2012 in  nominal terms (see fig. 7). According to BEA, U.S. FDI in ASEAN  countries in 2003 through 2013 was concentrated in holding companies,  which accounted for about half of total U.S. FDI. Manufacturing,  especially computer and electronic products manufacturing, was the  second largest category of U.S. FDI.

From 2007 through 2012, U.S. investment was concentrated in several of  the ASEAN 6 countries whereas a larger share of Chinese investment  was in the CLMV countries (see fig. 8). Almost all U.S. FDI flows were to  four of the ASEAN 6 countries—Indonesia, Malaysia, Singapore, and  Thailand. U.S. FDI flows exceeded China’s FDI flows in these countries.  U.S. FDI flows in the four ASEAN 6 countries represented 99 percent of  all U.S. FDI flows to ASEAN countries during this period. However,  Chinese FDI flows exceeded U.S. FDI flows for the four CLMV countries.

Chinese FDI flows to these four countries totaled $7.8 billion for 2007  through 2012, whereas U.S. FDI flows to those countries totaled around  $0.5 billion. China’s FDI in CLMV countries represented 35 percent of  Chinese FDI in ASEAN countries in this time period. For both the United  States and China, the largest FDI flows were to Singapore. Singapore is a  regional financial hub; therefore, according to BEA, a portion of FDI in  Singapore is likely to have been reinvested in other countries, which may  include other ASEAN countries.

section_title: U.S. and Chinese Firms Often Compete in Different Sectors
paragraphs: Data on competition between U.S. and Chinese firms in ASEAN countries  are limited but indicate that the United States competes more often with  firms from Europe, South Korea, and Japan than with Chinese firms. In  addition, U.S. firms tend to obtain World Bank and ADB contracts in  different sectors than Chinese firms.
subsections: section_title: Goods Export Data Indicate That U.S. Firms Exporting to ASEAN Countries Compete More with Japanese and European Firms Than with Chinese Firms
paragraphs: From 2001 through 2014, U.S. exports of goods to ASEAN countries  were more similar to Japanese and EU exports than to Chinese exports,  suggesting that U.S. firms are more likely to compete directly with  Japanese and EU firms than with Chinese firms for exports to ASEAN  countries.

To assess the extent of the similarity of exports, we calculated a  commonly used index to compare U.S., Chinese, and other countries’  exports to ASEAN countries. From 2001 through 2014, U.S. exports to  ASEAN countries have consistently been more similar to EU and  Japanese exports than to Chinese exports (see fig. 9). However, during  this period, Chinese exports to ASEAN countries have grown more similar  to U.S. exports, while Japanese exports have grown less similar to U.S.  exports. This is consistent with the pattern for Chinese exports globally.  According to an IMF study, China has traditionally competed with other  Asian countries, and although large differences remain, China’s exports  are becoming more similar to those of advanced economies, such as  Germany and the United States. China’s export similarity index with the  United States grew from 0.248 in 1995 to 0.333 in 2008, according to the  IMF study.

We identified three data sources that provide some information on  individual contracts competed for, or obtained by, U.S. and Chinese firms.  These data indicate that in ASEAN countries, U.S. firms compete more  often with firms from countries other than China and tend to be awarded  contracts in different sectors. We analyzed data for contracts funded by  the World Bank and ADB as well as data from Commerce’s Advocacy  Center on host-government contracts. The World Bank and ADB track the  awardees of their contracts, as well as contract size and sector. The  Advocacy Center tracks contract competitors and awardees for the U.S.  firms that apply for and receive its support, as well as the size and sector  of the contract. Although these data represent a small share of activity in  the region, they provide insights into the degree of competition between  U.S. and Chinese firms for the projects represented.

From 2000 through 2014, both U.S. and Chinese firms were awarded  hundreds of World Bank-financed contracts in ASEAN countries, but they  tended to obtain contracts in different sectors (see fig. 10). Excluding  contracts that went to domestic firms, our analysis of World Bank data  showed that Chinese firms were awarded a higher dollar value of World  Bank contracts in ASEAN countries ($781 million) than firms from any  other country.value of World Bank contracts that Chinese firms were awarded in  ASEAN countries, and contracts for consulting services accounted for  less than 1 percent. In contrast, U.S. firms did not obtain any World Bank  contracts for civil works in ASEAN countries, and contracts for consulting  services accounted for about 78 percent of the value of World Bank  contracts obtained by U.S. firms. Contracts for goods accounted for about   Civil works projects accounted for about 73 percent of the  22 percent of the value of the contracts that U.S. firms obtained in  ASEAN countries and about 26 percent of the value of contracts obtained  by Chinese firms.

ADB has also predominantly awarded contracts to U.S. and Chinese  firms in different sectors in ASEAN countries (see fig. 11). Similar to  World Bank contracts, most ADB contracts in 2013 and 2014 went to  domestic firms in the project country. However, U.S. firms received the  largest amount of contract value ($329 million) awarded to foreign firms  and Chinese firms received the second largest ($308 million). Nearly all  ADB contract value awarded to U.S. firms was for management of  emergency assistance to typhoon-affected areas of the Philippines. In  contrast, Chinese firms received 84 percent of their contract value for  construction. Of Chinese construction contracts, the largest share, $242  million, was for road transportation projects in Vietnam, Cambodia, and  Laos. Chinese firms received 16 percent of their contract value ($50  million) for goods to be used in the electricity and renewable energy  sectors, such as transformers, wires, and hydraulic equipment. U.S. firms  received one contract for a renewable energy construction project, a $9  million contract for a geothermal plant in Indonesia.

U.S. firms that received support from Commerce’s Advocacy Center in  fiscal years 2009 through 2014 competed less often with Chinese firms  than with firms from other countries. The Commerce data cover those  public sector contracts competed for by U.S. firms in ASEAN countries for  which the Advocacy Center received an application by a U.S. firm for  commercial advocacy. Chinese firms competed for 30 out of these 172  contracts (see table 2). The value of the contracts for which Chinese firms  competed was $6.8 billion—6 percent of the $112 billion in total contract  value for which U.S. firms were competing and less than the total value  competed for by nine other countries’ firms. U.S. firms that applied for  Advocacy Center support competed against firms from only China or from  China and other developing countries in only five cases. U.S. firms were  most likely to compete with Chinese firms in the telecommunications  sector, where U.S. and Chinese firms competed for 5 of 8 contracts; and  the energy and power sector, where U.S. and Chinese firms competed for  7 of 19 contracts.

section_title: The United States and China Engage with ASEAN Countries through Trade Agreements, Support for Firms, and Support for Regional Integration
paragraphs: To further economic engagement with ASEAN countries, the United  States and China each have entered into existing trade agreements and  are parties to ongoing negotiations. The two countries also support their  domestic firms by providing export financing and other services. The  United States supports regional economic development and integration  as part of its trade capacity building (TCB) assistance to strengthen  institutions and governance. China supports regional economic  development and integration through capacity building and has provided  billions of dollars for infrastructure development. China has also promised  additional billions of dollars for future infrastructure construction in the  region, including through the creation of the new multinational Asian  Infrastructure Investment Bank, headquartered in Beijing.
subsections: section_title: The United States and China Have Existing and Proposed FTAs with ASEAN Countries
paragraphs: The United States has an FTA with Singapore, while China has free trade  and investment agreements with all 10 ASEAN countries as well as a  separate FTA with Singapore. The United States is party to the ongoing  TPP negotiations, which include 4 ASEAN countries. China is party to the  Regional Comprehensive Economic Partnership negotiations, which  include all ASEAN countries.
subsections: section_title: The United States Has an FTA with Singapore, while China Has Free Trade and Investment Agreements with All ASEAN Countries
paragraphs: U.S.-Singapore FTA. The January 2004 U.S.-Singapore FTA eliminated  tariffs for U.S. exports to Singapore and phased out tariffs for Singapore’s  exports to the United States over a 10-year period.  As a result of the  U.S.-Singapore FTA, goods from the United States and Singapore no  longer face any tariffs in each other’s markets. For example, Singapore  faces no tariff on its exports to the United States of a type of medicine, a  top Singapore export in 2014, for which other U.S. trading partners with  normal trade relations face a tariff of 6.5 percent. In addition to eliminating  tariffs, the U.S.-Singapore FTA provided greater access for U.S. service  providers and addressed trade issues, such as strengthening  Singapore’s intellectual property rights protection, government  procurement, protection of the environment, and protection of labor  rights. According to USTR, the U.S. goods trade surplus with Singapore  was $14.1 billion in 2014; and the U.S. services trade surplus with  Singapore was $5.8 billion in 2013, the latest data available.

China-ASEAN Framework Agreement on Comprehensive Economic  Cooperation. China’s framework agreement with the ASEAN countries  comprises a series of trade and investment agreements focused on  expanding access to each other’s markets. From 2004 through 2009,  China and the ASEAN countries signed three agreements:

The China-ASEAN Trade in Goods Agreement entered into force in  July 2005. The agreement separates goods into different groups,  each with different timelines for tariff reduction. For example, under  the agreement the parties committed to reduce tariffs to zero for most  goods traded between the ASEAN 6 and China by 2012; CLMV  countries agreed to reduce most tariffs to zero by 2018. The parties  also agreed to reduce tariffs for goods categorized by a country as  sensitive or highly sensitive for its economy to no more than 5 percent  by 2018 for ASEAN 6 countries and by 2020 for CLMV countries.  CLMV countries may also designate more goods as sensitive or  highly sensitive than China and the ASEAN 6 countries. According  to the WTO, the average Chinese tariff on imports from ASEAN  countries in 2013 was 0.7 percent (0.8 percent for Laos and  Cambodia), compared with an average of 9.4 percent for all of China’s  trading partners. For example, according to WTO data, ASEAN  countries face no tariff on a type of rubber, a key export from ASEAN  countries to China in 2014, for which other Chinese trading partners  with normal trade relations face a tariff of 8 percent. Similarly, for  example, according to WTO data, China faces a 10 percent tariff on  women’s cotton jackets and blazers, a top Chinese export to Vietnam  in 2014, for which other Vietnamese trading partners with normal  trade relations face a 20 percent tariff.

The China-ASEAN Trade in Services Agreement entered into force in  July 2007. The agreement provides market access for participant  countries’ companies and requires that firms located in participant  countries be given treatment equal to domestic service providers in  agreed-upon sectors. All countries signing the agreement agree to the  specific service sectors to which the agreement applies in each  country. The agreement permits CLMV countries to open fewer  sectors and liberalize fewer types of transactions.

The China-ASEAN Investment Agreement entered into force in  February 2010. Under the agreement, China and ASEAN countries  commit to treat each other’s investors as equal to domestic investors  and investors from other countries with which China and ASEAN  countries have signed investment agreements. The agreement also  included a provision on how disputes between the investor and the  invested country are to be settled.

In August 2014, China and ASEAN announced discussions to upgrade  these agreements. The second round of discussions, held in February  2015, focused on investment, economic cooperation, and other areas.

China-Singapore FTA. The China-Singapore FTA, which entered into  force in 2009, included tariff reductions for goods beyond those covered  under the China-ASEAN Trade in Goods Agreement. All of China’s  exports to Singapore, and almost all of Singapore’s exports to China,  enter the respective countries tariff free. As of 2014, Singapore  generally did not apply any tariffs on any imports, including those from the  United States and China. According to Singapore’s Ministry of Trade and  Industry, the FTA also included provisions to expand access for  Singapore’s and China’s service providers beyond each country’s WTO  commitments for certain sectors such as business and hospital services.

Unlike the U.S.-Singapore FTA, China’s FTAs with ASEAN and  Singapore do not address issues such as protection of intellectual  property rights and labor rights. For example, the China-ASEAN FTA  does not address protection of the environment and labor rights and only  reaffirms each country’s commitments to WTO provisions on the  protection of intellectual property rights. According to USTR, China’s  existing FTA covers only three areas—goods, services, and investment— while the U.S.-Singapore FTA has 21 chapters covering a wide range of  areas, including intellectual property rights, government procurement,  environment, and labor rights. In addition, according to USTR, China’s  FTA is significantly less ambitious in the areas of services and investment  than the U.S.-Singapore FTA. USTR expects that, although negotiations  are ongoing, TPP will be a more ambitious and comprehensive  agreement than the proposed Regional Comprehensive Economic  Partnership (RCEP).

section_title: The United States and China Are Each Party to Different Proposed Regional FTAs
paragraphs: The United States and China are actively engaged in ongoing  negotiations for TPP and RCEP, respectively. Several countries in the  Asia-Pacific region, including ASEAN countries, are parties to  negotiations for both agreements (see fig. 12).

Trans-Pacific Partnership (TPP) Agreement Negotiations  As of August 2015, the United States Trade Representative is engaged in  TPP negotiations with 11 other Asia-Pacific region countries, including 4  ASEAN countries—Brunei, Malaysia, Singapore, and Vietnam. According  to our analysis of World Bank and UN data, in 2013, the 12 Asia-Pacific  countries negotiating TPP had a combined population of approximately  800 million people; had a combined GDP of almost $28 trillion, about 37  percent of global GDP; and covered about 26 percent of world goods   The four ASEAN countries that are engaged in TPP negotiations  trade.accounted for 58 percent of U.S. trade with ASEAN countries. Launched  in 2002, with the United States joining in 2009, TPP has had several  rounds of negotiation, the most recent in July 2015. Although TPP’s text  is not finalized, in 2011 negotiators agreed that it would address, for  example, ensuring a competitive business environment; providing TCB in  developing countries; improving customs procedures; addressing  impediments to e-commerce; creating clear rules for addressing disputes;  and protecting the environment, labor rights, and intellectual property  rights, among other issues. USTR is seeking to finalize TPP in 2015.

Regional Comprehensive Economic Partnership Agreement  Negotiations  China, the 10 ASEAN countries, and five other countries are currently  negotiating RCEP to expand trade and investment access. In 2011,  ASEAN proposed establishing RCEP to broaden and deepen existing  FTAs between the ASEAN countries and six others—Australia, China,  India, Japan, New Zealand, and South Korea. According to our analysis  of World Bank and UN data, RCEP negotiating partners have a combined  population of more than 3.4 billion people, have a combined GDP of more  than $21 trillion—more than 28 percent of global GDP—and account for  about 29 percent of world goods trade.spoke with, RCEP will not greatly expand the six existing ASEAN  agreements but will synthesize their provisions in a single comprehensive  agreement. RCEP negotiation working groups include those for trade in  goods, trade in services, investment, intellectual property, competition,  and economic and technical cooperation. The eighth round of RCEP  negotiations was held in Kyoto, Japan, in June 2015. Details of RCEP,  like those of TPP, are not finalized, but the negotiating parties have stated  that they hope to complete the agreement in 2015.

According to U.S. officials we  Existing FTA Relationships between FTA Negotiating Partners  China and the United States each have existing FTAs with a number of  their negotiating partners in the proposed regional FTAs. The United  States has existing FTAs with 6 of its 11 TPP negotiating partners (see  fig. 13). Of the 66 possible FTA pairings among the 12 TPP participants,  42 FTAs are currently in place. China has FTAs with ASEAN and New  Zealand and, in June 2015, signed FTAs with Australia and South Korea.  The Australia and South Korea FTAs have not entered into force (see fig.  14). Counting ASEAN as a single negotiating partner, there are 21  possible FTA pairings among RCEP participants, 12 of which are  currently in place.

Both TPP and RCEP include major trading partners with which China and  the United States do not currently have FTAs. According to our analysis  of UN and BEA data, TPP negotiating partners with which the United  States does not have an existing FTA represented approximately 7  percent of both U.S. goods trade and U.S. services trade in 2013 (see  table 3). In 2013, bilateral goods trade between the United States and  Japan, the largest U.S. trading partner engaged in TPP negotiations  without a U.S. FTA, represented 5 percent of total U.S. goods trade and 7  percent of U.S. services trade. The six TPP negotiating partners with  which the United States has an existing FTA constituted 33 percent of  U.S. goods trade in 2013 and 16 percent of U.S. services trade.  According to our analysis of data from the UN, the WTO, and the  International Trade Centre, Chinese trade with India and Japan—the two  countries in RCEP with which China has not negotiated an FTA— represented 9 percent of total Chinese goods trade in 2013 and more  than 8 percent of Chinese services trade in 2011 (see table 4). Chinese  trade with ASEAN, Australia, New Zealand, and South Korea represented  21 percent of total Chinese goods trade in 2013 and more than 18  percent of Chinese services trade in 2011.

In 2014, leaders of economies that belong to the Asia-Pacific Economic  Cooperation (APEC) forum, which includes seven ASEAN economies, the  United States, and China, among others, agreed to undertake a study of  issues related to the realization of a Free Trade Area of the Asia-Pacific  (FTAAP).a statement issued at APEC’s 2014 meeting, FTAAP is not viewed as an  alternative to TPP and RCEP but will build on current and developing   The study is to be completed by the end of 2016. According to  regional architectures. APEC identified TPP and RCEP as possible steps  toward eventual realization of FTAAP.

section_title: The United States and China Each Support Firms in ASEAN Countries
paragraphs: The United States and China provide support and financing to their firms  that trade and invest in ASEAN countries. U.S. agencies provide  financing and maintain overseas personnel to promote U.S. policies and  support U.S. firms. While country-specific data on Chinese financing are  unavailable, the Chinese government provides significantly greater  financing than the United States worldwide and has taken steps to  support Chinese investment in ASEAN countries.
subsections: section_title: The United States Has Provided More Than $6 Billion in Financing for Exports to, and Investments in, ASEAN Countries since Fiscal Year 2009
paragraphs: According to our analysis of U.S. agency data, from fiscal years 2009  through 2014, the United States provided more than $6 billion in financing  to support U.S. exports to, and investment in, ASEAN countries (see table  5). During that period:

The U.S. Export-Import Bank (Ex-Im) authorized about $5.4 billion in  loans, loan guarantees, and insurance to support U.S. exports to  ASEAN countries. Worldwide, Ex-Im authorizations were $27.3  billion in 2013 and $20.5 billion in 2014.

The Overseas Private Investment Corporation (OPIC), the United  States’ development finance institution, committed about $664 million  in financing to support U.S. investment projects in ASEAN countries.

OPIC supports U.S. investment projects in overseas countries by providing U.S. private  sector investors with direct loans, loan guarantees, political risk insurance, and support for  private equity investment funds. they offer loan terms more generous than those the arrangement  specifies.

According to our analysis of Ex-Im data, in fiscal years 2009 through  2014, Ex-Im’s authorizations in ASEAN countries largely consisted of loan  guarantees and were concentrated in Indonesia and Singapore. For  example, about half of the $2.1 billion that Ex-Im authorized to support  U.S. exporters in ASEAN countries in fiscal year 2013 was for a loan  guarantee to a U.S. firm exporting commercial aircraft to Indonesia.  According to our analysis of OPIC data, OPIC’s two largest individual  commitments in ASEAN countries from 2009 through 2014, each for $250  million, were for investment guarantees in fiscal year 2013 for a research  center, medical school, and teaching hospital in Malaysia and in fiscal  year 2011 for construction and development of solar power projects in  Thailand.

section_title: China Provides Competitive Financing but Does Not Publish Country-Specific Data
paragraphs: U.S. Ex-Im estimates and data from China’s export credit agencies  indicate that China provides significantly more financial support to its  exporters worldwide than does the United States. In 2014, Ex-Im  estimated in an annual report to Congress that China provided $111  billion worldwide in official export support in calendar year 2013, far more   Ex-Im’s report noted that  than Ex-Im’s $15 billion in calendar year 2013. Chinese export credit agencies—along with those of Japan and South  Korea—have multiple advantages, including greater funding capacity, the  ability to lend in dollars at competitive rates, and lending programs that  are not bound by OECD agreements. China is not a participant in the  OECD Arrangement on Officially Supported Export Credits. The Ex-Im  report also expressed concern that Chinese concessional loans provided  to other governments as development assistance—including some loans  with terms likely outside the range allowed by OECD agreements—may  affect the competitiveness of U.S. exports.

Three Chinese state-owned institutions offer various types of financing to  support Chinese firms engaged in international business, including  business in ASEAN countries. These three institutions do not publish data  by country on their financing for exports, imports, and investment by  private and state-owned enterprises.

Export-Import Bank of China (China Ex-Im). China Ex-Im provides  support for the import and export of goods and services, including  Chinese companies’ overseas construction and investment projects.  China Ex-Im is also the conduit for China’s official concessionary  lending to developing countries. No data are publicly available on  China Ex-Im financing for specific countries in Southeast Asia.  According to its 2014 annual report, China Ex-Im provided a total of  $70 billion in export and import credits worldwide that year.

China Development Bank. The China Development Bank supports  state-backed projects, such as airports, railways, and bridges.  Although the bank does not publish country-specific data on its  overseas lending, it reported that of its net loan balance of $1.24  trillion for 2014, 12.7 percent ($157 billion) was provided to recipients  outside mainland China. The bank did not specify whether those  recipients included foreign governments, Chinese companies  operating overseas, or both.

China Export & Credit Insurance Corporation (Sinosure).

These numbers are based on the December 31, 2014, exchange rate of 6.205 Chinese  yuan per U.S. dollar. report published by the OECD, Sinosure insured almost 15 percent of  China’s exports in 2013.

section_title: U.S. and Chinese Entities Support Business and Investment in ASEAN Countries
paragraphs: Multiple U.S. entities, such as the U.S. Departments of State (State),  Commerce, and Agriculture (USDA), provide export promotion services  and other support to help U.S. firms enter ASEAN markets or expand  their presence in ASEAN countries. For example:

State. State maintains economic officers in each of the 10 ASEAN  countries. State supports U.S. export promotion efforts by engaging  with foreign governments on policies that affect U.S. economic and  commercial interests and by supporting other U.S. agencies’ export  promotion efforts, among other things.

Commerce. Commerce maintains a presence in seven ASEAN  countries and a regional office in Singapore. Commerce provides  export promotion services to U.S. firms, including advocacy and  commercial diplomacy, market intelligence, matchmaking with local  firms, trade counseling, and trade promotion programs. Commerce  also leads or supports trade missions. From 2009 through 2014,  Commerce led 11 trade missions to ASEAN countries covering a  range of industries, such as aerospace, education, energy, and  textiles.

USDA. USDA maintains a presence in seven ASEAN countries.

USDA provides export promotion services for U.S. agricultural  exporters, such as market intelligence and international trade  missions. USDA also offers multiple market development programs in  partnership with U.S. food and agriculture industry groups.

For information about State, Commerce, and USDA staffing in ASEAN  countries, see appendix IV.

The Chinese government also pursues agreements with other countries  to facilitate trade and investment by Chinese firms in other countries,  including ASEAN countries. For example:

Special economic zones. China’s Ministry of Commerce has worked  with some ASEAN countries to set up special economic cooperation  zones to facilitate cross-border investment and trade. According to  China’s Ministry of Commerce, the Chinese government supports  Chinese firms that establish and invest in the zones by offering  financing, and facilitating movement of materials, equipment, labor,  and foreign exchange between China and the zones. China also  negotiates with the host government in the areas of tax, land, and  labor policies to support firms that choose to invest in the zones.  According to Chinese embassy websites, as of 2012, Chinese firms  had set up five zones in four countries—Cambodia, Thailand,  Vietnam, and Indonesia—91 enterprises had established businesses,  and more than $930 million had been invested in the zones.

Currency swaps. China also facilitates cross-border trade in local  currencies with ASEAN countries.

Chinese agencies have publicly  reported that China has currency swap agreements with the central  banks of Indonesia, Malaysia, Thailand, and Singapore totaling 650  billion Chinese yuan. Currency exchanges help to facilitate trade  and investment between the countries by eliminating the cost of  converting to a third currency, ensuring that sufficient amounts of  foreign currency are available for transactions, and reducing the risk  of exchange rate fluctuation. These agreements encourage trade  between China and the countries involved in the agreements to be  settled in those countries’ currencies rather than in dollars. Chinese  Premier Li Keqiang, the second-highest ranked Chinese Communist  party official, has stated that China also plans a pilot program to allow  currency swaps for cross-border transactions with other countries of  the Greater Mekong Subregion (Vietnam, Laos, Cambodia, and  Burma).

section_title: The United States Supports Capacity Building to Foster ASEAN Economic Development, while China Supports Infrastructure Development
paragraphs: The United States and China both provide assistance to ASEAN  countries to support regional economic development and integration. U.S.  initiatives have included enhancing governance and regional connectivity  by, for example, efforts to improve customs procedures across ASEAN  countries. Chinese initiatives have focused on infrastructure development.  China has promised billions of dollars for infrastructure investment  through new funds and multilateral institutions, such as the Asian  Infrastructure Investment Bank.
subsections: section_title: The United States Has Supported Economic Development in ASEAN Countries by Enhancing Governance and Regional Connectivity
paragraphs: In fiscal years 2009 through 2013, the United States identified $536  million of its assistance to ASEAN countries and the ASEAN Secretariat  as TCB assistance—that is, development assistance intended to improve  a country’s ability to benefit from international trade. U.S. TCB  assistance has supported initiatives aimed at, among other things,  helping ASEAN countries draft laws and regulations, improve public  financial management, train government officials, meet WTO  commitments, and increase accountability and transparency. U.S. TCB  assistance has supported multiple initiatives to advance ASEAN’s goal of  increased connectivity and integration throughout the region. For  example:

ASEAN Connectivity through Trade and Investment. This 5-year,  $16.2 million USAID program, begun in 2013, seeks to facilitate trade  through improving standards and systems, boosting the capacity of  small and medium-sized enterprises, accelerating the deployment of  clean energy technologies, and expanding connectivity. One of the  program’s objectives is to provide support for the ASEAN Single  Window, which will integrate ASEAN’s 10 national single customs  windows to enable electronic exchange of data to expedite cargo  clearance and lower the cost of doing business. According to USAID officials, four ASEAN countries were ready to use the system as of  January 2015, and it is planned to be operational by the end of the  year.

ASEAN-U.S. Partnership for Good Governance, Equitable and  Sustainable Development and Security. This 5-year, $14 million  program supported by USAID and State, also begun in 2013, seeks to  support ASEAN integration by harmonizing approaches to the rule of  law across countries; supporting people-to-people links through, for  example, fellowships; collaboration on disaster response; and  enhancing the ASEAN Secretariat’s management capabilities,  including information technology and public outreach capacities.

U.S.-ASEAN Connectivity Cooperation Initiative. Launched in  2011, this U.S. Trade and Development Agency (USTDA) initiative  seeks to support ASEAN integration by leveraging private sector  resources and expertise to support activities that increase connectivity  and investment in the energy, transportation, and information and  communications technology sectors. For example, USTDA has led  reverse trade missions and workshops to increase U.S. trade and  investment in electric smart grids, rail development, and other  infrastructure areas in ASEAN countries. In September 2013, USTDA  sponsored the ASEAN Connectivity through Rail Workshop in  Indonesia that highlighted U.S. firms’ capabilities in operation and  maintenance of rail systems. In addition, USTDA is sponsoring the  Global Procurement Initiative with the goal of fostering procurement  systems that will make awards based on the best value offered, rather  than on the lowest cost.

MCC is a U.S. government corporation that seeks to reduce global poverty through  economic growth. The Indonesia compact’s Green Prosperity Project is designed to  increase productivity in rural areas and reduce reliance on fossil fuels by expanding  renewable energy, and to increase productivity and reduce greenhouse gas emissions by  improving land use practices and management of natural resources.

MCC had expended $1.2 million of its $333 million commitment to  Indonesia. For more information about U.S. TCB in ASEAN countries, see  appendix V.

section_title: China Supports Trade Capacity Building and Infrastructure Development and Proposes Tens of Billions of Dollars for Future Infrastructure Projects
paragraphs: Like the United States, China has supported capacity-building efforts in  ASEAN countries, but it also provides billions of dollars for infrastructure  construction. According to the Chinese government’s July 2014 white  paper on foreign aid China’s capacity-building efforts in ASEAN countries  since 2010 have included setting up experimental crop stations, building  three agricultural technology demonstration centers, dispatching 300  agricultural experts to provide technical guidance, and helping to  establish systems for animal and plant disease prevention and control.  The paper states that China has also provided training to more than 5,000  officials and technicians from ASEAN countries in fields such as business  promotion, culture and arts, Chinese language, finance, energy, and  agriculture.

China has also contributed to regional development and integration  through infrastructure construction, generally in the form of loans for  specific projects, many of which are carried out by Chinese firms. The  2014 white paper states that China appropriated $14.4 billion for global  foreign assistance from 2010 to 2012, 64 percent of which was interest- free or concessional loans. The white paper also indicates that China  emphasized assistance in infrastructure construction, with 45 percent of  China’s total aid for economic infrastructure and 28 percent for social and  public infrastructure. The white paper did not break out information on  foreign aid in ASEAN countries. the U.S.-China Economic and Security Review Commission in May 2015,  as a result of overcapacity in the domestic Chinese construction market,  projects overseas have become more attractive to Chinese state-owned  enterprises.

See app. VI for information on U.S. and Chinese official development assistance to  ASEAN countries.

China has also provided loans to neighboring countries to finance  transportation links that will facilitate trade and other exchanges. Some of  these projects are part of the Greater Mekong Subregion (GMS)  Economic Cooperation Program, supported by ADB. Burma, Cambodia,  Laos, Thailand, Vietnam, and China’s Yunnan Province and Guangxi  Zhuang Autonomous Region are members of the subregion. According to  Chinese government publications and other sources, China funded  construction of part of a highway in Laos on a route between Kunming  and Bangkok, has upgraded its own highways that connect to other GMS  countries, has built other roads financed by ADB, and has financed and  built bridges in the subregion. The Chinese and Burmese governments  recently completed construction of crude oil and natural gas pipelines  from an Indian Ocean port in Burma to China. China also recently signed  a memorandum of understanding with Thailand to build a railway in  Thailand from the Thai-Laos border to Bangkok and the southeastern  province of Rayong and is negotiating with Laos to build a railway  connecting China with Laos’ capital of Vientiane and the Thai border.

China has promised billions of dollars for new funds and multilateral  institutions for the purpose of investing in infrastructure, including in  ASEAN countries. For example:

Silk Road Fund. China announced the creation of the $40 billion Silk  Road Fund to finance infrastructure construction and other  development in support of two initiatives announced by Chinese  President Xi Jinping in 2013: the Silk Road Economic Belt and 21st  Century Maritime Silk Road. According to a document released by the  Chinese government in March 2015, these initiatives aim to improve  land and maritime cooperation and connectivity along routes between  China and the rest of Asia, the South China Sea, the Indian Ocean,  Africa, and Europe. In February 2015, the Chinese central bank  announced that an initial $10 billion had been contributed to the fund  by state-owned financial institutions and the Chinese foreign  exchange reserves.investment, in support of a hydropower project in Pakistan.

In April 2015, China announced the fund’s first

Asian Infrastructure Investment Bank (AIIB). In 2013, Chinese  President Xi Jinping proposed the creation of an international  institution, AIIB, to finance infrastructure projects throughout the Asia- Pacific region. Under the bank’s initial agreement, the bank’s  authorized capital is $100 billion. According to AIIB documents, 57  countries are prospective founding members of the bank, including  each of the 10 ASEAN countries, and the bank anticipates beginning   The bank will be headquartered  operations before the end of 2015.in Beijing. Chinese officials have said that all countries are welcome to  join the bank; the United States and Japan have so far declined to do  so. U.S. Treasury officials have stated that the United States  welcomes the creation of new development institutions but have also  expressed concerns about the governance and standards of the new  bank.

Other funds. In addition, in November 2014, Chinese Premier Li  Keqiang pledged $20 billion in loans to boost infrastructure  connectivity in Southeast Asia, including $10 billion in loans to ASEAN  countries. He also announced that China would raise another $3  billion for the China-ASEAN Investment Cooperation Fund, a dollar- denominated equity fund that targets investment opportunities in  infrastructure, energy, and natural resources in ASEAN countries. As  of June 2015, the fund reported that its current size was $1 billion,  and it had set a target to ultimately raise $10 billion.

section_title: Agency Comments
paragraphs: We are not making recommendations in this report. We sent a draft of this  report for review and comment to the Departments of Agriculture,  Commerce, State, and the Treasury and to MCC, OPIC, USAID, Ex-Im,  USTDA, and USTR. We received technical comments from Agriculture,  Commerce, State, the Treasury, and USTR, which we incorporated as  appropriate.

We are sending copies of this report to the Secretaries of Agriculture,  Commerce, State, and the Treasury; the Chairman of Ex-Im; the  Administrator of USAID; the United States Trade Representative; the  Director of USTDA; the Chief Executive Officers of OPIC and MCC; and  other interested parties. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.

If you or your staff members have any questions about this report, please  contact me at (202) 512-3149 or gootnickd@gao.gov. Contact points for  our Offices of Public Affairs and Congressional Relations may be found  on the last page of this report. GAO staff members who made key  contributions to this report are listed in appendix VII.

section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: We were asked to review the nature of the United States’ and China’s  economic engagement in Southeast Asia. Our objectives were to  examine (1) what available data indicate about U.S. and Chinese trade  and investment with the Association of Southeast Asia Nations (ASEAN)  countries and (2) what actions the U.S. and Chinese governments have  taken to further economic engagement with these countries.

As part of this review, we conducted fieldwork in Jakarta, Indonesia— where the ASEAN Secretariat is located—and Hanoi and Ho Chi Minh  City, Vietnam. We based our selection of these two countries, among the  10 ASEAN countries, on the amounts of U.S. and Chinese exports and  imports, foreign direct investment (FDI), and development assistance in  each country. We also considered whether a country participated in U.S.  and Chinese trade agreements or was a negotiating partner in the Trans- Pacific Partnership, whether a country was the location of any regional  institutions, whether it was an emerging partner, and whether it was a  South China Sea claimant. The information on foreign law in this report is  not a product of GAO’s original analysis but is derived from interviews  and secondary sources.

To describe U.S. and Chinese engagement with ASEAN countries, we  analyzed data on U.S. and Chinese trade in goods, trade in services, and  FDI. We also analyzed trade and contract data to determine the extent to  which U.S. and Chinese firms compete. To assess the reliability of these  data, where possible, we cross-checked the data with other sources,  conducted checks on the data for internal consistency, and consulted with  U.S. officials. Because of the limited availability of data and the context  for different sets of data we report, the time period for each set of  reported data varied. We determined that the data were sufficiently  reliable for the purposes of our report and have noted caveats where  appropriate to indicate limitations in the data.

To obtain data on U.S. and Chinese trade in goods from 1994 through  2014, we accessed the United Nations’ (UN) Commodity Trade  Statistics Database by means of the Department of Commerce’s  (Commerce) Trade Policy Information System. This database  provides data for comparable categories of exports and imports of  goods for the United States and China. In reporting the value of  exports, we used data on total exports, which include re-exports— goods that are imported but then exported in substantially the same  condition. China does not report export data to the UN Commodity  Trade database that separates re-exports from total exports.  Therefore, we used data on total exports to ensure the comparability  of U.S. and Chinese data on goods exports. For imports, we used  data on general imports, which include goods that clear customs and  goods that enter into bonded warehouses or foreign trade zones. We  determined that data on trade in goods for the United States and  China were generally reliable for comparing trends over time and the  composition of trade.

To categorize the U.S. and Chinese trade in goods into capital,  intermediate, and consumer goods, we assigned each good from the  UN Commodity Trade database to one of these three categories using  the UN’s Broad Economic Categories. For goods that the UN does not  classify as capital, intermediate, and consumer goods, we created an  unclassified category. For example, the UN does not classify  passenger motor cars as capital or consumer goods.

We analyzed data from the Organisation for Economic Co-operation  and Development (OECD) and the World Trade Organization (WTO)  on trade in value-added goods and services to illustrate the  importance of accounting for components of a country’s exports that  originate in other countries.

We analyzed data from the ASEANstats database for 2003, 2008, and  2013 to examine ASEAN countries’ trade in goods with their trading  partners over time. Because some of the ASEAN countries’ trading  partners do not report data to the UN Commodity Trade database, we  used data from the ASEANstats database as a comprehensive set of  data on trade in goods for all of ASEAN countries’ trading partners.  We compared trade data from the ASEANstats database and the UN  Commodity Trade Database and found some differences in values of  bilateral trade between ASEAN countries and their trading partners.  Reasons for the differences include differences in the valuation of  goods and differences in data quality.

We calculated U.S. trade in services for 2011 and 2012, based on  tabulations prepared for us by the Commerce’s Bureau of Economic  Analysis (BEA) and other sources, including the U.S. Census Bureau.  BEA's data on trade in services for several categories—travel and  passenger fares, transportation, education, and other private  services—are based on data from various sources. According to BEA,  its survey data are from mandatory surveys of primarily U.S.  businesses with services trade that exceeds certain thresholds. BEA  does not survey a random sample of U.S. businesses and therefore  does not report the data with margins of error. Our estimates of U.S.  trade in services represent broad estimates rather than precise  values. We extrapolated values for certain services at the country  level from broader data (e.g., travel service data are based on  multiplying the number of travelers for a country by data on average  expenditures for travelers and average passenger fees for the region)  We calculated values for other services (e.g., business, professional,  and technical services) from a range of estimates based on survey  data. In instances where the volume of trade for a service was  presented to us as a range, we used the midpoint value to estimate  the volume of trade for that service. In instances where the volume of  trade for a service was presented as a range and described by BEA  as trending upward, we used the lowest value for the earlier years and  the highest value for the later years and assumed that the growth was  linear.

For China’s trade in services in 2011, we used estimates from the UN  Conference on Trade and Development, the World Trade  Organization (WTO), and the International Trade Centre downloaded  from the International Trade Centre’s Trade Map database. The  estimates for 2009 from the Trade Map database are the same as  data on China’s trade in services from a report by China’s Ministry of  Commerce.

For data on U.S. firms’ investments from 2007 through 2012, we used  data that we obtained directly from BEA. For Chinese firms’  investments, we used data from the UN Conference on Trade and  Development as reported by China’s Ministry of Commerce. To  identify patterns in, and to compare, U.S. and Chinese FDI, we report  U.S. and Chinese data on FDI while noting their limitations. First, as  we have previously reported, both U.S. and Chinese FDI may be  underreported, and experts have expressed particular concern  regarding China’s data. U.S. and Chinese firms set up subsidiaries in places such as the Netherlands and the British Virgin Islands, which  can be used to make investments that are not captured by U.S. and  Chinese data on FDI. Experts state that this could be a significant  source of underreporting for China’s data. For U.S. data, according to  BEA, U.S. data on FDI are based on quarterly, annual, and  benchmark surveys. BEA’s benchmark survey is the most  comprehensive survey of such investment and covers the universe of  U.S. FDI. According to BEA, quarterly and annual surveys cover  samples of businesses with FDI that exceed certain thresholds. BEA  does not survey a random sample of businesses and therefore does  not report the data with margins of error; therefore, we have not  reported margins of error. Second, China does not report its definition  of FDI when reporting its data. However, the types of data included by  China in its FDI (e.g., equity investment data and reinvested earnings  data) appear similar to data reported for U.S. FDI, which the United  States defines on the basis of the OECD definition of FDI. Despite  these limitations, various reports, including those published by  international organizations such as the IMF, government agencies,  academic experts, and other research institutions, use China’s  reported investment data to describe China’s FDI activities. In  addition, despite some potential underreporting of FDI data, we  determined that the U.S. FDI data were reliable for reporting general  patterns, when limitations are noted.

Given challenges in determining appropriate deflators for some data, we  used nominal rather than inflation-adjusted values for U.S. and Chinese  trade and for investments in ASEAN countries. However, we did test to  see what the impact would be of deflating these data and found that  deflating these values made a limited difference in describing the overall  trends. For example, if the goods trade values that we report were  adjusted using the U.S. gross domestic product (GDP) deflator, total  Chinese trade in goods would surpass total U.S. trade in goods in 2007— similar to trends we found in nominal trade values. U.S. total trade in  goods increased by a factor of 2.4 from 1994 through 2013 if not adjusted  for inflation and by a factor of 1.7 if adjusted for inflation. Over the same  period, Chinese total trade in goods increased by a factor of 30.9 if not  adjusted for inflation and by a factor of 21.4 if adjusted for inflation.

To determine the extent to which U.S. and Chinese firms compete in  ASEAN countries, we interviewed U.S. agency and private sector  representatives and analyzed available data. To assess the extent to  which exporters from the United States, China, and other countries  compete, we calculated an export similarity index to compare U.S.,  Chinese, and other countries’ exports to ASEAN countries from 2001  through 2014. The export similarity index is a measure of the similarity of  exports from two countries to a third country. For example, to calculate  the index for U.S. and Chinese exports to ASEAN countries, for each type  of good that the United States and China exports, we first calculate the  share of that good in the United States’ and China’s total exports to  ASEAN countries. We then identify the minimum of the United States’ and  China’s shares. The index is the sum of the minimum shares for all types  of goods that the United States and China export to ASEAN countries.  We used data on goods exports from the UN Commodity Trade database  at the four-digit level and calculated each country’s export of a particular  good as a share of that country’s total exports to ASEAN countries.

We also analyzed data from Commerce’s Advocacy Center on host- government contracts and data for contracts funded by the Asian  Development Bank (ADB) and World Bank. Although these data  represent a small share of activity in the region, they provide insights into  the degree of competition between U.S. and Chinese firms for the  projects represented.

Commerce’s Advocacy Center data were for a limited number of  cases (184) where U.S. firms requested the agency’s assistance in  bidding for host-government contracts in ASEAN countries in 2009  through 2014. Because these data included the nationality of other  firms bidding on a host-government contract, we used this information  to determine the extent to which Chinese firms or firms of other  nations were competing with U.S. firms for these contracts. We  counted the numbers of contracts and summed the value of contracts  in the Advocacy Center data for which each foreign country’s firms  competed against U.S. firms. We excluded 12 contracts for which the  nationality of competitors was not identified, and in cases where the  U.S. firm(s) competed against a consortium of firms from different  countries, we counted the whole value of the contract in each  country’s total. We also used the Advocacy Center’s classification of  contracts by sector to determine the sectors in which Chinese firms  competed for the highest proportion of contracts. To determine the  reliability of these data, we manually checked the data for missing  values and reviewed information about how the data were collected.  In addition, we interviewed Advocacy Center staff about the data.  Advocacy Center staff told us that data from before 2010 may be less  complete, because the center switched databases at that time, and  some contracts that had been closed may not have been transferred.  Overall, we found the data to be reliable for reporting on competition  between U.S. and other firms, including Chinese firms, in ASEAN  countries.

The World Bank publishes data on the value, sector, and suppliers of  its contracts in ASEAN countries. We used the World Bank’s  classification of contracts into procurement categories (goods, civil  works, consultant services, and nonconsultant services) to compare  the value and types of contracts that U.S. and Chinese firms were  awarded from 2001 through 2014. However, we combined the  consultant services and nonconsultant services categories into one  category that we titled “consultant and other services”. The data  include contracts (generally large-value) that World Bank staff  reviewed before the contracts were awarded. We analyzed all  contracts in individual ASEAN countries as well as Mekong and  ASEAN regional contracts. To determine the reliability of these data,  we electronically checked the data for missing values and possible  errors. We also contacted World Bank personnel to determine how  the data were collected and any limitations of the data. We found that  the data for contracts funded by the World Bank were generally  reliable for the purpose of demonstrating U.S. and Chinese  competition in ASEAN countries over time.

To compare the value and types of contracts obtained by U.S. and  Chinese firms, we used ADB’s published data on the value, sector,  and recipient of its contracts for consulting services, goods, and civil  works provided as technical assistance or funded by loans and grants  to ASEAN countries in 2013 and 2014. We also included regional  contracts for Southeast Asia or the Greater Mekong Subregion in our  analysis. ADB publishes data only for consulting contracts over $0.1  million in value and other contracts over $1.0 million, so our analysis  of ADB contracts does not include some smaller ADB contracts. In  addition, a portion of the ADB data did not have the contracts  classified according to the nature of the contract (construction,  consulting services, goods, turnkey, and others). Therefore, we  classified contracts obtained by U.S. and Chinese firms that were  missing these categories according to those used in the rest of the  data. To determine the reliability of these data, we checked the data  for missing values and other types of discrepancies. We found that  the ADB data were generally reliable for our purpose of reporting on  U.S. and Chinese competition in ASEAN countries in 2013 and 2014.

To examine the actions that the U.S. and Chinese governments have  taken to further economic engagement, we reviewed regional and country  studies and U.S., Chinese, and ASEAN agency documents and  interviewed U.S. and third-country officials, officials from private sector  business associations, and experts from think tanks. We tried to arrange  visits with Chinese government officials in the ASEAN countries we  visited and in Washington, D.C.; however, they were unable to  accommodate our requests for a meeting. U.S. agencies included in the  scope of our study are the U.S. Departments of Agriculture (USDA),  Commerce, State (State), and the Treasury; the Office of the U.S. Trade  Representative (USTR); the Millennium Challenge Corporation; the U.S.  Agency for International Development (USAID); the Export-Import Bank of  the United States (Ex-Im); the Overseas Private Investment Corporation  (OPIC); and the U.S. Trade and Development Agency.

To obtain information about U.S. and Chinese trade agreements with  ASEAN countries, we reviewed the trade agreements; U.S., Chinese,  and ASEAN documents; academic and government studies; prior  GAO reports; and documents from multilateral organizations, such as  the WTO. We also interviewed U.S. officials in Indonesia and  Vietnam, officials from private sector business associations, and  experts from think tanks. To calculate examples of tariff reductions  from these trade agreements, we used data on trade in goods from  the UN Commodity Trade database to identify top traded goods and  data from the WTO and the U.S. International Trade Commission on  U.S., Chinese, and ASEAN countries’ tariffs.

To calculate the percentage of world goods trade for the participants  in the Trans-Pacific Partnership negotiations, the Regional  Comprehensive Economic Partnership negotiations, and the North  American Free Trade Agreement, we used data on trade in goods  from the UN Commodity Trade Database. As of July 2015, some  countries such as Malaysia and Italy had not reported data on trade in  goods for 2013, so we used the average of those countries’ available  data from 2010 through 2012 as an estimate of its 2013 trade in  goods.so we excluded it from the calculations. To calculate the total  population and percentage of world GDP for these participants, we  used data on population and GDP from the World Bank’s World  Development Indicators.

In addition, Laos did not report data for 2010 through 2013,

To obtain information about U.S. financing, we compiled Ex-Im and  OPIC data from these agencies’ annual reports and congressional  budget justifications and interviewed agency officials to provide  additional context and to clarify elements of the data. Where relevant,  we note that additional Ex-Im insurance may include ASEAN  countries but do not include these in our totals. To determine the  reliability of these data, we interviewed agency officials and checked  their published annual reports against agency-provided summary data  to determine any limitations of the data or discrepancies in the data.  We determined that data from Ex-Im and OPIC were generally reliable  to present trends and aggregate amounts by year.

To document U.S. efforts to provide export promotion services in  ASEAN countries, we reviewed State’s Foreign Affairs Manual and  information about Commerce and USDA’s export promotion policies  and trade missions. We also interviewed State, Commerce, and  USDA officials in Washington, D.C., and in Vietnam and Indonesia.  We obtained data from State, Commerce, and USDA on the agencies’  staffing in ASEAN countries. To determine the reliability of the data,  we obtained information about how the data were collected and  tabulated. We determined that the data were sufficiently reliable to  show staffing trends over time (see app. IV).

To document Chinese financing and support for firms, we used  publicly available information from the websites of the Export-Import  Bank of China, the China Development Bank, and the China Export &  Credit Insurance Corporation. We converted financing numbers from  Chinese yuan to U.S. dollars using exchange rates reported by the  Federal Reserve. We supplemented this information with estimates  from U.S. Ex-Im on Chinese export finance in 2013. We also used  information reported by China’s Ministry of Commerce about Chinese  investment in special economic zones and from Xinhua, China’s state  press agency, about currency swap agreements between China and  other countries’ central banks.

To obtain data on U.S. official development assistance, we used data  from the OECD’s Development Assistance Committee. To obtain data  on China’s grants and aid, we used data from China’s 2014 white  paper on foreign aid, which describes China’s foreign assistance  activities from 2010 through 2012. To determine the reliability of U.S.  development assistance data, we interviewed a knowledgeable  USAID official about the definitions and collection of the data. We  determined that U.S. development assistance data were generally  reliable for showing the trends and composition of aid to ASEAN  countries over time. China’s white paper does not break out the data  that it provides by country; thus, we were unable to provide data on  China’s provision of aid to ASEAN countries.

To document U.S. support for economic development and integration  in ASEAN countries, we used the USAID trade capacity building  (TCB) database to capture U.S. development assistance efforts  related to trade in ASEAN countries and at the ASEAN Secretariat.  USAID collects data to identify and quantify the U.S. government’s  TCB activities in developing countries through an annual survey of  agencies on behalf of USTR. We also reviewed agency project  summaries and interviewed agency officials in Washington, D.C.,  Indonesia, and Vietnam. Where relevant, we noted that funds  provided in a larger region (for example, funds provided to the East  Asia and Pacific region) may include ASEAN countries, but we did not  include these regional funds in our totals. To determine the reliability  of these data, we interviewed agency officials regarding their methods  for compiling and reviewing the data. We determined that data from  the TCB database were sufficiently reliable for our purposes.

To describe China’s support for regional integration, we assessed  publicly available information from China’s July 2014 white paper on  foreign aid; from Chinese ministries, such as the Ministry of Foreign  Affairs; and from Xinhua, China’s state news agency. We determined  that the white paper and web publications from the Ministry of Foreign  Affairs represented official Chinese statements. We relied on Xinhua  for translation of statements by Chinese officials about Chinese  initiatives and strategies and for other factual information, such as the  location of infrastructure built in ASEAN countries with Chinese  support.

We conducted this performance audit from April 2014 to August 2015 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

section_title: Appendix II: Roles and Responsibilities of U.S. and Chinese Entities in ASEAN Countries
paragraphs: Multiple U.S. and Chinese entities have roles in managing and conducting  economic engagement with member countries of the Association of  Southeast Asian Nations (ASEAN). Tables 6 and 7 provide more  information about the roles and responsibilities of 10 U.S. entities and 6  Chinese entities that seek to promote trade and investment in, and  provide aid to, ASEAN countries.

Six Chinese entities manage China’s economic relationship with ASEAN  countries. (See table 7.)

section_title: Appendix III: U.S., Chinese, European Union, and Japanese Goods Trade with ASEAN Countries
paragraphs: Machinery is the largest component of both the United States’ and  China’s total goods exports and imports with the Association of Southeast  Asian Nations (ASEAN) countries, but machinery’s share of goods trade  is falling. From 2007 through 2014, approximately 95 percent of U.S. and  Chinese traded machinery was for industrial use, to produce other goods.  For example, integrated circuits, a top machinery good, are used for  producing computers and other electronic goods. The significant role of  trade in machinery indicates that ASEAN countries are integrated into the  U.S. and Chinese supply chains.

Imports. From 2000 through 2014, U.S. imports of machinery from  ASEAN countries declined from 61 percent to 40 percent of U.S.  imports from ASEAN countries. As of 2014, the next largest  categories of U.S. imports from ASEAN countries consisted of “other”  (23 percent); textiles (15 percent); chemicals, plastic, and rubber (11  percent); and animals, plants, and food (10 percent). Machinery as a  percentage of Chinese imports from ASEAN countries ranged from a  low of 41 percent in 2000 to a high of more than 60 percent in 2006  before falling to 43 percent in 2014. Other leading Chinese imports in  2014 were chemicals, plastic, and rubber (16 percent) and mineral  products (15 percent).

Exports. From 2000 through 2014, machinery declined from 64  percent to 34 percent of U.S. exports to ASEAN countries, as the  export share of U.S. transportation products grew from a low of 5  percent in 2000 to a high of 15 percent in 2013. In 2014, the other  large categories of U.S. exports to ASEAN countries were “other” (17  percent); animals, plants, and food (14 percent); chemicals, plastic,  and rubber (12 percent); and mineral products (6 percent). Machinery  as a percentage of Chinese exports to ASEAN countries fell from a  high of 46 percent in 2004 to 33 percent in 2014. Other leading  Chinese exports in 2014 were “other” (30 percent); metals (13  percent); chemicals, plastic, and rubber (10 percent); and  transportation (5 percent).

Figure 15 shows the United States’ and China’s total goods imports from  ASEAN countries, by type of goods, in 2000 through 2014.

Figure 16 shows the United States’ and China’s total goods exports to  ASEAN countries, by type of goods, from 2000 through 2014.

Tables 8 through 11 show the top 10 exports by the United States, China,  the European Union (EU), and Japan to ASEAN countries in 2014. In  2014, electronic integrated circuits and microassemblies was the top  export to ASEAN countries for both the United States and China;  otherwise, U.S. and Chinese top 10 exports to ASEAN countries did not  overlap. Electronic integrated circuits and microassemblies was also the  only top 10 U.S. export to ASEAN that was among the top 10 EU exports  to ASEAN. Three of the top 10 U.S. exports to ASEAN:  (1) electronic  integrated circuits and microassemblies; (2) diodes, transistors and  similar semiconductor devices and photosensitive semiconductor devices,  light emitting diodes; and (3) gold, nonmonetary (excluding gold ores and  concentrates) were among the top 10 Japanese exports.

section_title: Appendix IV: Overseas Staffing in ASEAN Countries by Departments of State, Commerce, and Agriculture
paragraphs: Overseas staffing in the member countries of the Association of  Southeast Asian Nations (ASEAN) by the Departments of State (State)  and Commerce (Commerce) generally increased in recent years, while  the Department of Agriculture’s (USDA) overseas staffing remained  relatively constant.

State’s economic foreign service officer (FSO) positions in ASEAN  countries increased from 2008 through 2014, with the largest increase in  positions from 2011 through 2012. However, State attributed the increase  in positions in 2011 and 2012 to a worldwide reclassification of some  positions from generalist interfunctional to economic. State economic  FSO positions in ASEAN countries as a percentage of economic FSO  positions worldwide remained from 6 to 7 percent from 2008 to 2014 (see  table 12).

Commerce’s FSO positions in ASEAN countries increased in fiscal years  2012 through 2014, while its locally employed staff (LES) positions  remained about the same (see table 13).

The Department of Agriculture’s (USDA) FSO and LES positions in  ASEAN countries did not change significantly in fiscal years 2009 through  2014. USDA positions in ASEAN countries as a percentage of its global  presence gradually increased for FSO positions during these years but  decreased somewhat for LES positions from fiscal years 2009 through  2014 (see table 14).

section_title: Appendix V: U.S. Trade Capacity Building Assistance to ASEAN Countries and the ASEAN Secretariat
paragraphs: U.S. agencies have identified certain official development assistance to  member countries of the Association of Southeast Asian Nations  (ASEAN) and the ASEAN Secretariat as trade capacity building (TCB)  assistance. TCB assistance addresses areas including the regulatory  environment for business, trade, and investment; constraints such as low  capacity for production and entrepreneurship; and inadequate physical  infrastructure, for example, poor transport and storage facilities. Table 15  shows U.S. TCB assistance to ASEAN countries, including the ASEAN  Secretariat, in fiscal years 2009 through 2013.

As table 15 shows, in fiscal years 2009 through 2011, U.S. TCB  assistance to ASEAN countries and the ASEAN Secretariat remained  relatively constant at approximately $45 million annually. In fiscal year  2012, the Millennium Challenge Corporation (MCC) signed a $600 million  compact with Indonesia. MCC categorized its Indonesia compact’s  $332.5 million Green Prosperity Project as TCB assistance, resulting in  an increase to $365.5 million in identified TCB assistance that year. In  fiscal year 2013, U.S. TCB assistance fell to approximately $34 million.

Indonesia was the largest recipient of TCB assistance among ASEAN  countries in recent years. Indonesia received almost 70 percent of the  TCB funding in fiscal years 2009 to 2013, primarily because of funding  from the MCC compact. The Philippines, Vietnam, and Cambodia were  the next largest recipients of TCB assistance, with the Philippines  receiving about 9 percent of total TCB assistance to ASEAN countries  and the Secretariat in fiscal years 2009 through 2013, followed by  Vietnam with 6 percent and Cambodia with about 5 percent. Singapore  and Brunei did not receive TCB assistance during this period.

section_title: Appendix VI: U.S. and Chinese Official Development Assistance to ASEAN Countries
paragraphs: U.S. official development assistance (ODA) to member countries of the  Association of Southeast Asian Nations (ASEAN) has increased in recent  years due to Millennium Challenge Corporation (MCC) commitments and  has focused on social infrastructure and services. China does not report  ODA by country and does not use the definitions used by the United  States and other members of the Organisation for Economic Co-operation  and Development’s Development Assistance Committee (OECD-DAC).
subsections: section_title: MCC Commitments Have Increased U.S. ODA to ASEAN Countries
paragraphs: In calendar years 2005 through 2013, the United States provided  approximately $7.2 billion in ODA to ASEAN countries, approximately 2.8  percent of U.S. ODA worldwide for that period. In calendar year 2013,  U.S. ODA to ASEAN countries was 4.5 percent of total U.S. ODA. More  than half of U.S.-provided ODA to ASEAN countries was for “social  infrastructure and services,” which includes categories such as education,  health, and assistance to government and civil society. In accordance  with the 2005 Paris Declaration on Aid Effectiveness, the U.S.  government generally does not condition its aid on, or tie it to, the  recipient country’s use of the aid to procure goods or services from the  United States. From 2005 through 2013, the three highest U.S. ODA  commitment levels to ASEAN countries resulted from large one-time  commitments. In 2005, the United States committed $374 million in  humanitarian aid to Indonesia. The 2011 and 2013 peaks reflect the  entry-into-force of MCC compacts with the Philippines and Indonesia,  respectively (see fig. 17).

MCC’s 5-year $434 million Philippines compact consists of rehabilitation  of a 222-kilometer road on Samar to improve access to markets and  social services ($214.4 million); funding for projects selected by  communities, such as water systems, clinics, and schools ($120 million);  efforts to improve tax administration ($54.3 million); and $45.1 million for  program administration, monitoring, and evaluation.  MCC’s 5-year, $600  million Indonesia compact consists of the Green Prosperity Project  ($332.5 million) to provide technical and financial assistance for locally  identified projects in renewable energy and natural resource  management; the Community-Based Health and Nutrition to Reduce  Stunting Project ($131.5 million) to improve child health and nutrition; and  the Procurement Modernization Project ($50 million) to increase  institutional capacity and employee knowledge of good procurement  practices; and $86 million for program administration, monitoring, and    Supported by the large commitments by MCC, Indonesia  evaluation.and the Philippines, the first and second-largest ASEAN countries by  population, received the largest percentages of U.S. ODA to ASEAN  countries in 2005 through 2013. Vietnam, the third largest, received the  third-largest percentage (see table 16).

section_title: China Does Not Publish Aid Data Disaggregated by Country
paragraphs: China is not a member of the OECD-DAC and does not provide data  according to OECD-DAC definitions and categories. In recent years,  however, China has published some information about its foreign  assistance. In 2011 and again in July 2014, China released a white paper  on its foreign aid. The white paper stated that China appropriated a total  of $14.4 billion for global foreign assistance as grants (36 percent of the  total), interest-free loans (8 percent), and concessional loans (56 percent)  in 2010 through 2012. The white paper also stated that 31 percent ($4.4  billion) of China’s aid was provided to Asia, but did not break out this aid  by country. According to the white paper, 45 percent of China’s total aid  was for economic infrastructure, 28 percent was for social and public  infrastructure, and from 2010 to 2012 China emphasized assistance in  infrastructure construction. Unlike OECD-DAC countries, China has not  agreed to eliminate tying aid to the use of its own goods and services.

section_title: Appendix VII: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Emil Friberg (Assistant Director),  Charles Culverwell, Fang He, Kira Self, Michael Simon, and Eddie W.  Uyekawa made key contributions to this report. Benjamin A. Bolitzer,  Lynn A. Cothern, Mark B. Dowling, Justin Fisher, Michael E. Hoffman,  Reid Lowe, J. Daniel Paulk, and Oziel A. Trevino provided technical  assistance.


Question-summary annotations: questions: question: How do US and Chinese economic engagements compare?
answer: China has surpassed the United States in goods trade with Association of Southeast Asian Nations (ASEAN) countries and trades a similar amount of services, but U.S. investment exceeds reported Chinese investment. China surpassed the United States in goods trade with ASEAN countries in 2007. In 2014, China's total goods trade of $480 billion was more than twice the U.S. total goods trade of $220 billion.
child_questions: question: How did China's goods trade with ASEAN compare to US?
answer: China surpassed the United States in goods trade with ASEAN countries in 2007. In 2014, China's total goods trade of $480 billion was more than twice the U.S. total goods trade of $220 billion.

question: How did US and China trade with ASEAN with regards to services in 2011?
answer: Limited available data indicate that in 2011, the United States and China each traded about $37 billion in services with ASEAN countries.

question: How did US foreign direct investment to ASEAN compare to China?
answer: From 2007 through 2012, U.S. foreign direct investment flows to ASEAN countries of $96 billion exceeded China's reported $23 billion.

questions: question: How do FTAs of US and China in ASEAN compare?
answer: Trade agreements. The United States has a free trade agreement (FTA) with one ASEAN country, Singapore, while China has an FTA with all 10 ASEAN countries.
child_questions: question: How do US and China regional trade agreement negotiations differ?
answer: The United States and China are each party to separate regional trade agreement negotiations—the United States through the Trans-Pacific Partnership and China through the Regional Comprehensive Economic Partnership.

question: What does China's FTA not address?
answer: China's existing FTAs do not address aspects of trade addressed in the U.S.-Singapore FTA, such as intellectual property, the environment, and labor rights.

questions: question: What do US and China want?
answer: Both the United States and China seek to deepen their economic engagement with the 10 ASEAN members: Brunei Darussalam, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

question: What do ASEAN countries want?
answer: ASEAN countries are seeking to further integrate their economies and create an economic community by the end of 2015.
child_questions: question: How would ASEAN countries fare economically if they were one nation?
answer: According to International Monetary Fund data, if ASEAN countries were a single nation, their collective 2014 GDP would represent the seventh largest economy in the world.

question: What was US's focus since 2011?
answer: In 2011, the President announced a renewed focus—known as the rebalance—on the Asia-Pacific region. The U.S. Department of State and U.S. Agency for International Development prepared a 5-year strategy for the rebalance.

questions: question: What was GAO asked to examine?
answer: GAO was asked to examine the United States' and China's economic engagement in the region.
child_questions: question: What does the GAO report examine?
answer: This report examines (1) what available data indicate about U.S. and Chinese trade and investment with ASEAN countries and (2) what actions the U.S. and Chinese governments have taken to further economic engagement with these countries.

question: How did GAO analyze US and China economic engagement in Southeast Asia?
answer: GAO analyzed publicly available economic data and Chinese government documents and reviewed documentation from 10 U.S. agencies. GAO also interviewed U.S. officials and private sector representatives.