Can ASEAN Truly Remain Neutral Between the US and China?

As the 2025 ASEAN Chair, Malaysian Prime Minister Dato’ Seri Anwar Ibrahim affirmed his commitment to safeguarding ASEAN’s centrality while advancing a policy of nonalignment. At the same time, this year China’s President Xi Jinping has undertaken an intensive round of visits to several Southeast Asian nations, concluding over 30 strategic cooperation agreements with multiple ASEAN member states in areas such as artificial intelligence, energy, port development, and railway infrastructure. While these initiatives are framed as measures to deepen bilateral and regional ties, they have also drawn international attention to the potential long-term implications for ASEAN’s strategic orientation.

In April 2025, Xi embarked on state visits to Malaysia, Vietnam, and Cambodia, underscoring economic and trade cooperation and emphasizing the importance of ASEAN unity in the face of U.S. trade protectionism – particularly the high “reciprocal tariffs” introduced under President Donald Trump. To look at Malaysia specifically, just before Xi’s arrival, the United States had announced an increase in tariffs on Malaysian goods to 24 percent.

Following negotiations, Washington subsequently reduced the rate to 19 percent on the condition that Malaysia commit to purchasing more than $240 billion worth of American exports, including Boeing aircraft, coal, and telecommunications equipment – an arrangement aimed at narrowing the U.S. trade deficit with Malaysia.

ASEAN is currently China’s largest economic partner, yet the region has also been among the most affected by the tariff regime under Trump. The United States now levies import duties of 19 percent on goods from Thailand, Indonesia, the Philippines, and Cambodia, 20 percent on Vietnam, and 25 percent on Brunei. Laos and Myanmar face the highest rates in Southeast Asia – 40 percent – second only to Syria’s global peak of 41 percent.

What do these developments tell us about whether Anwar’s proclaimed “policy of nonalignment” for ASEAN has indeed become a firmly established principle, or remains, in practice, a matter of diplomatic rhetoric?

Neutrality as Strategy: Malaysia’s Calculated Response to Great Power Rivalry

Dr. Mohd Ramlan Mohd Arshad, a senior lecturer at the Faculty of Administrative Science and Policy Studies at Universiti Teknologi MARA (UiTM), argued that neutrality between the United States and China remains a core tenet of Malaysia’s foreign policy – but in practice, it is far more nuanced. While Malaysia’s official rhetoric emphasizes nonalignment and strategic balance, its approach is closer to a pragmatic hedging strategy than absolute neutrality.

“Neutrality is both a genuine foreign policy position and a carefully designed strategy for navigating the complexities of great power competition,” Ramlan said.

Malaysia has long adhered to an independent, nonaligned foreign policy, embodied in its staunch defense of ASEAN’s principle of non-interference and participation in the Non-Aligned Movement (NAM). Anwar has repeatedly stressed the importance of engaging with all major powers without forming exclusive partnerships. “As a medium-sized country in a strategic location, with economic and security reliance on both China and the U.S., Malaysia’s geopolitical context fits this strategy perfectly,” Ramlan noted.

In reality, economic and security considerations often shape Malaysia’s behavior, leading it to lean toward one side or the other on specific issues. The country’s deepening economic ties with China, including major infrastructure projects under the Belt and Road Initiative (BRI), such as the East Coast Rail Link (ECRL), illustrate significant economic dependence.

According to the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCIM), China has been Malaysia’s largest trading partner for 16 consecutive years. Between January and April 2025, bilateral trade totaled just under 162 billion Malaysian ringgit ($38.5 billion), driven primarily by exports of electrical and electronic products. Following Xi’s visit to Malaysia in April this year, the two countries further deepened cooperation in green development, the digital economy, and Belt and Road infrastructure projects.

Malaysia’s muted response to Chinese activity within its Exclusive Economic Zone (EEZ) in the South China Sea is often perceived as evidence that Malaysia has become overly dependent on China, to the detriment of its own national interests.

However, Ramlan emphasized that Malaysia also maintains active strategic and defense cooperation with the United States. This includes supporting freedom of navigation, participating in regional security dialogues such as the ASEAN Defense Ministers’ Meeting Plus (ADMM-Plus), and conducting joint military exercises – positions that align with U.S. security interests in the region. Malaysia is also part of the U.S.-led Indo-Pacific Economic Framework (IPEF), which was launched under the Biden administration and designed in part to counterbalance China’s economic influence.

This dual-track approach, Ramlan explained, is better described as strategic ambiguity or hedging – benefiting from both sides while avoiding entanglement in conflict. For countries seeking to preserve strategic maneuverability and sovereignty, he argued, it is a rational choice. “When Malaysia appears less forceful in responding to Chinese actions that affect its national interests, such as incursions in the South China Sea, it may well be part of this delicate balancing strategy,” he said.

In short, Ramlan concluded, Malaysia’s goal of neutrality between the United States and China is genuine, with historical and geographic logic behind it. But in practice, it functions more as a form of strategic balancing shaped by regional dynamics, economic dependencies, and national interests. The neutrality narrative, he stressed, is a tool for maintaining diplomatic flexibility, while policy actions often reflect selective alignment on specific issues.

“As a result, there is neutrality, but it is not absolute.”

Is Malaysia Gradually Moving Toward Structural Dependence on China?

Ramlan said that while Malaysia’s economic and technological integration with China is indeed deepening, the country has not yet fallen into structural dependence on Beijing. However, he admitted that if such trends are not managed carefully, they could, over the long term, erode Malaysia’s strategic room for maneuver.

“Malaysia must diversify its partnerships, improve project transparency, and strengthen domestic capacity in key industries to prevent economic and technological cooperation from evolving into one-way political or institutional dependence,” he said.

Ramlan noted that Malaysia’s growing portfolio of strategic cooperation agreements with China – spanning the economy, energy, infrastructure, technology, and artificial intelligence – has fueled concerns about potential overreliance. These developments point to a more pragmatic and intensive economic relationship with Beijing, though such interdependence does not necessarily equate to irreversible one-way dependence.

Chinese investment has expanded beyond traditional manufacturing and trade into major infrastructure projects – such as the ECRL – as well as ports, energy, and emerging technologies. These involve long-term economic and institutional linkages, prompting heightened vigilance over the risk of “structural dependence.”

“One manifestation of structural dependence is Malaysia’s increasing reliance on Chinese capital, technology, or platforms in critical infrastructure and digital governance,” Ramlan explained. “For instance, the ECRL, financed and built by Chinese firms, has often raised concerns over debt risks and long-term repayment obligations. Similarly, in 5G, AI, and digital infrastructure cooperation, overdependence on Chinese companies – such as Huawei – for platforms and core technologies could limit Malaysia’s autonomy in areas like technology governance, cybersecurity, and data sovereignty.”

He noted that “economic dependence can also become a channel for political influence. While Malaysia upholds sovereignty and an independent foreign policy, deepening economic interests may, in some cases, shape its external positions. For example, on China’s activities in the South China Sea, Malaysia’s public response has been relatively restrained – a stance some interpret as influenced by economic considerations.”

Nonetheless, Ramlan stressed that Malaysia is not a passive recipient. The government has re-examined or renegotiated certain project terms – such as with the ECRL – to secure more favorable conditions and mitigate potential risks. This indicates that Malaysia still retains bargaining power and institutional control.

Malaysia’s Impact on ASEAN’s Great Power Strategy

Dr. Azmi Hassan, senior research fellow at the Nusantara Academy for Strategic Research (NASR), noted that “ASEAN’s relationship with China is extremely close, especially since the signing of the China-ASEAN Free Trade Agreement.” According to the geostrategist, “This reflects the bloc’s desire to engage with both major powers – not just China, but also the United States and others.”

After Trump’s first tariff announcement, Azmi pointed out, “At the time, the chair also suggested that ASEAN member states avoid imposing retaliatory tariffs on one another. This showed our intent to engage in dialogue with other countries on tariff issues and demonstrated the chair’s significant influence on ASEAN’s policy direction.”

Azmi also underscored Malaysia’s timely action amid recent border tensions between Cambodia and Thailand to avert the involvement of other nations – or China – in the conflict.

“This shows that Malaysia, as ASEAN chair, fully understands that the bloc cannot ignore these two superpowers,” Azmi said. “Even though they are rivals, ASEAN needs both of them. That is why Malaysia invited them to the ceasefire talks – because the influence of the United States and China can put pressure on Cambodia and Thailand to reach a settlement.”

Azmi pointed to the South China Sea dispute as another example of great power rivalry shaping ASEAN dynamics – albeit in less productive ways. “That is one reason why the issue remains unresolved, and why negotiations on the Code of Conduct have dragged on for 15 years,” he said. “Within ASEAN, some members lean toward China, others toward the U.S., creating a superpower divide over the South China Sea.”

Malaysia, Azmi argued, is acutely aware of this reality. This was reflected in the Kuala Lumpur Declaration 2045, issued in May after the 46th ASEAN Summit, where Malaysia stressed the need for ASEAN to strengthen its “centrality” – not only on issues directly affecting the bloc, but also on more distant matters involving powers such as the United States.

“That is also why, for the first time, the joint communiqué of the last ASEAN summit placed the Gaza conflict at the center of its agenda,” he added. “It was to signal that ASEAN is not isolated, but responsive to global developments – positioning the bloc as a more respected organization capable of addressing both internal challenges and international issues far beyond its borders.”

Azmi also pointed out that ASEAN is not static – as the chair position rotates each year, the focus and statements from the grouping change. “The trajectory of ASEAN in any given year depends heavily on its chair. This year it is Malaysia; last year it was Laos, and that year was relatively quiet.”

“...Next year, the chairmanship will pass to [the Philippines] – and we all know Manila tends to align more closely with the United States. So ASEAN’s direction under Manila’s leadership will be very interesting to watch.”

Cautious Strategic Hedging in the Face of China-U.S. Rivalry

Ramlan said that after observing regional dynamics and Malaysia’s foreign policy, he would describe ASEAN’s overall approach to the China-U.S. rivalry as one of cautious strategic hedging, with a particular emphasis on neutrality, centrality, and nonalignment.

“As a bloc, ASEAN has continuously sought to strike a balance in its interactions with both major powers, prioritizing regional peace, economic growth, and diplomatic autonomy over siding with any geopolitical camp. The strength of ASEAN is its capacity to serve as a mediator or buffer between opposing states.”

According to Ramlan, through mechanisms such as the ADMM-Plus, the East Asia Summit, and the ASEAN Regional Forum, ASEAN advocates for a rules-based regional order. He said these platforms allow China and the United States to engage constructively on security and economic issues, rather than turning Southeast Asia into a battleground for influence. While this approach has its shortcomings, it reflects ASEAN’s general desire to avoid being forced into binary choices.

“Maintaining this delicate balance is becoming increasingly challenging. The escalating U.S.-China competition, particularly in trade, technology, and the South China Sea, is exerting growing pressure on ASEAN to adopt more definite positions,” Ramlan explained. “China’s assertive actions, particularly in maritime issues, are testing ASEAN unity. For instance, people often perceive nations like Cambodia and Laos as more pro-Beijing, while Malaysia, the Philippines, and Vietnam have active territorial concerns. This division weakens ASEAN’s capacity to project unity, especially on pressing security or sovereignty matters.”

Ramlan believes Malaysia does not need to “choose a side” in the near term, but the space for neutrality is rapidly shrinking. Malaysia has long taken a pragmatic approach – seeking economic opportunities from China while maintaining close defense and diplomatic ties with the United States and other Western allies. This “dual-engagement” strategy, he said, is deeply embedded in the country’s foreign policy tradition and remains the most rational course of action.

“But if geopolitical rivalry intensifies, especially if it extends into the military sphere or becomes sharply divided along ideological lines – such as democracy versus authoritarianism – Malaysia may have to make issue-specific decisions that appear to favor one side. For instance, Malaysia would need to reassess the extent of its collaboration with certain Chinese tech companies if cybersecurity or digital sovereignty emerge as significant points of contention, particularly under external pressure.”

“Malaysia’s ultimate objective should be to maintain strategic autonomy while promoting a multipolar and inclusive regional order,” he concluded. “To ensure that we are not susceptible to pressure from any external force, we must strengthen ASEAN unity, expand intra-ASEAN collaboration, and invest in our national resilience across economic, technological, and diplomatic fronts. Malaysia will remain committed to ASEAN’s balanced and engaged stance.”

Ramlan added that despite growing pressure to “pick a side,” he is confident Malaysia can, through careful diplomacy, avoid binary choices and safeguard the country’s sovereignty and long-term interests amid China-U.S. competition.