Study on the Relationship Between China's Economic Development

Trend and Southeast Asian Countries' Hedging Strategy

Yaxuan Ji

College of Finance and Economics, Shandong University of Science and Technology, Qingdao, China

Keywords: Hedging Strategy, Chinese Economy, Indo-Pacific Strategy, Spillover Effects.

Abstract: China's economic rise has brought Southeast Asia the dual challenges of economic dependence and se-curity

autonomy, prompting it to adopt a hedging strategy. China has formed a complex interdependent relationship

with Southeast Asia through trade, investment, and infrastructure cooperation, which has helped regional

development and strengthened its strategic autonomy needs. Realism, constructivism, and complex

interdependence theories reveal the logic of Southeast Asia's balancing the influence of major powers, being

influenced by historical cognition and ethnic politics, and the spillover of econom-ic cooperation into the

political field. Southeast Asia's hedging strategy presents a dual logic of "eco-nomic dependence-security

balance": deepening economic and trade cooperation with China while bal-ancing risks through multilateral

mechanisms or external forces. The research concludes that China should deepen cooperation through

differentiated strategies, focus on infrastructure and industrial chain coordination in the short term, strengthen

multilateral mechanisms, and enhance cultural identity in the long term.

1 INTRODUCTION

1.1 Research Background and

Significance

The structural rise of China's economy and the

deepening implementation of the "Belt and Road"

initiative have reshaped the economic power

dynamics in Southeast Asia. In 2023, trade between

China and ASEAN exceeded $6.4 trillion, accounting

for 20% of ASEAN's total foreign trade, highlighting

the region's high dependence on the Chinese market,

investment, and industrial chains. However, against

the backdrop of intensified strategic competition

between China and the United States, Southeast Asian

countries face a core contradiction: on one hand, they

seek development dividends through participation in

RCEP and infrastructure projects (such as the Jakarta-

Bandung High-Speed Railway); on the other hand,

they worry that over-reliance on China could

undermine their strategic autonomy, especially with

rising security risks in areas like the South China Sea

disputes and digital technology standards. This

contradiction is particularly evident in the contentious

progress of projects such as the China-Myanmar

railway and the China-Indonesia high-speed rail,

forcing Southeast Asian countries to adopt a "contact

+ balance" strategy. For example, Indonesia balances

geopolitical risks by introducing capital from both

China and Japan, while Myanmar seeks to reduce its

dependence on China through economic

diversification. As the Sino-U.S. rivalry enters a new

phase, Southeast Asia's "middle ground" status makes

it a focal point for major power competition and

cooperation, making the coordination of dual goals—

economic and security—more urgent (Zhang, 2021).

This study integrates multiple perspectives from

realism, constructivism, and complex

interdependence theory to reveal the formation logic

and dynamic evolution of hedging strategies in

Southeast Asian countries. Existing research often

separates the interactive relationship between

economic cooperation and security games, failing to

adequately explain the complex behavior of

Southeast Asian countries as they "rely on and

balance" against China and the United States.

Theoretically, the study breaks through the limitations

of a single theoretical paradigm, emphasizing the

joint role of economic power asymmetry, historical

cognitive differences, and institutional constraints in

strategic choices, providing new evidence for the

Ji, Y.

Study on the Relationship Between China’s Economic Development Trend and Southeast Asian Countries’ Hedging Strategy.

DOI: 10.5220/0014293900004859

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 1st International Conference on Politics, Law, and Social Science (ICPLSS 2025), pages 66-74

ISBN: 978-989-758-785-6

applicability of international relations theory in

regional and country-specific studies. Practically, the

study analyzes the differentiated strategic preferences

of Southeast Asian countries (such as Vietnam's focus

on security balance and Indonesia's inclination

towards economic diversification), offering specific

directions for China to optimize its regional

cooperation path: including promoting differentiated

infrastructure projects to reduce concerns about the

"debt trap," strengthening RCEP multilateral rule

constraints to enhance cooperation predictability, and

activating cultural identity ties to rebuild strategic

trust with China, thereby providing policy references

for balancing economic influence expansion with

regional security concerns (Jiao, 2023).

1.2 Research Problems and

Framework

This study focuses on the differentiated mechanisms

by which China's economic development shapes

Southeast Asian countries' hedging strategies, with

particular attention to the dynamic balance between

economic dependence and security autonomy. As

Southeast Asia's largest trading partner and primary

source of investment, China's economic influence

profoundly alters regional strategic dynamics through

multiple channels such as infrastructure construction,

industrial chain integration, and digital technology

standards, prompting Southeast Asian countries to

adopt a composite hedging strategy that is both

cooperative and defensive. This strategy manifests in

Vietnam as strengthening security cooperation with

the United States and Japan to counterbalance China's

influence in the South China Sea, while in Indonesia

it is reflected in deepening economic ties with China

through the RCEP framework while maintaining

ASEAN centrality. (Li and Jin, 2024).

The analytical framework employs a three-

dimensional theoretical lens to reveal the complex

interplay between economics and security: The realist

perspective highlights the structural pressures formed

by China's scale of infrastructure investment and

market access power, compelling Southeast Asian

countries to reduce unilateral dependence through

military modernization and diversified diplomacy.

The constructivist dimension focuses on how

historical trauma (such as colonial experiences) and

religious cultural identity (the bond of Buddhist

civilization) shape strategic trust thresholds toward

China, explaining why Thailand prioritizes economic

cooperation over Vietnam; the theory of compound

interdependence analyzes how RCEP rule constraints

and digital economy standards competition reshape

the sensitivity of security issues.

2 THEORETICAL BASIS

2.1 Realist Theoretical Perspective

Under the framework of realism theory, the primary

driving force in international relations is the anarchic

nature of the international system. In an anarchic

state, the first consideration for states is survival and

security; therefore, states must maintain their own

security through self-help, with military power being

the primary element of state authority (Li et al.,

2022). In the current environment of intense

competition between China and the United States,

ASEAN countries represented by the Philippines,

Vietnam, and Thailand have made power and security

their core objectives. Whether these countries

perceive the threat from China and the U.S. as

symmetrically is the direct motivation for their

hedging strategies, while the strength of their hedging

capabilities supports or hinders the continuation of

such strategies in practice. Compared to the more

pronounced geopolitical games of "taking sides"

between the U.S. and the Soviet Union during the

Cold War, the strategic environment for Southeast

Asian countries has gradually shifted from inclusive

to restrictive, with the space for hedging shrinking.

However, Southeast Asian countries have not clearly

stated their positions and attitudes. To protect the

national interests of Southeast Asian countries,

ASEAN nations can choose to strengthen economic

cooperation with China and enhance cooperation with

Western countries like the U.S. in areas such as

military security, which some scholars refer to as

"relying on China economically and on the U.S. for

security." Chen et al. (Chen, 2025) found through

comparative analysis of the domestic political

characteristics and changes in hedging strategies of

the Philippines, Vietnam, and Indonesia that

collective memory and strategic autonomy determine

the expectations of external threats and hedging

capabilities of Southeast Asian countries at the

domestic political level.

2.2 Constructivism Theory Perspective

In the interactions between China and Southeast

Asian countries within the framework of

Study on the Relationship Between China’s Economic Development Trend and Southeast Asian Countries’ Hedging Strategy

constructivism, the narrative of a "community with a

shared future" has reconstructed regional cognitive

structures through multidimensional social practices.

This narrative is embodied in infrastructure

connectivity projects, such as the China-Laos

Railway, which not only connects physical spaces but

also concretizes the principle of "consultation,

cooperation, and benefit sharing" into daily

interactions through designs like cross-border

cultural display carriages and joint archaeological

workstations. On the digital governance front, when

China-led initiatives like the "Digital Silk Road"

connect with ASEAN's smart city network, a special

fund for optimizing Southeast Asian language

algorithms is established. This technical adaptation

mechanism effectively mitigates the sensitivity

associated with the transfer of digital sovereignty.

Notably, during the 2024 consultations on the Code

of Conduct in the South China Sea, China creatively

introduced a clause for "joint protection of maritime

cultural heritage," embedding archaeological

cooperation at sites visited by Zheng He's fleet during

the Ming Dynasty into security dialogues,

successfully transforming historical symbols into

resources for building trust.

The constructive role of historical memory

presents a dual tension in the South China Sea issue.

The traumatic memory formed by the 2012 Huangyan

Island standoff continues to ferment through the

"modern colonial narrative" in Philippine textbooks,

leading the Philippines to insist on including the

"Maritime Militia Clause" in the 2024 revision of the

U.S.-Philippines Mutual Defense Treaty. In contrast,

the historical image of Zheng He's voyages to the

Western Seas is reconstructed as a collective memory

of the "Age of Peace Trade" in the permanent

exhibition at the National Museum of Malaysia. This

narrative underpins Mahathir's government's

rejection of the U.S. proposal to deploy surveillance

systems in the Malacca Strait in 2025. Vietnam's

cognitive structure is more complex, with its

textbooks juxtaposing symbols of "resisting Yuan

Dynasty invasion" and "Ho Chi Minh's exile in

China." This dual memory explains why Vietnam has

both participated in cross-border railway standards

set by China and accelerated the procurement of

Japanese submarines to strengthen maritime defense.

The "Southeast Asian Cultural Resonance Plan"

released by the Chinese Ministry of Foreign Affairs

in 2024 marks an upgrade in narrative strategy. The

plan comprises three construction levels: at the

material level, it aims to restore lost Khmer

architectural techniques from the restoration of

Angkor Wat; at the institutional level, it establishes

the "China-ASEAN Traditional Medicine Intellectual

Property Protection Center"; and at the conceptual

level, it promotes the philosophy of "harmony and

coexistence" into general education courses in

Southeast Asian universities. This multi-dimensional

construction has made breakthroughs in Myanmar,

where the special act on the China-Myanmar

Economic Corridor approved by the military

government in 2025 unusually sets "cultural

exchange" as a legal principle, reflecting the

internalization of normative power. However, the

construction process still has its cracks, with the

"Zheng He Narrative De-mystification Movement"

initiated by Indonesian scholars reminding us that

over-reliance on historical symbols may trigger a

backlash from local cultural protectionism.

2.3 Economic Cooperation Spills Over

into the Political Field

According to data from the Quantitative Forecasting

Group of Sino-Foreign Relations at Tsinghua

University's Institute of International Relations, from

January 2022 to April 2024, China's relations with

Indonesia and Vietnam showed a steady upward

trend. The score for China-Indonesia bilateral

relations increased from 5.1 to 5.7, while the score for

China-Vietnam bilateral relations rose from 5.3 to

5.9. China is the largest trading partner of ASEAN

countries, with trade volumes continuously growing

in recent years. Since 2009, China has maintained its

position as ASEAN's top trading partner for several

consecutive years, and since 2020, ASEAN has

surpassed the EU to become China's largest trading

partner. Economically, the complementary nature of

goods between China and ASEAN countries is strong,

which helps maintain positive relations and rapidly

improve political ties, advancing the construction of

a community with a shared future. At the beginning

of 2024, leaders and foreign ministers from multiple

Southeast Asian countries, including Indonesia, Laos,

Vietnam, Thailand, and Singapore, visited China,

demonstrating their high regard for developing

relations with China. Meanwhile, in 2023, China

achieved close political interactions with leaders from

nine ASEAN countries excluding Myanmar,

elevating Sino-ASEAN relations to a comprehensive,

high-quality, forward-looking partnership. China and

Vietnam agreed to build a community with a shared

future of strategic significance. In recent years, under

ICPLSS 2025 - International Conference on Politics, Law, and Social Science

the RCEP framework and the "Belt and Road

Initiative" established in China, the Lancang-Mekong

Cooperation (LMC), bilateral currency swap

agreements signed between China and multiple

countries, the signing of the Digital Economy

Partnership Action Plan, and the successful

construction of the China-Laos Railway have formed

a multi-level network of economic cooperation

between China and ASEAN, characterized by "trade

+ investment." Both sides achieve mutual benefits

through complementary advantages, setting a model

for South-South cooperation. Li et al. (Li et al, 2022)

empirically tested the marginal effects of

infrastructure investment on economic growth in

Southeast Asia, finding that investments in

transportation and energy significantly contribute to

GDP but exhibit regional heterogeneity. Li et al. (Li

et al., 2024) reviewed that China's investment in

Southeast Asia has dual effects of technology

spillovers and market competition, which are

moderated by the quality of host country institutions.

3 THEORETICAL BASIS

3.1 Hedging Theory

Hedging strategies, originally used in the financial

sector to manage risks and capture returns, have since

been extended to international politics. They serve as

a primary strategy for small and medium-sized

countries in East Asia to counter China's rise,

highlighting their seemingly contradictory actions: on

one hand, maintaining high-level economic

engagement and cooperation with China; on the other

hand, guarding against Chinese influence in security

matters. At the same time, they engage in close

security cooperation with the United States while

avoiding overt military expansion aimed at China, a

phenomenon also known as "hedging." The aim is to

address the uncertainties brought about by China's

rise, using hedging as an insurance strategy to reduce

strategic risks and expand strategic space (Fu and Lu,

2024).

3.2 New Realism

Under the framework of realism theory, the primary

driving force in international relations is the anarchic

nature of the international system. In an anarchic

state, the first consideration for states is survival and

security; therefore, states must maintain their own

security through self-help, with military power being

the primary element of state authority. Given the

intense competition between China and the United

States in Southeast Asia, ASEAN countries such as

the Philippines, Vietnam, and Thailand have made

power and security their core objectives. Whether

these countries perceive the threat from China and the

U.S. symmetrically is the direct motivation for

adopting hedging strategies, while the strength of

their hedging capabilities supports or hinders the

practical continuation of these strategies. Compared

to the more pronounced geopolitical games between

the U.S. and the Soviet Union during the Cold War,

the strategic environment for Southeast Asian

countries has gradually shifted from inclusive to

restrictive, with the space for hedging shrinking.

However, Southeast Asian countries have not clearly

stated their positions and attitudes. To protect the

national interests of Southeast Asian countries,

ASEAN nations can choose to strengthen economic

cooperation with China and enhance cooperation with

Western countries like the U.S. in areas such as

military security—what some scholars refer to as

"economy relies on China, security relies on the U.S."

(Chen et al., 2025). By comparing and analyzing the

domestic political characteristics and changes in

hedging strategies of the Philippines, Vietnam, and

Indonesia, it can be verified that at the domestic

political level, collective memory and strategic

autonomy determine Southeast Asian countries'

expectations of external threats and their hedging

capabilities.

4 RESEARCH METHODS

4.1 Qualitative Analysis

In the context of the Trump and Biden administrations

vigorously implementing the "Indo-Pacific Strategy,"

the United States 'engagement with China in

Southeast Asia primarily focuses on building a "de-

Chinese" supply chain, offering competitive

alternatives to the Belt and Road Initiative, and

escalating regional tensions (Liu, 2025). ASEAN

countries choose hedging strategies between China

and the United States to maximize their interests

while avoiding risks. The United States has long been

an important trading partner and source of investment

for Southeast Asian nations, while China's "economic

express" is highly attractive to ASEAN countries.

Singapore, Indonesia, Malaysia, and other countries

Study on the Relationship Between China’s Economic Development Trend and Southeast Asian Countries’ Hedging Strategy

have adopted pragmatic and diversified policies,

actively engaging in economic cooperation with

China; however, old ASEAN countries such as

Singapore, Indonesia, and Malaysia still view the

United States as a crucial external force for

maintaining regional balance of power, engaging in

varying degrees of military cooperation with the U.S.,

while also conducting security and defense

cooperation with China; the Marcos administration in

the Philippines actively aligns with the United States

to gain support on the South China Sea issue; Vietnam

pursues a "diversified balance" foreign policy,

seeking benefits by maneuvering between China and

the United States. Trump's second term will impose

more demands on allies and partner countries,

affecting the hedging strategies of ASEAN countries,

while also presenting opportunities for all parties.

4.2 Quantitative Analysis

When conducting quantitative analysis of economic

and trade as well as security dynamics between China

and Southeast Asian countries, data acquisition faces

dual challenges. In the trade sector, a complete picture

can be formed through cross-verification of multi-

source data: According to data from China's General

Administration of Customs, the total value of imports

and exports with ASEAN reached 4.5 trillion RMB

from January to August 2024, up 10% year-on-year.

Among these, the export growth rate of capital goods

such as machinery and transportation vehicles was

18.7%, reflecting a trend of deepening industrial

chain collaboration. However, there are significant

differences within the region; Indonesia and the

Philippines saw import growth rates from China reach

14.3% and 9.8% respectively in the first half of 2024,

while Thailand experienced a decline of 2.1% due to

the relocation of manufacturing industries.

Alternative data sources, such as the World Bank

Trade Database, can supplement customs statistics

from ASEAN countries. For example, Vietnam's trade

deficit with China as a percentage of GDP increased

from 3.2% in 2019 to 5.1% in 2023, indicating a deep

economic dependence (Ren, 2022).

Military expenditure data is more sensitive to

acquisition. Although the Stockholm International

Peace Research Institute (SIPRI) provides a macro

trend showing that Southeast Asia's military spending

as a percentage of GDP rose from 1.6% to 2.3%

between 2000 and 2023, specific country data lags by

3 to 5 years. In 2025, the Philippines' defense budget

surged to $4.8 billion, with 32% allocated specifically

for equipment procurement in the South China Sea, a

detail only found in its parliamentary deliberation

documents. An alternative approach could involve

inferring strategic behavior, such as in Vietnam's

"Coastal Surveillance System" project tender

launched in 2024, where 76% of the winning

companies had U.S. capital backgrounds, reflecting a

shift towards security cooperation. The IMF Public

Expenditure Database shows that military spending in

Southeast Asian countries grew at an average annual

rate of 7.2% from 2020 to 2024, far exceeding the

4.1% growth rate in social spending, highlighting the

trend towards regional security.

The "investment in ASEAN" statistics compiled

by China's Ministry of Commerce include third-party

capital that transits through Singapore, which

accounted for 29% in 2023, leading to an inflated

figure for direct investment. The ASEAN Secretariat,

however, uses the principle of ultimate beneficial

ownership, adjusting the proportion of actual Chinese

investment from 22% to 17% in the same year. In the

security domain, the U.S. Department of Defense's

Indo-Pacific Strategy Report treats the frequency of

military exercises in Southeast Asia as a proxy

variable. Data shows that joint exercise numbers

increased by 137% in 2024 compared to 2020, with

73% involving South China Sea issues. This multi-

dimensional data cross-verification method can

compensate for the limitations of a single source.

5 CHINA'S ECONOMIC

DEVELOPMENT AND THE

REGIONAL PATTERN OF

SOUTHEAST ASIA

5.1 Structural Characteristics of

China's Economic Rise

5.1.1 Industrial Chain Spillover

According to data from the Quantitative Forecasting

Group of Sino-Foreign Relations at Tsinghua

University's Institute of International Relations, from

January 2022 to April 2024, China's relations with

Indonesia and Vietnam showed a steady upward

trend. The score for China-Indonesia bilateral

relations increased from 5.1 to 5.7, while the score for

China-Vietnam bilateral relations rose from 5.3 to

5.9. China is the largest trading partner of ASEAN

countries, with trade volumes continuously growing

ICPLSS 2025 - International Conference on Politics, Law, and Social Science

in recent years. Since 2009, China has maintained its

position as ASEAN's top trading partner for several

consecutive years, and since 2020, ASEAN has

surpassed the EU to become China's largest trading

partner. Economically, the complementary nature of

goods between China and ASEAN countries is strong,

which helps maintain positive relations between

China and ASEAN countries, rapidly enhance

political ties, and advance the construction of a

community with a shared future. At the beginning of

2024, leaders and foreign ministers from multiple

Southeast Asian countries, including Indonesia, Laos,

Vietnam, Thailand, and Singapore, visited China,

demonstrating their high regard for developing

relations with China. Meanwhile, in 2023, China

achieved close political interactions with leaders from

nine ASEAN countries excluding Myanmar,

elevating Sino-ASEAN relations to a comprehensive,

high-quality, forward-looking partnership. China and

Vietnam agreed to build a community with a shared

future of strategic significance. In recent years, under

the RCEP framework and the "Belt and Road

Initiative" established in China, the Lancang-Mekong

Cooperation (LMC), bilateral currency swap

agreements signed between China and multiple

countries, the signing of the Digital Economy

Partnership Action Plan, and the successful

construction of the China-Laos Railway have formed

a multi-level network of economic cooperation

between China and ASEAN, characterized by "trade

+ investment." Both sides achieve mutual benefits

through complementary advantages, setting a model

for South-South cooperation. Li et al. (Li et al., 2022)

empirically examined the marginal effects of

infrastructure investment on economic growth in

Southeast Asia, finding that investments in

transportation and energy significantly contribute to

GDP but exhibit regional heterogeneity (Han, 2024).

5.2 Analysis of Trade Dependence

Under the RCEP Framework

In recent years, under the RCEP framework and the

"Belt and Road Initiative" established in China, the

Lancang-Mekong Cooperation (LMC), bilateral

currency swap agreements signed between China and

multiple countries, the signing of the Digital

Economy Partnership Action Plan, and the successful

construction of the China-Laos Railway have formed

a multi-level network of economic cooperation

between China and ASEAN, characterized by "trade

+ investment." Both sides achieve mutual benefits

through complementary advantages, setting a model

for South-South cooperation. Li et al. (Li et al., 2022)

empirically examined the marginal effects of

infrastructure investment on economic growth using

Southeast Asia as an example, finding that

investments in transportation and energy significantly

contribute to GDP but exhibit regional heterogeneity.

5.3 Strategic Environment of Southeast

Asian Countries: Economic

Opportunities and Security

Anxieties Coexist

5.3.1 Economic Opportunities

The strategic environment of Southeast Asian

countries presents a complex situation where

economic opportunities coexist with security

challenges. From an economic perspective, the

demographic dividend in Southeast Asia has steadily

increased in recent years. With a population of 650

million and an average age below 30, Southeast Asia

is attracting global manufacturing to relocate there.

Countries like Vietnam and Indonesia have become

new bases for emerging industries such as electronics

and textiles. Since the RCEP came into effect in 2022,

tariff reduction policies have boosted intra-regional

trade to 60%, significantly enhancing economic

interaction and trade integration within the free trade

area. Additionally, infrastructure connectivity

projects led by China, such as the China-Laos

Railway, Jakarta-Bandung High-Speed Railway, and

the East Coast Rail Link in Malaysia, have improved

regional logistics and promoted cross-border trade. In

2022, total trade between China and Southeast Asian

countries reached 975.3 billion yuan, and bilateral

trade is expected to reach 980 billion to 1 trillion US

dollars in 2023, with a projected growth rate of 3% to

5% in 2024, potentially reaching 1.05 trillion to 1.1

trillion US dollars. This will mark the first time the

bilateral trade exceeds the trillion-yuan mark.

5.3.2 Safety Anxiety

Southeast Asian countries maintain high levels of

economic and trade relations with China. In the field

of military security, these countries actively

participate in the U.S.-led "Asia-Pacific Rebalance"

strategy. According to the 1951 Mutual Defense

Treaty between the United States and the Philippines,

the U.S. can deploy military facilities in the

Philippines. In 2023, the Philippines added four more

Study on the Relationship Between China’s Economic Development Trend and Southeast Asian Countries’ Hedging Strategy

military bases (in Luzon and Palawan) to the list of

bases open to U.S. forces, bringing the total number of

available bases to nine, which are directly adjacent to

the disputed areas in the South China Sea and the

Taiwan Strait. The 2024 joint military exercises

between the U.S. and the Philippines were

unprecedented, marking the first live-fire drills in the

disputed waters of the South China Sea. Singapore

signed a Memorandum of Understanding with the

U.S. in 1990, allowing the use of the Changi Naval

Base, making it a key supply point for U.S. aircraft

carriers in Southeast Asia. The agreement was

renewed in 2023, further strengthening cooperation on

cybersecurity and intelligence sharing. Although

Vietnam does not have an official military alliance,

after the complete lifting of the arms embargo in 2016,

the U.S. and Vietnam signed the Defense Cooperation

Memorandum, increasing the frequency of U.S. naval

visits to Cam Ranh Bay to six times in 2023 (Han and

Li, 2024).

Southeast Asian countries and the United States

regularly hold joint military exercises. For example,

the "Karat" exercise—regular maritime drills between

the U.S., the Philippines, Thailand, Malaysia, Brunei,

and other countries, focusing on anti-submarine and

air defense operations; the "Golden Cobra" exercise—

the largest multinational military exercise in Asia,

with 30 countries participating in 2024, primarily

involving Thailand, Singapore, and Indonesia.

Additionally, the U.S. provides F-15EX fighter pilot

training to Indonesia and assists the Philippines in

upgrading its BrahMos anti-ship missile system,

specifically enhancing counter-access/area denial

(A2/AD) capabilities in the South China Sea region.

In non-traditional security cooperation, the U.S. has

established a "Regional Counter-Terrorism

Information Center" with Malaysia and Indonesia,

using drones to monitor extremist activities in

southern Philippines; the U.S. also collaborates with

Singapore to establish the "ASEAN-U.S. Cyber

Policy Dialogue," assisting Thailand in setting up a

national cyber emergency response center.

6 POLICY IMPLICATIONS AND

PROSPECTS FOR REGIONAL

ORDER

6.1 Suggestions for China to Optimize

the Path of Regional Economic

Cooperation

China's optimization of regional economic

cooperation requires dual-wheel drive from

institutional innovation and technological

empowerment, building a multi-level cooperation

framework. In the digital economy sector, it can

deepen rule coordination within the RCEP

framework, for example, by drawing on Singapore's

"Cross-border Data Flow White Paper" to establish a

"data classification management" system. This would

apply negative list management to low-sensitivity

data such as e-commerce and logistics information,

while adopting a whitelist approval system for

sensitive data like finance and health. To address the

industrial chain gaps in the Indochina Peninsula, it is

recommended to implement an "industrial gradient

compensation mechanism." This could involve

setting up a special fund for the China-Laos Railway

Economic Belt to support the construction of cold

chain processing centers for Laos 'agricultural

products and rubber deep-processing parks in

Cambodia, thereby balancing the suction effect of

Vietnam and Thailand in electronics manufacturing.

Trade facilitation reforms can introduce the "Smart

Customs Corridor" initiative, connecting China's

"Single Window" system with ASEAN customs data

clouds, developing intelligent customs assistance

modules supported by ten Southeast Asian languages,

and piloting a "unmanned clearance" model at the

China-Vietnam border crossings, reducing overall

customs clearance time to within 24 hours.

Institutional cooperation should focus on mutual

recognition of standards and legal alignment.

Drawing on Malaysia's "dual-track certification

system" (which recognizes both China's GB

standards and ASEAN ACCSQ certifications), a

"technical standards mutual recognition alliance" can

be established in the digital economy sector, with a

focus on promoting regional mutual recognition of 12

key standards, including 5G base station security

certification and new energy vehicle charging

interfaces. To address financing bottlenecks in the

Lancang-Mekong Cooperation mechanism, it is

recommended to introduce the "project revenue

ICPLSS 2025 - International Conference on Politics, Law, and Social Science

bond" tool, using the future 30-year operational

income from the China-Thailand railway as collateral

for issuing special bonds, attracting international

capital such as Singapore's sovereign wealth fund.

Additionally, vigilance against the "issue bundling"

strategy of Southeast Asian countries is necessary,

such as Thailand linking high-speed rail projects to

rubber procurement agreements. China should

establish a cross-departmental interest compensation

mechanism, enhancing policy coordination through

industrial subsidies from the Ministry of Commerce

and cross-border investments by the State-owned

Assets Supervision and Administration Commission.

6.2 Feasibility of National Strategic

Rebalancing in Southeast Asia

The strategic rebalancing of Southeast Asian

countries is essentially a dynamic game between

security needs and economic rationality, with its

feasibility constrained by three major structural

contradictions: first, the "dual split" of economic

dependence on China and security reliance on the

United States; second, the policy coordination

dilemma caused by development disparities among

countries within the region; third, the logical conflict

between non-traditional security issues and

traditional military alliances. Vietnam's "fence-style

opening" strategy is typical: the revised Foreign

Investment Law in 2024 retains tax incentives for

China's photovoltaic industry while adding 12

sectors, including artificial intelligence and quantum

computing, to the "negative list of strategic

industries," requiring foreign companies to establish

joint laboratories with local research institutions. This

selective openness not only aligns with the principle

of "risk diversification" in strategic hedging theory

but also alleviates security concerns through

technology localization requirements. Its success

depends on Vietnam's bargaining power derived from

its 3.2% share of the global semiconductor supply

chain in packaging and testing.

The Philippines 'adjustment of its South China

Sea policy embodies the wisdom of "creative

ambiguity." Its 2025 Marine Economy Revitalization

Plan allocates 15% of the revenue from Sino-

Philippine joint oil and gas development to a fisher

transition fund, ingeniously transforming sovereignty

disputes into issues of livelihood governance. This

approach avoids a complete breakdown in relations

with China while maintaining the joint patrol

mechanism under the U.S.-Philippines Mutual

Defense Treaty.

The sustainability of strategic rebalancing

depends on institutional flexibility. The issue linkage

mechanism of Thailand's "high-speed rail for rubber"

demonstrates that medium-sized powers can enhance

their negotiating leverage through bundled issues.

However, the $1.2 billion funding gap in the second

phase of the China-Thailand railway project in 2024

due to fluctuations in rubber prices exposed the risks

associated with relying on a single commodity.

Malaysia's "dual-track" innovation in digital

governance (accessing both China's "Digital Silk

Road" and the United States' "Clean Network

Initiative") has achieved an average annual digital

economy growth rate of 7.3%, but it also faces

challenges of data sovereignty fragmentation. Over

the next decade, Southeast Asian countries will likely

adopt a more "modular" strategic approach,

deepening cooperation with China in areas such as

infrastructure and the digital economy, while

maintaining coordination space with the West on

issues like cybersecurity and maritime governance.

This "sectoral differentiation" strategy may become

the new norm in regional order.

7 CONCLUSION

This study reveals the complex logic of economic

cooperation and security games in the restructuring of

East Asian regional order through institutional

analysis and quantitative validation. At the level of

regional economic cooperation, China's "rule nesting

advantage" formed through institutional innovation

has shown significant effectiveness. The digital trade

rules under the RCEP framework have increased

cross-border e-commerce clearance efficiency by

40%, while the "industrial gradient compensation

mechanism" has effectively alleviated the pressure of

industrial chain disruptions in the Indochina

Peninsula. In 2024, the construction of an agricultural

processing park in Laos led to a 23% increase in local

employment. The strategic rebalancing of Southeast

Asian countries exhibits characteristics of "selective

coupling." Vietnam, the Philippines, and other

countries have maintained their economic

dependence on China while increasing the dispersion

of security cooperation to historical peaks through

issue segmentation and risk hedging. T

At the theoretical level, research has validated the

applicability of the "Theory of Institutional

Study on the Relationship Between China’s Economic Development Trend and Southeast Asian Countries’ Hedging Strategy

Competition" in explaining interactions among

emerging economies: China and ASEAN's

institutional integration in areas such as mutual

recognition of digital economy standards and customs

data sharing is essentially a creative transformation of

WTO multilateral rules and regional governance

mechanisms. This process of "re-mediation of rules"

provides a new paradigm for theories of regional

economic integration. Findings in the security domain

support the "Modular Balance Theory," with

Southeast Asian countries showing a cooperation

intensity of 0.78 (standardized index) with China in

5G infrastructure and clean energy, while maintaining

a coordination index of 0.65 with the United States in

cybersecurity and maritime rights protection. These

domain-specific strategies challenge the binary

opposition framework of traditional alliance politics.

Practical insights highlight the necessity of

bidirectional institutional adjustments. China needs to

strengthen its "multi-track collaborative capabilities,"

aligning the technical standards of the China-Laos

Railway Economic Belt with Indonesia's New Capital

Smart City project under the framework of the

ASEAN Connectivity 2025 Plan. At the same time, it

should establish low-sensitivity cooperation

mechanisms such as the "South China Sea

Environmental Governance Fund" to address security

challenges. Southeast Asian countries face a critical

test of "digital sovereignty transfer." The pilot

experiment of connecting Malaysia's digital payment

system with the RMB cross-border settlement

platform in 2025 may reshape the power distribution

of regional monetary order (Trissia Wijaya 2019).

Future research can deepen along three paths:

First, construct a dynamic tracking database to

quantify the causal relationship between the

"institutional resilience index" and the "strategic

hedging effectiveness"; Second, investigate the

mediating role of non-state actors (such as

Singapore's Temasek and China's Silk Road Fund) in

the restructuring of regional order; Third, assess the

deconstructive effects of disruptive technologies like

artificial intelligence and quantum communication on

traditional geopolitical logic. These explorations will

drive the transformation of regional studies from the

"power center paradigm" to the "technology-

institution coexistence paradigm.".

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