“Capital for China” [December 1994] and “Arms for Asia” [January 1995] are among Arrigo Cervetto’s last writings. They are part of a series of articles on the social, political, and military consequences of Asia’s irruption into the multipolar world.
A 1992 article, “Rearmament in Asia”, had already observed how the end of the Cold War
translated into China’s rise in Asia, including in the military sphere. Consequently, in the process of China’s imperialistic maturation, its power relations with Japan, India, and the United States were changing. The rapid development in the region, supported by a very high rate of proletarianisation, attracted massive amount of capital, fuelling tensions. The old imperialist metropolises intervened with huge flows of credit and arms. The supposed end of history
, celebrated in the West through the benign myth of globalisation, was met in the East by a massive arms race, which revealed the nature of that global development and established a new balance of power.
Thirty years later, those trends of uneven imperialist development, necessarily only foreshadowed at the time, are now fully underway, and it is telling that capital and weapons now also come from China. The Dragon has imposed itself on the Asian balance of power, altering the calculations of all powers in the process. Washington has moved from opening up to Beijing — initiated in 1971 as a play against Moscow, but also against Tokyo — to leveraging its asymmetrical alliance with the Land of the Rising Sun to balance the emerging Chinese Dragon, while maintaining a more or less consistent balancing act with the Indian Elephant. According to a formulation by Walter Russell Mead, probably endorsed by the late Henry Kissinger, the US should have deterred China militarily, while waiting for the rest of Asia, India first and foremost, to develop. This would have shaped a new regional order — a multipolar Asia in Indian doctrines — capable of balancing China or at least relieving the US of some of the costs required to maintain the balance. Mead’s analysis presupposed a long-term calculation based on uneven development and the commitment of multiple American administrations in Asia, in order to guard against China’s temporary strengthening, while waiting for regional counterweights to emerge. It remains to be seen to what extent Donald Trump’s trade war will force allies to adhere to this plan or, instead, alienate them, assuming his administration confirms this strategy.
On the one hand, Asian powers cannot rule out the possibility that Washington might return to prioritising direct engagement with Beijing, defending its prerogative to remain at the centre of all regional relations. On the other hand, and this is the real countertrend to Mead’s scheme, China’s growing influence is pushing Asian States to seek a more complex balance. Asian powers are in two minds about the situation: they are attracted by China’s economic weight but also intimidated by its military strength; they calculate that they can take advantage of China’s momentum, but doing so means facing competition from its big economic groups. In the case of India, it is reluctant to accept Beijing’s influence, but fears being left behind if it refuses to welcome a share of its capital. However, no power can afford to ignore the Chinese factor when it comes to economic and foreign policy strategies. Ultimately, it is Beijing’s imperialist development — now deployed in financial, political, and military forms — that is pushing all Asian powers towards multi-alignment.
A page in the Financial Times on the competition between China and India in Southeast Asia contains several insights into the instruments of Chinese influence. The City’s newspaper challenges a hasty thesis in Le Monde on the Asian springs
— the political crises in Sri Lanka, Bangladesh, and Nepal — which the French newspaper prematurely extended to Indonesia and the Philippines. China is said to have engaged in these countries by establishing connections with both government and opposition forces, taking advantage of the realignment
in India’s neighbourhood. The case of Bangladesh is indicative, influenced by Silk Road capital, arms sales, and the opening of the Chinese market to Bangladeshi goods with zero tariffs
.
According to the Financial Times, and presumably also its owner, Japan’s Nikkei, even if the US were indifferent to the recent shifts in the Asian periphery, Japan is not. The movements of fighter jets and submarines, which follow the flow of billions of yuan, are being closely monitored in Tokyo.
A study by the Rhodium Group in New York confirms the acceleration of Beijing’s capital investment in Southeast Asia, identifying a combination of three trends. The first is the capitalist development of the region, marked by pre-pandemic rates of proletarianisation exceeding 4% per annum and by the emergence of large outlet markets for means of production, even before those for consumer goods. The second trend is the restructuring of Chinese industry, which appears to be driving the migration of entire sectors from the Middle Kingdom to its rapidly developing Asian neighbours. Finally, there is the diversification away from China undertaken by European and American groups, in response to the trade war begun in Trump’s first term and continued by Joe Biden. An unintended consequence is that Chinese suppliers of those same European and American groups have often followed them — and sometimes even preceded them — in relocating elsewhere in Asia. Ironically, the China+1
derisking strategy of German groups — being in China and in another large market to reduce risks — has been applied by China itself.
Taking into account the use of offshore holding companies and vehicles — particularly relevant in the case of Beijing, given that a significant portion of its foreign capital passes through Hong Kong and Singapore, as well as through a number of tax havens well known to the old powers — it can be estimated that Southeast Asia has absorbed the bulk of Chinese foreign investment in the manufacturing sector. A third of the flow in the last three years has gone to Indonesia. In turn, Chinese capital has accounted for a third of foreign investment in the region.
Chinese textile production was among the first sectors to be relocated to Southeast Asia, especially Vietnam. From its new Asian base, it then contributed to the decline of the Indonesian textile industry, leading to a wave of bankruptcies in recent years. This was followed by investments in the production of household appliances in Vietnam, Cambodia, and Indonesia, attracted by growing domestic demand. The electronics sector forms part of the third wave, driven by Western companies’ efforts to reduce their dependence on China. Malaysia captured 67% of investments in semiconductors, while Vietnam captured 85% of those in consumer electronics between 2018 and 2024. Finally, a fourth wave, started with components and extended to electric cars, has been underway since 2021, with investment flows to Thailand, Vietnam, and Cambodia for components; to Indonesia, Thailand, the Philippines, and Vietnam for cars; to Malaysia for batteries; and to Indonesia for nickel.
There is a Japanese counterpoint, gathered from sources in Singapore: Japanese companies have remained key players, despite low growth rates since the 1990s. This is particularly evident in Thailand, the Detroit of Southeast Asia
, where Japanese automotive groups continue to dominate the market. According to these sources, China appears to invest in less advanced economies and sectors, while Japan and Korea continue to capture the most lucrative markets. The crucial factor at stake, in the competition over Asian capital markets, is the timing and pace of China’s restructuring.
The tempo of arms exports appears even faster. According to the IISS in London, Beijing’s growing arms exports coincide with Asian rearmament and the multiple alignments of regional actors. Joint exercises, military agreements, and arms contracts are the forms taken by Asian multi-alignments in the face of the Chinese military giant. The latter holds a third of the submarines and ships above corvette level in the region, and two-fifths of the combat aircrafts, excluding the US deployment in Asia. Over the past two years, Beijing has conducted military exercises at various levels with each of the major Southeast Asian countries, except the Philippines. Meanwhile, regional actors have been participating in manoeuvres with the United States and signing bilateral agreements among themselves: Tokyo and Manila for reciprocal access to bases, Canberra and Jakarta for military cooperation, and so on.
According to the IISS report for 2024, Asia is becoming a hotbed for undersea-warfare developments
and a large market for fleet expansion. The presence of German suppliers, which has slipped under the radar of the major European press, is significant, while deliveries of Chinese submarines to Burma, Thailand, Bangladesh, and Pakistan are on the rise. It must be taken into account that second-hand equipment is particularly important in the large arms market, often used as technology transfers with a view to new commissions. In 1998, China purchased a Russian aircraft carrier from Ukraine, which it then turned into China’s first aircraft carrier; in 2004, India followed suit with the Gorshkov, decommissioned by Moscow. Similarly, many Asian countries are turning to old Russian or Western vessels for their naval programmes. Jakarta recently purchased the aircraft carrier Garibaldi from Italy; Bangladesh has been using second-hand Chinese frigates since 2014 and has turned to Beijing for submarines. Pakistan is doing the same, switching from French to Chinese suppliers. Tokyo has also made a move, transferring three decommissioned destroyers to the Philippines.
Hely Desai, of the New Delhi-based Council for Strategic and Defence Research founded by Happymon Jacob, writes in The Hindu that the naval element of the next India-Pakistan crisis is unlikely to remain peripheral
. The author exhorts readers not to take Indian superiority for granted, citing the May air battle in which Pakistan shot down several Indian fighter jets with Chinese-supplied J-10s. Islamabad is introducing Chinese-designed submarines and corvettes from Turkey into its arsenal. It is clear that pressure is growing for powers to prove the credibility of their respective conventional deterrents, while Chinese weapons are spreading throughout India’s neighbours. Bangladesh is reportedly set to purchase twenty Chengdu J-10 fighter jets. However, it is Indonesia’s military multi-alignment that truly crosses a Chinese Rubicon, with the purchase of 43 J-10 fighter jets to complement French and American supplies: a major step for Southeast Asia’s leading power. According to authoritative Chinese sources, Malaysia is also interested in doing the same.
It was almost a foregone conclusion, and in any case widely predicted by Marxist analysis, that the Asian epicentre would take the lead in the new cycle of global rearmament. The effects of the crosscurrents of arms and capital in the system of States, on the other hand, require a specific analysis of both the military agreements with China and the international reactions to its rearmament, which are harbingers of tomorrow’s agreements and ruptures.