But China is shaping far more than Southeast Asia's economic revival. With the U.S. absorbed in its war on terror and many in Southeast Asia feeling neglected by Washington, Beijing may be seizing the opportunity to displace the U.S. as the region's heavyweight. "Historically, Southeast Asia was the domain of China," says Daniel Lian, Southeast Asia economist for Morgan Stanley in Singapore. "It's easy to see how China will want to see the region under its sphere of influence again." Last November, at an ASEAN forum, China sketched out accelerated plans for a regional trade bloc that could be the world's largest by population by 2010—and which Beijing has called a counterweight to Western economic interests. Naturally, China, with its $1.65 trillion economy, will stand at the center of this trading solar system, and Southeast Asia's economies are having to adapt to its growing gravitational force. "The 21st century will be the Chinese century," says Prapat Thepchatree, director of the Centre for International Policy Studies at Bangkok's Thammasat University. "There is nothing to be gained by not recognizing this inevitability."

It wasn't politics, however, that first enticed China back into Southeast Asia. With the country's torrid economic growth outstripping its own natural resources, a nation that was once determined to maintain socialist self-sufficiency has been forced to power itself with global commodities. In 2000, Beijing unveiled a "Going Out" policy that offered financial incentives to some domestic companies willing to invest abroad. Since then, China has secured trade deals as far away as Sudan for oil and Brazil for soybeans. But Southeast Asia remains the first fueling stop for Chinese businesses. It's no coincidence that two of the biggest deals Hu announced during his trip to Southeast Asia last month were a $950 million contract by the Shanghai Baosteel Group Corp. and Jinchuan Nonferrous Metals Corp. to rehabilitate a Philippine nickel plant and a $500 million commitment by state-owned investment fund CITIC to invest in an Indonesian palm-oil plantation. Meanwhile, Chinese state-owned firms are making deals as diverse as a $275 million investment in a liquefied-natural-gas project in Indonesia's Tangguh gas fields and a $1.5 billion aluminum mine in Vietnam.

But China's effort to secure dependable access to natural resources doesn't please everyone in Southeast Asia. Although Hu has urged the region to turn the South China Sea into a "sea of friendship and cooperation," Beijing is embroiled in several territorial disputes in those waters. In March, the Philippines, Vietnam and China agreed to jointly explore for oil and natural gas in the contested area, but none of the countries has given up its territorial claims. And with Chinese state-owned firms snapping up majority stakes in Southeast Asian resource companies, concern is mounting over long-term control of the region's most valuable commodities. "Whenever a country sells off parts of oil companies or coal mines or timber concessions, there's a sense that the country is losing something," says Stephen Frost, research fellow at the Southeast Asia Research Centre at the City University of Hong Kong. "Right now, it's the Chinese—not the Americans or Japanese—who seem to be doing the high-profile buying." Ironically, Southeast Asia's protectionist concerns come just as China is safeguarding its own forests through a ban on most domestic logging. In places like Indonesia, where 40% of forestry exports go to China, environmentalists are worried that the mainland's hunger for natural resources could have a disastrous effect. "The risk to Indonesia's forests is major," says David Kaimowitz, director of the Center for International Forestry Research in Bogor, West Java, who notes that much of the timber destined for China is illegally felled. "China is like a vacuum cleaner sucking up resources in the region."

For China's acquisitive companies, however, the region's raw-material wealth is a potential bonanza. "This is the age of economic globalization, and we want to be part of it," says Li Xiaoming, director general of the Bureau of Geology and Mineral Resources in southern China's Yunnan province, whose corporate arm this year signed a 30-year deal for exploration rights of a 800 million-ton potassium mine in Laos. China imports 90% of its potassium, a key ingredient in fertilizer. As he discusses his investment strategy, Li dissects Southeast Asia with the efficiency of a latter-day colonialist: Vietnam and Burma, he says, have an abundance of nonferrous minerals and relatively friendly governments; Cambodia is still backward but has mineral potential and ports; Laos may be the best of all because its mineral lode is largely undeveloped and the countries share a socialist comradeship. "In Laos, the Prime Minister personally signed the deal himself," says Li. "Because we can deal directly with the top level, things can happen quite quickly. Laos is a good partner for us."

But one nation's partner is another country's pariah state. Chinese firms, many of which are state-owned and don't need to field tough questions on ethics from their boards or shareholders, have invested heavily in places where Western companies face severe restrictions. In Burma, for instance, investments by Chinese state-run enterprises in timber, energy and minerals are helping Rangoon's military rulers counteract Western human-rights sanctions. Last year in a visit to Rangoon, Chinese Vice Premier Wu Yi assured the generals that Burma's internal affairs "should be coordinated and resolved by the government and its people themselves." She then projected that bilateral trade would reach $1.5 billion this year. Given that Burma could give its energy-dependent neighbor easier access to oil through a proposed pipeline from the Burmese port of Sittwe to Yunnan, Beijing's warmth may not be surprising. Furthermore, at a time when China's entry into the World Trade Organization is compelling the nation to raise its labor standards, closed regimes like Burma's and Laos' offer Chinese investors an alternative base for factories that are safe from bureaucratic scrutiny. Says one official with a Chinese state-owned company operating in Southeast Asia: "Since we contract the projects out to local companies, Chinese state firms reduce the burden on themselves by not having to worry about workers' safety."

1 | 2 | 3 | Next

	China's Wealth Effect [May 16, 2005] To get rich has been glorious, but now Chinese want to spend their wealth—and that might just save the global economy Global Business: Let It Rain! [Mar. 28, 2005] An élite group of venture capitalists, bankers and lawyers is bringing billions to China China's Quest for Oil [Oct. 18, 2004] The Middle Kingdom can't find enough oil to meet booming domestic demand—and the world is paying the price at the pump Time to Cool Down [May. 17, 2004] Why the inevitable slowing of China's roaring economy won't hurt as much as Asia thinks it will Too Much, Too Soon? [Nov. 17, 2003] China is making more cars, TVs and washing machines than it can consume. Eventually, this glut could swamp the world More Related Items | Search all issues of TIME Magazine