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Worldview: Ameliorating China’s ‘Malacca Dilemma’

Since the inception of transoceanic trade, the Strait of Malacca has been one of the most crucially important waterways in the world. The narrow passage between the island of Sumatra and the Malay Peninsula serves as the maritime highway between the Indian Ocean and the South China Sea. The surrounding region has therefore been a subject of significant interest for China for centuries.

Today the Straits of Malacca are of greater importance to Beijing than ever before. As of such, over 80 percent of China’s oil imports, mainly coming from the Middle East, pass through the Straits of Malacca. While China has been hoping to wean itself off of Middle Eastern oil by developing relationships with Russia and Kazakhstan, for the foreseeable future, China will be heavily reliant on this historic route. The Straits of Malacca, while clearly the most expedient routes, are also the most dangerous segments, as Beijing has no jurisdiction over the region. In this sense, China is exceedingly vulnerable. The threat of a U.S. naval blockade of the Straits and the possibility of piracy in the region are all components of what China’s former president Hu Jintao dubbed the ‘Malacca Dilemma’ back in 2003.

In the eyes of Beijing, there are two possible paths to alleviate China’s dependency on the Straits of Malacca. The first path would be to circumvent the Straits entirely. This policy can manifest in two forms: obtaining energy from new trading partners or by constructing new trading routes altogether. As mentioned previously, China is attempting to decrease its reliance on Middle Eastern oil and diversify its trading partners so as to avoid the Straits of Malacca. Having recently passed the United States as the world’s leading crude oil importer in 2017, this task will be no small feat. Russia and Kazakhstan seem to be the main beneficiaries of this diversification initiative, as they are both able to trade with China over land rather than by sea.

Moreover, China’s massive infrastructure projects in the One Belt, One Road initiative (OBOR) are another way China intends to avoid the Straits. The Trans-Myanmar oil pipeline, which was opened after several delays in 2017, connects the Myanmar’s Indian Ocean port Kyaukphyu to Kunming in South East China. This pipeline, coupled with a natural gas line that runs parallel to it, enables China to import oil from the Middle East through Myanmar instead of through the Straits of Malacca. Similarly, in Pakistan, China is working to develop infrastructure to connect the Pakistani coast to Xinjiang, China’s westernmost province.

Perhaps the most ambitious project in China’s arsenal, however, is in Thailand where the Chinese have pressured Thai Prime Minister General Prayut Chan-o-cha into planning a potential canal across the Isthmus of Kra. While no contracts have been signed, a canal through Thailand would provide China with a new maritime corridor directly north of the Straits of Malacca, rendering China’s maritime commerce far less vulnerable.

The second path Beijing has undertaken is a campaign to win over the two main players in the Straits, Malaysia and Indonesia, through its typical style of dollar diplomacy. Should Malaysia and Indonesia become allies or at least cordial partners of China, the risk associated with conducting trade through the Straits of Malacca would decrease exponentially. Furthermore, investment in the region, especially in the ports, would grant China a larger say in the region, further limiting the risk.

Indonesia has been a willing partner with China in recent years and has received significant funding. Malaysia, however, has become a less willing partner in recent years. China has invested heavily in Malaysia, particularly in the port city of Malacca, namesake of the Straits. Malacca was once a lucrative port whereby spices and other luxuries would pass through. Nowadays, however, the port has silted up and lost its value. China’s $10 billion plan to restore Malacca to global significance is therefore instantly attractive to the denizens and the government in Kuala Lumpur.   

Kuala Lumpur has tempered its relations with Beijing, however, fearing that it may become grossly indebted to the financial superpower, and be reduced to a form of economic vassalage. Fuziah Salleh, a member of Malaysia’s new governing coalition, told The New York Times, “We welcome foreign investment and development, but we question the huge price that we will have to pay.”

Malaysia’s hesitance to negotiate with China will undoubtedly cause consternation in Beijing, yet their ultimate aim — decreasing reliance on shipments through the Straits of Malacca — will be achieved regardless due to the multitude of other projects throughout Asia. While still valuable, China’s efforts to circumvent the Straits will ultimately dull Malaysia, Indonesia and Singapore’s respective geostrategic power. Moreover, the Malacca Dilemma will be addressed or at least ameliorated, rendering China less vulnerable to foreign adversaries, strengthening its position in the world at large.

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