As China’s economy flounders under internal pressures and global isolation, President Xi Jinping has launched an aggressive diplomatic campaign across Southeast Asia. In April 2025, he visited Vietnam, Malaysia, and Cambodia, the countries with whom Beijing has had decades of bitter disputes, particularly in the South China Sea. The tour, marketed as a strategic strengthening of regional ties, is better seen as a desperate attempt to re-brand economic dependence as partnership.
At home, the Chinese economy is grappling with structural decay. A decades-long over-dependence on infrastructure-driven growth has left it overbuilt, over-leveraged, and under-consuming. Retail sales are weak, unemployment is rising, and the property market—once a pillar of China’s economic boom—is in crisis. According to internal assessments, even if China were to reduce its investment share of GDP by ten points, the country would still rank among the world’s highest. The problem is, that investment is no longer productive.
Attempts to stimulate consumption through regulatory tweaks—like marriage law reform and rural income boosts—have made little difference. Foreign direct investment has also plunged to levels not seen since 2008, and with Western economies tightening trade barriers, China’s traditional export avenues are closing rapidly.
In response, China is turning to its neighbours. During his April, 2025 tour, Xi signed dozens of deals: 45 agreements with Vietnam, 31 with Malaysia, and 37 with Cambodia. These span infrastructure, technology, trade, education, and digital governance. But the core motive is clear: Beijing needs to offload its manufacturing surplus, and it’s using diplomacy to seek regional partners willing to help disguise the origin of Chinese goods to bypass U.S. and EU sanctions.
What Xi might also be seeking behind the handshake diplomacy is something more logistical: warehouses. As Chinese ports and domestic storage facilities overflow with unsold goods, there is growing speculation that Beijing is now quietly negotiating for space in Southeast Asian industrial zones to stockpile excess products. From a strategic standpoint, this makes perfect sense: by housing inventory closer to ASEAN logistics hubs, Chinese companies can later reprocess, relabel, and export through local networks under regional identities. In effect, Xi isn’t just looking for markets—he’s looking for storage. And Southeast Asia, with its growing logistics infrastructure and weak regulatory frameworks in some states, is the ideal launchpad.
The irony of Xi’s Southeast Asia charm offensive lies in the long-standing—and often aggressive—history of maritime conflict between China and these very nations.
Vietnam has been one of China’s fiercest rivals in the South China Sea. In 1974, Chinese forces seized the Paracel Islands from South Vietnam in a bloody naval clash, killing dozens of sailors. Tensions flared again in 2014 when China deployed a deep-water oil rig (Haiyang Shiyou 981) in waters claimed by Vietnam, sparking nationwide anti-China riots and damaging bilateral ties. Vietnamese fishing boats have regularly been harassed or sunk by Chinese maritime forces. Moreover, we cannot forget that China has been delaying, sometimes for months, its approval of permits for companies to repair or lay new cables under the sea. The delays have been particularly troublesome for countries such as Vietnam, which is anxious to replace five aging cables that have failed repeatedly, slowing internet traffic in the country.
Malaysia too has found itself in Beijing’s crosshairs. Despite being more diplomatically subdued, Kuala Lumpur has consistently lodged protests over China’s illegal encroachments into its exclusive economic zone (EEZ). In 2019 and 2020, Chinese survey ships and coast guard vessels operated for months in disputed Malaysian waters, leading to a standoff involving U.S. naval support for Malaysia. Malaysian oil exploration projects in the area have been disrupted multiple times due to Chinese pressure.
The Philippines, though not part of Xi’s recent tour, remains a critical case study. In 2016, Manila won a landmark case at the Permanent Court of Arbitration in The Hague, which ruled that China’s expansive claims in the South China Sea had no legal basis. Beijing dismissed the ruling outright. In the years since, Chinese vessels have blocked Filipino fishermen from traditional fishing grounds and militarised artificial islands in contested areas.
These are not ancient grievances—they are ongoing. And now, Xi arrives with a new message: friendship, mutual prosperity, shared destiny. But to Southeast Asian leaders and security analysts, this abrupt shift looks more like economic desperation packaged as reconciliation.
What Xi Jinping proposes is not simply trade cooperation—it’s a veiled trade circumvention plan. China seeks to use these countries as intermediaries to repackage Chinese goods under ASEAN labels and re-export them to tariff-hostile markets like the U.S. and EU. This would temporarily revive Chinese factories and make trade data appear healthy—but it risks destabilising regional economies in the process.
If Southeast Asia becomes economically entangled in repackaging and redistributing Chinese goods, it sets up a new kind of dependency—one based not on ports and roads, but on trade flow manipulation. Much like the Belt and Road Initiative has left nations in Africa, South Asia, and Latin America burdened with debt and Chinese influence, this could result in a similar pattern of economic and strategic entrapment.
Xi’s shift in tone—from gunboats and artificial islands to “shared growth” and “strategic trust”—isn’t trust-building. It’s re-purposing. And while countries like Cambodia may welcome China’s embrace, others like Vietnam and Malaysia walk a tightrope between economic opportunity and geopolitical manipulation.
Should the West uncover this re-export strategy or detect mass stockpiling intended for trade rerouting, ASEAN countries risk being hit with secondary sanctions, exclusion from Western trade agreements, or WTO action. Their own brands and manufacturing reputations may be collateral damage.
In conclusion, Xi Jinping’s Southeast Asia diplomacy is not about multilateralism; it’s about damage control or maybe warehousing survival. This isn’t a friendship tour; it’s a salvage operation for an economy drowning in overcapacity and global mistrust. It is a temporary fix to extend the lifespan of a failing economic machine. The question for Asia is: are these deals a chance to grow, or the seeds of a new kind of entanglement?
The red carpets may be rolled out, but the message is clear: China is not rising—it’s reaching.
