The Essence of Hedging: Malaysia and Singapore's Response to a Rising China

Author(s): KUIK CHENG-CHWEE

Source: Contemporary Southeast Asia , August 2008, Vol. 30, No. 2 (August 2008), pp.
159-185
Published by: ISEAS - Yusof Ishak Institute

Stable URL: https://www.jstor.org/stable/41220503

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Contemporary Southeast Asia Vol. 30, No. 2 (2008), pp. 159-85 DOI: ЮЛЗбб/сзЗО-га
© 2008 ISEAS ISSN 0219-797X print / ISSN 1793-284X electronic

The Essence of Hedging:

Malaysia and Singapore's
Response to a Rising Ch
KUIK CHENG-CHWEE

Recent International Relations scholarships and policy publications

have used the term "hedging" as an alternative to "balancing" and
"bandwagoning" in describing small states' strategies towards a rising
power. In the case of Southeast Asian countries' responses to a re-
emerging China, more and more analysts have asserted that none of
the smaller states are pursuing balancing or bandwagoning in the strict
sense of the terms, and that the states are in fact adopting a "middle"
position that is best described as "hedging". This paper seeks to assess
this assertion by performing three principal tasks. First, it attempts
to identify the key defining attributes and functions of hedging as
a strategy that is distinguishable from pure forms of balancing and
bandwagoning. Second, it aims to operationalize the term within the
context of Southeast Asia-China relations, by focusing on the cases of
Malaysia and Singapore's response to China in the post-Cold War era.
Third and finally, the study explains why these two states have chosen
to hedge in the way they do. The central argument of the essay is that
the substance of the two smaller states' policies are not determined by
their concerns over the growth of China's relative power per se; rather,
it is a function of regime legitimation through which the ruling elite
seek to capitalize on the dynamics of the rising power for the ultimate
goal of justifying their own political authority at home.

Keywords: Hedging, balancing-band wagoning, regime legitimation, small-

behaviour, Southeast Asia-China relations.

Kuik Cheng-Chwee is a Lecturer in International Relations at the National

University of Malaysia (UKM), and concurrently a Ph.D. candidate at
Johns Hopkins SAIS, Washington, D.C.

159

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 160 Kuik Cheng-Chwee

What do states do when f

potentially threatening G
International Relations (IR) t
to this central question: st
bandwagon with that power
to preserve their own secu
- tend to perceive a rising
counter-checked by allian
(internal balancing).2 This
aggregate capability is ac
offensive capability and o
school, by contrast, opines
rather than contain against
come to accept a subordina
for profit.4 This may happen
of strength that can be expl
Notwithstanding the en
thought, recent scholarly
propositions might not a
Asian states to a rising C
indicate that the regional s
or bandwagoning. While
some form of military tie
United States), these effort
strategy in its strictest se
cooperation actually pred
clear indication that the st
have been primarily stimu
the growth of China's rela
In a similar vein, while East Asian states have all chosen to
develop economic ties and to engage China diplomatically, this gesture
should not be confused as bandwagoning. Economic cooperation
and diplomatic engagement are chiefly motivated by a pragmatic
incentive to gain economic and diplomatic profit; by themselves they
do not constitute an act of power acceptance.8 Bandwagoning, by
contrast, reflects a readiness on the part of smaller states to accept
- voluntarily or otherwise - the larger partner's power ascendancy;
and such power acceptance often take the forms of political and
military alignment. Empirically, however, none of the regional states
have forged security alliances with China.
A range of factors explain why most regional states have rejected
pure-balancing and pure-bandwagoning. Pure-balancing is considered

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 The Essence of Hedging 161

strategically unnecessary, because

potential rather than actual. It is a
and counter-productive, in that an
push China in a hostile direction,
a real one. Further, it is regard
is likely to result in the loss of t
reaped from China's growing mar
other hand, albeit economically
undesirable and strategically ris
smaller states' freedom of action.
For these reasons, most of the East Asian states do not regard
pure-balancing and pure-bandwagoning as viable options vis-à-v
China. In the case of the original members of the Association o
Southeast Asian Nations (ASEAN), none of the countries have
chosen to contain against or crouch under China in the post-Cold
War era. Instead, they have taken a middle position that is now
widely termed as the "hedging" strategy.9 Borrowed originally from
finance, the term is brought into IR to refer to an alternative strategy
distinguishable from balancing and bandwagoning. It has been used
not only to describe small-state reactions to power ascendancy, but
also big-power strategies.
This article examines the former, focusing on the cases of
Malaysia and Singapore's response to the rise of China in the post-
Cold War era, specifically, from 1990-2005. It seeks to explore the
notion of hedging as an alternative analytical tool to identify the
substance and differences of small-state behaviour in the face of
power asymmetries. Ultimately, it aims to explain why the smaller
states have responded to a rising power in the way they have.
The main argument of the paper is that a small state's strategy
towards a rising power is driven not so much by the growth of
the Great Power's relative capabilities per se; rather, it is motivated
more by an internal process of regime legitimation in which the
ruling elite evaluate - and then utilize - the opportunities and
challenges of the rising power for their ultimate goal of consolidating
their authority to govern at home. This argument - which may be
termed the Regime Legitimation (RL) framework - is premised on
three core assumptions. First, foreign policy choices are made by
ruling elites, who are concerned primarily with their own political
survival. As such, their policy actions are geared towards mitigating
all forms of risks - security, economic and political - that may
affect their governance capacity. Second, the representation of risks
- which risks will be identified and prioritized as foreign policy

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162 Kuik Cheng-Chwee

"problems" - is neither gi
by the way in which elit
acting in accordance with t
a given time. Third, such
compliance with liberal-de
preserve security and inter
to uphold sovereignty an
peculiar to a particular c
with vulnerability", the ne
It is within the context of
ramification of a rising p
This set of assumptions
mainstream neo-realist tradi
ing premises. First, states
who seek their own securi
tend to rely on military f
behaviour is driven chiefl
across units, rather than sta
hold true, then we should
of power - in this case, an
- will cause the small sta
turn, will compel them to
capabilities for balancing
their security.
On the other hand, if t
should expect that a gro
not necessarily have an in
whether or not the struct
smaller states, it will depe
perceive the power as a boo
All things being equal, in
Power is perceived to be
the power's growing ascen
the Great Power's growing
legitimation, the state is e
instances in which the ram
to be mixed or unclear, th
intricate approach, the s
ordering of the elite's leg
if the elite's current legi
of prosperity-maximizing
expected to highlight econ

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The Essence of Hedging 163

tapped from the power, while

it may have about the giant.
The remainder of the paper i
first section provides a working
its antecedent conditions. The s
into five components along the
as a way to measure the range
Next, on the basis of the ident
takes an empirical look by deta
policies. The final section concl
strengths of neo-realism and R
variation in the two strategies.

Defining "Hedging"
The term "hedging" is defined
country seeks to offset risks b
that are intended to produce mu
the situation of high-uncertaint
The notion of "risks" is a ke
human behaviour, either in agricu
In the realm of international p
three major genres: security,
of these risks (e.g. military agg
are originated from intentional
actors, others are products of im
global economic downturns, dom
changes in the distribution of
these risks are especially harmf
the states' internal limitation t
and in part because they lack re
and to mitigate the risks by th
In this regard, Great Powers o
or otherwise - in a small state's risk management. Their roles,
however, are far from unidirectional. On the one hand, a big power
may throw its weight behind the state's elite and provide them with
the needed resources to mitigate certain risks, such as a looming
military threat or an enduring economic hardship. On the other
hand, a Great Power may harm smaller states in every conceivable
way. It may turn its might into a "right" to impose its will on
actors within its "sphere of influence", or it may invade them for
resources or political domination.

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 164 Kuik Cheng'Chwee

Given the Great Powers'

mitigation efforts, an ag
weak states is thus: how s
Powers, in a way that w
simultaneously cushionin
stronger powers? Should
something else?
Fundamentally, the ma
to accept, accommodate
well as the manner in which it would approach other actors
(other powers, neighbouring countries, etc) to strengthen its position
- is largely dependent on whether it is faced with ал imminent
security threat In cases where a state comes to view a particular
actor as an immediate threat, the state is likely to pursue a
balancing strategy vis-à-vis the actor: its strategic assets will be
mobilized for security-seeking ends. Conversely, in cases where a
state views an actor not as a threat but a principal source of aid,
then it is likely to opt for bandwagoning: profit-seeking behaviour
will prevail.
More often, however, there are circumstances where elites do
not perceive any imminent and unambiguous threat. Instead, they
may view the embodiments of risks to be more versatile,
multifaceted and uncertain. This is a situation many countries in
the Asia Pacific have found themselves in post-Cold War. While the
collapse of the socialist bloc effectively ended the decades-long
East-West confrontation, the abrupt disappearance of bipolarity
engendered a deep sense of uncertainty among regional countries,
particularly the smaller ASEAN states.13 Following the reduction
of superpower military presence in Southeast Asia, uncertainties
have revolved around whether, and to what extent: (a) the United
States will scale down its force structure in the region; (b) the
Asian powers of China, Japan and India will compete to fill in the
"power vacuum"; and (c) ASEAN will remain relevant in the new
regional environment.14
In part due to the uncertain regional order, and in part due
to the double-edged role of Great Powers, the smaller states can
no longer afford to develop too close or too distant a relationship
with any of the major powers. This is because getting too close to a
colossus may entail the possibility of losing their independence and
inviting uncalled-for interference, which, in turn, may undermine
the elites' legitimacy in the eyes of their constituencies. Worse,
it may unnecessarily drag the states into potential Great Power

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 The Essence of Hedging 165

conflict, leaving them with t

the wrong horse". On the oth
from a Gulliver may cost the e
sort of benefits that can be util
standing. Worse, it may arouse
Gulliver, thus putting the state
Great Power gains pre-eminence
high for small states to adopt th
and evolving power structure.
The problem for small states i
power structure will fluctuate a
for them to ascertain how and when this will occur. This is because
the distribution of power is a systemic process that cannot be
controlled by any single actor, and because the commitment of
a Great Power is always open to change, as painfully learned by
ASEAN elites in the wake of the British "East of Suez" policy and
the Nixon Doctrine in the late 1960s. Given the uncertainties and
the stakes involved, small states would always have a tendency to
hedge, and to avoid taking sides or speculating about the future of
Great Power relations.
Whether such a tendency will be actualized as a behaviour,
however, is contingent on many factors. Three factors stand out: (a) the
absence of an immediate threat (that might compel a state to ally with
a power for protection); (b) the absence of any ideological fault-lines
(that might rigidly divide states into opposing camps); and (c) the
absence of an all-out Great Power rivalry (that might force smaller
states to choose sides). Hedging behaviour is possible only when
all three conditions are fulfilled.

Deconstructing Hedging: Southeast Asian Responses towards a

Rising China
Based on the above defining parameters, hedging is conceived as a
multiple-component strategy between the two ends of the balancing-
bandwagoning spectrum (see Table I).15 This spectrum is measured
by the degrees of rejection and acceptance on the part of smaller
states towards a Great Power, with pure-balancing representing
the highest degree of power rejection, and pure-bandwagoning the
extreme form of power acceptance.
In the context of Southeast Asia-China relations, hedging consists
of five constituent components, as follows:

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166 Kuik Cheng-Chwee

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 Th e Essen ce of Hedging 167

Economic-Pragmatism
This refers to a policy wherein a s
gains from its direct trade and inve
regardless of any political problems
It signifies a neutrality point on t
profit-maximizing itself does not carr
or rejection. Economic-pragmatism
equally emphasized by all original
longest held, dating back to the Co
were still politically at odds with
(PRC).16 In fact, all ASEAN states e
well before they proceeded to estab
ship with Beijing. In the 1960s Sing
state to forge direct commercial an
was followed by Malaysia in 1971,
in 1974 and Indonesia in July 1985. 18 In all cases, economic-
pragmatism had the effects of developing socio-economic linkages
while necessitating a certain level of bureaucratic coordination,
thus establishing the foundations for normalization when political
conditions were ripe.

Bin ding-Engagem en t

Engagement refers to a policy wherein a state seeks to establish and

maintain contacts with a Great Power, for the purposes of creating
channels of communication, increasing "voice opportunities" and
influencing the power's policy choices.19 Binding, on the other
hand, refers to an act in which a state seeks to institutionalize its
relations with a power by enmeshing it in regularized diplomatic
activities. When binding and engagement are combined, they serve
to socialize and integrate a Great Power into the established order,
for the goal of neutralizing the revisionist tendency of the power's
behaviour.20
Malaysia's engagement policy can be traced back to the Cold War
period, when it became the first ASEAN state to establish diplomatic
ties with Beijing in May 1974. In the case of Singapore, although it
did not establish formal relations with the PRC until after Indonesia
had done so in 1990, the city state had long maintained close
"unofficial" contacts with China, as is illustrated by the exchanges
of visits between their leaders since 1975. Throughout this period,
however, the states' engagement posture did not entail any "binding"
element, simply because there was no regularized diplomatic

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 168 Kuik Cheng-Chwee

platform between them. It

was implemented hand-in
creations of various institu
China and the ASEAN sta
China established a mechanism for consultations between the two
foreign ministries in 1991. Singapore followed suit in 1995. At th
multilateral level, the smaller states have also been actively engagin
and binding China in various ASEAN-driven institutions, such a
the ASEAN Regional Forum (ARF) and the ASEAN-China dialogu
process. Among the regional states, Singapore and Malaysia (along
with Thailand) are the most enthusiastic advocates and practitioner
of binding-engagement.
This observation, however, is not to say that the ASEAN states
are taking a united stand vis-à-vis China in these institutions. I
fact, while the smaller states have all attempted to make use of th
institutions as an indispensable platform to deal with the PRC, th
states' actions are, ultimately, aimed at serving their own interests
When their interests converge, the individual states would make
collective move (e.g. their efforts to enmesh China in the ASEAN
led institutions in the early 1990s). However, when their interest
diverge, the states would go their own separate ways (e.g. during
the negotiations over the code of conduct in South China Sea).
Occasional collective efforts, hence, should not be mistaken as a
unified stance.

Limited-Ban d wagoning

Bandwagoning refers to a policy wherein a state, driven by a desire

to win present or future rewards, chooses to align with a Great Power
which displays a prospect for reaching pre-eminence.21 It may exist
in two forms: "pure bandwagoning" (PB) and "limited bandwagoning"
(LB). They are differentiated in at least three ways. First, PB often
takes the form of political and military alignment,22 whereas LB
involves only political partnership that is manifested in: (a) policy
coordination on selective issues; and (b) voluntary deference giving
to the larger partner. Second, PB signifies a zero-sum scenario for
Great Powers, that is, when a state bandwagons with one power,
it simultaneously distances itself from another power. LB, on the
other hand, does not necessarily denote a zero-sum situation. A
state may opt for LB with a rising power while still maintaining
its relations with the existing hegemon. Finally, PB implies an
acceptance of superior-subordinate relations between a patron and

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 The Essence of Hedging 169

a smaller actor, whereas in LB, t

losing its autonomy or becoming
acceptance whereas LB is hierarch
As is demonstrated below, a de
that China's influence is likely
inducements identified by Rand
bandwagoning - have motivated
these factors, however, have enc
same direction.
On a comparative basis (see Table 1), it can be observed that
Thailand shares Malaysia's position in embracing LB, whereas
Indonesia concurs with Singapore in rejecting LB as an option (albeit
for different reasons). Malaysia's LB behaviour is reflected in its
elites' willingness to accord deference to Beijing over the latter's
core interests (e.g. "One China" Policy), as well as their inclination to
see Beijing as a partner in pushing for certain common foreign policy
goals. In this regard, Thailand has similarly worked together with
Beijing to push for various Thai-initiated programmes, such as the
Asian Cooperation Dialogue (ACD). Besides, perhaps as a reflection of
Thai diplomatic culture of bending- with-the- wind, Bangkok has shown
an even greater readiness to display allegiance to China over Taiwan,
Tibet and the Falun Gong.23 Indonesia's policy, by contrast, does not
exhibit clear elements of LB. First, except in the economic domain,
Indonesia does not forge major policy coordination with China in the
same way that Thailand and Malaysia have collaborated with China
over ACD and East Asian cooperation respectively. Second, Jakarta
does not - and probably would not - demonstrate a readiness to
give deference to Beijing in the same way that Bangkok and Kuala
Lumpur have occasionally chosen to do so. Indonesia's position thus
comes closer to that of Singapore. However, unlike Jakarta which
rejects LB primarily because of its elites' perception of Beijing as a
"natural geopolitical rival",24 Singapore's no-bandwagoning stance is
chiefly due to its leaders' acute sensitivity over autonomy, as well
as their wariness about the long-term ramifications of a powerful
China, as will be discussed.
While the above policy thrusts connote more persuasive and
profit-maximizing elements, this is not the case for the remaining two.

Dominance-Denial

This policy is aimed at preventing and denying the emergence

a predominant power that may exert undue interference on sma

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 170 Kuik Cheng-Chwee

states.25 Its modus operandi is

actors, either individually or
(a) involving other powers
their own resilience and str
clout. It is different from
is about balance-of-political
military-power.26 Second, p
country (or bloc) in mind,
targeting at a particular pow
Dominance-denial is adopt
as evidenced by their comm
not necessarily equal - relat
policy has been in practice
after the reduced Western commitments in the late 1960s.
Dominance-denial and binding-engagement can be seen as
two different sides of the same coin. They are related because
both are aimed at influencing a Great Power by binding it in an
institutional web that involves other major actors. However, they
are two distinctive approaches because unlike binding-engagement
that seeks to change the Great Power's action by a persuasive point
("let's preserve the status quo together, because you too have a stake
in it"), dominance-denial seeks to do the same with an implicitly
more confrontational message ("don't dictate us in a hegemonic way,
or we will have no choice but to move closer to other powers").
Given that ASEAN states' own capabilities will never be adequate
to guarantee an effective binding-engagement policy, other powers'
presence is essential to induce China to stay on the engagement
course and to behave in a restrained way. ASEAN states' effort to
ensure other Great Powers involvement in the ARF and the East
Asia Summit is a case in point.

Indirect-Balancing
This is a policy wherein a state makes military efforts to cope w
diffuse uncertainties (as opposed to a specific threat in the case
pure-balancing) by forging defence cooperation and by upgradi
its own military. It is different from "soft-balancing", which ref
to the act of maintaining informal military alignment for balanc
purposes.27 There are reasons why the present study uses "indire
rather than "soft" to describe ASEAN states' balancing acts. To be
with, the issue of informal vs. formal military cooperation betw
ASEAN states and Western powers is largely attributable to facto

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 The Essence of Hedging 171

other than the rise of China, and

the states' China policies. By con
direct balancing may usefully ref
Beijing. That is, if and as soon a
threat, the state is expected to ma
targeted at China. If this happens
to direct balancing. Presently, how
ASEAN states are seeing China as
are developing defence capabilit
military modernization. Hence, it
states' postures still remains on
* * *

These components indicate that hedging, in essence, is a

two-pronged approach. It is two-pronged because it operates by
simultaneously pursuing two sets of mutually counteracting policies,
which can be labelled as "return-maximizing" and "risk-contingency"
options. The first set - consisting of economic-pragmatism, binding-
engagement and limited-bandwagoning - allows the hedger to reap
as much economic, diplomatic and foreign policy profits as possible
from the Great Power when all is well. It is counteracted by the
risk-contingency set, which, through dominance-denial and indirect-
balancing, aims at reducing the hedger's loss if things go awry. Hedging,
thus, is a strategy that works for the best and prepares for the worst.
A policy that focuses on merely return-maximizing without preparing
for risk contingency - and vice versa - is not a hedging strategy.
By concurrently adopting these options, smaller states such as
Singapore and Malaysia aim to offset possible risks that may arise from
the uncertain regional order. Regardless of how the power structure will
evolve - whether the US commitment will remain strong; whether
Beijing will turn revisionist; whether China will become weak and will
no longer be seen as an alternative power centre; whether China will
grow stronger; or whether China will co-exist peacefully with Japan and
India - the states hope that their act of counteracting one transaction
against another will serve to insure their long term interests.
The assertion here that the original ASEAN members have all
adopted a hedging position does not imply that they are pursuing
a common strategy vis-à-vis Beijing. Far from it, as is reflected in
the earlier discussion on limited-bandwagoning, there are in fact
subtle differences across the states' responses. This will be further
elaborated in the following pages.

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 172 Kuik Cheng-Chwee

Operationalizing Hedging
This section compares Ma
operationalizing the consti
earlier.

Malaysia's China Policy

The evolution of Malaysia's
hostile and mutually suspi
into a cordial partnership
1980s, Malaysia still percei
largely due not only to Ch
Communist Party of Mal
Chinese policy and the Spr
Since the end of the Cold
much more sanguine out
to three factors: (a) the dissolution of the CPM in 1989, which
removed a long-standing political barrier; (b) the growing salience
of economic performance as a source of legitimacy for the ruling
Barisan Nasional (BN) coalition; and (c) Prime Minister Mahathir
Mohamad's foreign policy aspirations. These factors have led to a
shift in Malaysian elite perceptions of China, from a major threat
to a key economic and foreign policy partner.30 Accordingly, in
addition to deepening its long-held economic-pragmatism, Malaysia
has slowly pursued policies that can be seen as binding-engagement
and limited-bandwagoning.
Malaysia's economic-pragmatism is best illustrated by its leaders'
high-level visits to China, which have always been accompanied by
large business delegations and resulted in many joint-venture projects.
Mahathir made seven such visits during his tenure, while the current
Prime Minister Abdullah Badawi paid a major visit in May 2004.
Since 2001, China has been Malaysia's fourth largest trading partner.
Bilateral trade has increased by more than eight-fold over the past
decade, from US$2.4 billion in 1995 to US$19.3 billion in 2004.31
Presently, Malaysia's trade with China is growing at a faster rate than
that with the United States or Japan, the country's two traditional
major trading partners. If this trend continues, it is likely to help
reduce the risk of export volatility for Malaysia.
Binding-engagement is manifested in Malaysia's various efforts
that are aimed at increasing dialogue opportunities with China. In
April 1991, Malaysia and China established a consultative mechanism
between their foreign ministries.32 Above the bilateral level, Malaysia

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The Essence of Hedging 173

has joined hands with its ASE

regional level. China's appeara
Meeting in July 1991 - as a gu
- was Beijing's first multilatera
the foundation for China's subse
multilateral processes in the reg
and agreed to embark on the AS
(SOM) Consultation in 1995. It th
Ministerial Conference as a dial
allowing Malaysia (and other AS
the rising power at a time of stra
have also provided valuable plat
South China Sea dispute.34
Malaysia asserted its claim to
in 1979. The country's defenc
of China's intentions in the area
tion of law on the territorial s
stand-off over Mischief Reef in 1
the Malaysian leadership under
dispute to impede his goal of pr
ties with China. This became a
October 1995, Malaysia and Chi
"any form of outside interferen
May 1999, they signed a Joint
the settlement of disputes thro
and negotiations".36 In July t
Philippines' request to discuss
while Manila protested vehemen
structures on Investigator Sho
was low-key. Considering that
in Beijing just before the constr
conjecture", a well-informed Ma
minister was "actually dispatc
the latest development over Ma
Malaysia's moves, of course, were not so much about
accommodating China's position, but more about cashing in on its
like-minded views with the power for promoting its own interests
on the Spratlys, namely defending its territorial claims with a
view to exploiting maritime resources. According to Joseph Liow,
given that Malaysia's claimed territory in the South China Sea
lies furthest from China, this has kept both countries "from actual
conflict over their respective claims and in turn has facilitated

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 174 Kuik Cheng-Chwee

easier bilateral cooperation

the two countries have sim
quo" in the dispute.38
Malaysia's limited-bandw
East Asian cooperation. Pa
partly due to Beijing's int
valuable partner in pushing
among the East Asian eco
Mahathir's East Asia Econ
which he advocated a gro
collective interests in the
the West. The proposal wa
and received only a lukew
and other ASEAN members, even after it was renamed the East Asia
Economic Caucus (EAEC). Tokyo's response came as a disappointment
to Malaysia, which originally hoped that Japan would play a leading
role in the group. In due course, China stood out as the only
major power which lent explicit support to EAEC. In 1997, China,
along with Japan and South Korea, accepted ASEAN's invitation
to attend an informal summit, which evolved as the ASEAN Plus
Three (APT) process. In 2002, Kuala Lumpur's attempt to set up an
APT Secretariat was opposed by some ASEAN members, but was
supported by Beijing. In 2004, when Malaysia proposed to convene
the inaugural East Asia Summit (EAS), the proposal was backed by
China. During the run-up to the Summit in the following year, both
Malaysia and China favoured limiting EAS membership to the APT
countries. Later, when it became clear that India, Australia and New
Zealand would be included in the new forum, the two countries,
along with others, then advocated making the APT as the "main
vehicle" for East Asia community building, and the EAS "a forum
for dialogue" among the regional countries.
The growing bilateral and multilateral interactions since the
early 1990s have also offered opportunities for Malaysia and China
to discover that they share important commonalities over many
international issues. These range from human rights, the cause of
the developing world, opposition to the US-dominated international
order, and so on. The congruence of interests in these areas has
led them to support each other's position at various international
forums.39
The convergence of foreign policy interests, combined with the
tangible economic benefits, have lead Malaysian elites to downplay, if
not overcome, their earlier apprehensions about the potential security

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Th e Essen ce of Hedging 175

ramifications of a powerful neighbour

Abdullah in 2004: "Malaysia's Chin
good diplomacy and good sense. ..
for others to follow. Our China po
beyond your fears and inadequaci
principled positions, rewards will f
Driven chiefly by this belief, bot
efforts to reiterate and internalize
on various occasions, often referri
Zheng He's peaceful voyages to Mala
case to highlight the benevolent na
the leaders' open rhetoric has largel
Notwithstanding the lingering conc
forces about China's long-term intent
Malaysia is pursuing pure-balancing
defence modernization does not ref
targeted at China.41
To be sure, Malaysia has long been a
Defence Arrangements (FPDA), an
ties with the US. In May 2005, M
Acquisition and Cross-Servicing Ag
in 1994. These arrangements, howev
of "indirect" rather than direct-ba
appear to have more to do with the
than to target a specific threat. As
Zakaria Haji Ahmad, the view in
that "China will not enact policie
it will be benign." He adds that i
future, "there is no notion of the
'balance', counter or neutralize Ch
actions, should Beijing choose to ac
To Malaysian leaders, the notion
more than a self-fulfilling prophe
telling illustration: "Why should
a country as your future enemy, i
- because then they will identify y
be tension."43 In this regard, the b
signed in September 2005 is signific
that Malaysia is now more willing t
than a security threat.
That limited-bandwagoning has be
does not imply that Malaysia favou

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 176 Kuik Cheng-Chwee

order. In fact, dominance-

for Malaysia, as indicated b
all major powers. As emph
Razak, the decision to acce
means a reflection of our f
towards China".44 Given Mal
with the complex relations
the minority Chinese, Mala
to remain limited in the near future.

Singapore's China Policy

The peculiarity of Singapore's China policy is that it is by design
an ambivalent one: warm in economic and diplomatic ties but
distanced in political and strategic spheres.
Under the People's Action Party (PAP)'s rule, economic impera-
tives have always been a key driving force behind Singapore's
China policy. As far back as the 1960s and throughout the 1980s,
in the absence of diplomatic relations, Singapore already actively
promoted bilateral economic ties. The launch of China's open-door
policy in 1978, coupled with Singapore's economic recession in the
mid-1980s and the government's plan to develop a "second wing"
of the Singaporean economy, all provided additional incentives for
Singapore to exploit growing economic opportunities in China. Largely
because of the complementary nature of the two economies, Singapore
has long been China's largest trading partner in ASEAN, except in
2002 and 2003. Beyond trade, bilateral economic cooperation has
taken the forms of investment and management skills transfer, as
illustrated by the flagship Suzhou Industrial Park project.
On the diplomatic front, Singapore has been one of the key
advocates of binding-engagement policy since the early 1990s.
Together with other ASEAN states, it has implemented the policy
both through economic incentives and regional institutions, such as
the ARE45 By binding Beijing to a web of institutions, Singapore
hopes to give China a stake in regional peace and stability.46 To quote
a Singaporean scholar: "Singapore wants to see China enmeshed
in regional norms, acting responsibly and upholding the regional
status quo."47
One might wonder: why does Singapore care so much about
"regional status quo" and how is China factored in? To begin with,
Singapore is a tiny state with innate vulnerability. This vulnerability is
rooted in its minuscule size, its limited resources and its geopolitical

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The Essence of Hedging 177

setting. To cope with the vuln

resorted to a three-fold appr
interdependence, pursuing arm
regional balance of power.48 Th
to the maintenance of regional-st
at sea; (b) a cohesive ASEAN; and
there is no safe and free navigat
economic viability will be sever
divided, Singapore will not be a
in shaping external affairs; and
capabilities among the Great Po
compromised by the emergence
of these possibilities may weak
to ensure sustainable prosperity
potential risks to their very leg
It is in this light that Singa
and the Spratlys. Given Singapo
trade, its leaders have been nerv
in the Taiwan Straits. During t
feared that any armed conflict
foreign trade and investment".4
a claimant to the Spratlys, it is
a bearing on the safety of navi
In addition, Singaporean lead
a strong China will exercise i
uncertainties over Beijing's future
taken "a fall-back position" for
very much a reflection of a "
by Yuen-Foong Khong. In his
"think in terms of possible sce
might affect Singapore".52 Giv
absence of territorial disputes, C
Singapore. The city state's thou
the mid- to long-term, i.e., whe
regional stability and prosper
choices; and (c) drive a wedge b
would undermine ASEAN cohesion.53
Singapore's quintessence as an anticipatory state is well illustrate
by a decision it made at the end of the Cold War. In 1989, w
it appeared that the US might have to close its military bas
in the Philippines, Singapore announced that it would grant
Americans access to its facilities. Singapore's move was driven b

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 178 Kuik Cheng-Chwee

its fear that the US with

Asia Pacific, which would
regional powers. If that ha
in turn, would threaten Si
Prime Minister Lee Kuan Yew decided to "stick with what has
worked so far", i.e., the American military presence that he s
as the key to order and stability in East Asia.54 Lee's decision
aimed at coping with strategic uncertainty in the post-Cold W
environment; China's actions over Mischief Reef in 1995 validated
his concerns. In 1998, Singapore further strengthened its security
ties with America by constructing a new pier at its Changi Naval
Base, designed specifically to accommodate US aircraft carriers.
While Singapore's indirect-balancing has relied primarily on its
military cooperation with the US, it would be wrong to attribute
Singapore-US ties entirely to the China factor. In fact, Singapore's
recent move to strengthen its security relations with Washington
have less to do with China than its concerns over terrorism, following
the 11 September 2001 attacks in the US as well as the arrest of
the Al Qaeda-linked Jemaah Islamiyah members in Singapore in
December 2001. According to Evelyn Goh, the new counter-terrorism
agenda now acts "as stronger glue for the Singapore-US strategic
partnership than the China challenge".55
This development, however, does not mean that China has been
dropped from Singapore's list of strategic concerns. In fact, despite
Beijing's so-called "charm offensive" in recent years, Singapore still
cautiously guards against any potential risks of a powerful China.
As remarked by Goh Chok Tong in 2003:
China is conscious that it needs to be seen as a responsible power
and has taken pains to cultivate this image. This is comforting to
regional countries. Nevertheless, many in the region would feel
more assured if East Asia remains in balance as China grows. In
fact, maintaining balance is the over-arching strategic objective in
East Asia currently, and only with the help of the US can East
Asia achieve this.56

In this context, the bilateral diplomatic feud that sparked right after
Prime Minister-designate Lee Hsien Loong's visit to Taipei in 2004 may
have deepened Singapore's trepidation over a too powerful China.
Finally, Singapore's policy is also marked by its rejection of
limited-bandwagoning due to its demographic profile and geopolitical
complexity. Ever since Singapore became independent in 1965, the
island, where ethnic Chinese make up 76 per cent of the population,

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 The Essence of Hedging 1 79

has been uneasy about being seen a

its larger and Muslim-majority ne
During the Cold War, chiefly out
that it would be the "front post of
it would be the last ASEAN state t
Beijing. During the post-Cold W
attempts to downplay ethnic affinity
to avoid leaving any impression tha
in the region.58 For this reason, t
the part of Singapore as to the ext
ties with Beijing.59 Hence, bandwa
form, does not appear to be a like

Conclusion

The preceding analysis has reflected that Malaysia and Singapore's

response to a rising China cannot be adequately explained by neo-
realism. In the first place, neo-realism does not sufficiently captur
the range of state options and functions in the face of power
asymmetries. Neo-realists maintain that when faced with a rising
power, states are likely to opt for internal and external balancing
acts, for the function of threat-reduction. Our discussion, however,
suggests that state options are not confined to balancing (and
its anti-thesis, bandwagoning), but may include mixed strategie
such as hedging, which involves a combination of both military
and non-military options, with particular reliance on multilateral
institutions. Our discussion also reveals that state functions are not
limited to threat-reduction, but may involve the concurrent goals
of risk-contingency and return-maximizing. This is not to say that
neo-realism is irrelevant in explaining small-state responses to a
rising power. It merely suggests that the paradigm is more useful
in accounting for a situation where states are confronted by an
immediate security threat. In circumstances where states' security
is not directly at stake - as with the two cases under examination
- neo-realism has lost much of its explanatory strength.
Moreover, the limitations of neo-realism also lie with its
inadequacy to explain the variation in state responses. As discussed,
the growth of China's relative power since the 1990s has induced
Malaysia (and Thailand) to move closer to Beijing by embracing
limited-bandwagoning, but the very same structural force clearly did
not cause the same effect in the case of Singapore (and Indonesia).
It thus follows that structural factors per se have no inherent

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 180 Kuik Cheng-Chwee

consequence on state behav

that may have affected th
domestic factors is further
is Malaysia and not Singapo
China. Considering Malaysi
dispute, one would expec
than Singapore, which do
claims with Beijing and is g
record as discussed, howev
This is where the Regime
a nutshell, it argues that it
that explain the variation
In the case of Malaysia
mirrors the sources of th
inter alia, the elite's capacity to promote Malay dominance,
economic growth, electoral performance, national sovereignty and
international standing. Pure-bandwagoning (an across-the-board
alignment and an acceptance of hierarchical relations) is a non-
starter for the Malay-dominated regime, as the option is likely to
result in an imbalance in domestic political configuration and an
erosion of external sovereignty. The limited form of bandwagoning,
however, is desirable and in fact vital for the BN government. Given
Malaysia's multi-racial structure, a politically significant economic
growth requires the elite to concurrently attain the improvement of
the Malays' economic welfare and the enlargement of the overall
economic pie for the non-Malay groups.60 For the ruling elite, this is
indeed a key to consolidating their electoral base. In this respect, a
closer relationship with Beijing is crucial for the BN elite not only
because it boosts bilateral economic ties, but also because China's
support will strengthen Malaysia's ability to promote a new economic
order for East Asia. This ambition, if materialized, is expected to
elevate Malaysia's regional and international standing - itself an
important source of authority for BN. Hence, pure-balancing against
Beijing is not only unjustifiable, but it will also be harmful to BN
regime interests. This is because such an option would call for a
full-fledged alliance with the US, which is likely to reduce the
credibility of the BN's claim of pursuing an "independent" external
policy for Malaysia.
In Singapore's case its ambivalent policy towards China is best
explained by the foundation of PAP's domestic legitimacy, i.e.,
an ability to cope with the city state's inherited vulnerability. An
economically close and diplomatically cordial relationship with

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 Th e Essen ce of Hedging 181

China serves to attain this goal

and regional stability), but a str
would not. Rather, any bandwag
only increase Singapore's vulnera
its two larger neighbours. For a "l
as a Chinese island in a Malay se
destabilize Singapore's immediate
the PAP elites' attention from the otherwise more crucial domestic
economic functions.
To conclude, the substance of the states' reactions to a rising
power is not so much determined by the growth of the power's
relative capabilities per se; rather, it is a function of regime
legitimation through which the respective elites seek to capitalize
on the dynamics of the rising power for the goal of justifying and
enhancing their own authority at home. This study is of significance
for policy analysis. Given that very few states are adopting pure
forms of balancing or bandwagoning vis-à-vis China, conceptualizing
hedging as a spectrum of policy options is a more realistic way
to observe the change and continuity in state strategies over time.
Specifically, it allows policy analysts to ponder the possibility,
direction and conditions of a horizontal shift along the spectrum,
thereby providing useful pointers for systematically studying the
patterns of states' strategic choices amid the evolving power structure
in the twenty-first century.

NOTES

1 A shorter version of this essay originally appeared in BiblioAsia 3, no. 4

(January 2008), pp. 4-13. The author gratefully acknowledges the financial
support of the Fulbright Program, the UKM Study Leave Scheme, the SAIS
Doctoral Fellowship, the Lee Kong Chian Research Fellowship (National Library
Board, Singapore), and the Chiang Ching-kuo Foundation. He would also like
to express his appreciation to Karl Jackson, David Lampton, Francis Fukuyama,
Bridget Welsh, Wang Gungwu, Zakaria Haji Ahmad, Hari Singh, Ian Storey,
Kong Bo, Goh Muipong, Jessica Gonzalez, Jim and Joanie Allison, Laura Deitz,
John Copper, Yong Pow Ang and the journal's anonymous reviewers for their
helpful comments on the earlier drafts of the paper.
2 Kenneth Waltz, Theory of International Politics (Reading, Mass: Addison- Wesley,
1979).
3 Stephen Walt, "Alliance Formation and the Balance of World Power", International
Security 9, no. 4 (Spring 1985): 3-43.
4 Randall Schweller, "Bandwagoning for Profit: Bringing the Revisionist State
Back In", International Security 19, no. 1 (Summer 1994): 72-107.

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 182 Kuik Cheng-Chwee

5 Alastair Iain Johnston and Ro

of an Emerging Power (New Yo
Wrong: The Need for New Ana
no. 4 (Spring 2003): 57-85; Am
International Security 28, no.
6 Amitav Acharya, "Containmen
Response to the Rise of China",
p. 140.
7 Herbert Yee and Ian Storey, e
Reality (London: RoutledgeCurzo
Asia: Asymmetry, Leadership an
2003-04): 529-48.
8 Amitav Acharya has rightly cautioned that engagement cannot be viewed as
bandwagoning "because it does not involve abandoning the military option
vis-à-vis China". He also stresses that economic self-interest should not be confused
with bandwagoning because economic ties "do not amount to deference". See
Acharya, "Will Asia's Past Be Its Future?", op. cit., 151-52.
9 Johnston and Ross, Engaging China, op. cit., p. 288; Chien-Peng Chung, "Southeast
Asia-China Relations: Dialectics of 'Hedging' and 'Counter-Hedging'", Daljit
Singh and Chin Kin Wah, eds., Southeast Asian Affairs 2004 (Singapore: ISEAS,
2004), pp. 35-53; Evelyn Goh, Meeting the China Challenge, Policy Studies 16
(Washington, D.C.: East West Center Washington, 2005); Francis Fukuyama and
John Ikenberry, Report of the Working Group on Grand Strategic Choices, The
Princeton Project on National Security (September 2005), pp. 14-25; Bronson
Percival, The Dragon Looks South (Westport, CT & London: Praeger Security
International, 2007).
10 On inner justification of the "right to govern", see Max Weber, "Legitimacy,
Politics, and the State", in William Connolly, ed., Legitimacy and the State
(New York: New York University Press, 1984), pp. 32-62; David Beetham,
The Legitimation of Power (London: MacMillan, 1991); Muthiah Alagappa, ed.,
Political Legitimacy in Southeast Asia (Stanford: Stanford University Press,
1995).
11 On neo-realism, see Waltz, Theory of International Politics, op. cit.; Robert Keohane,
ed., Neorealism and Its Critics (New York: Columbia University Press, 1986).
12 This definition is adapted from Glenn Munn et al., Encyclopedia of Ranking and
Finance, 9th edition (New York: McGraw-Hill, 1991), p. 485; Jonathan Pollack,
"Designing a New American Security Strategy for Asia", in James Shinn, ed.,
Weaving the Net: Conditional Engagement with China (New York: Council on
Foreign Relations, 1996), pp. 99-132; Goh, Meeting the China Challenge, op.
cit., pp. 2-4.
13 On ASEAN's discourse of "uncertainty", see Yuen Foong Khong, "Coping with
Strategic Uncertainty: The Role of Institutions and Soft Balancing in Southeast
Asia's Post-Cold War Strategy", in J.J. Suh, Peter Katzenstein, and Allen Carlson,
eds., Rethinking Security in East Asia (Stanford: Stanford University, 2004).
14 Michael Leifer, The ASEAN Regional Forum: Extending ASEAN's Model of
Regional Security, Adelphi Paper no. 302 (London: Oxford University Press for
IISS, 1996); Khong, "Coping with Strategic Uncertainties", op. cit.

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 The Essence of Hedging 183

15 The need to go beyond the dichotomou

Acharya and Ja Ian Chong. See Acharya,
Dominance?", op. cit.; Chong, Revisitin
Working Paper no. 54 (Singapore: Insti
2003).
16 Stephen Leong, "Malaysia and the Pe
Political Vigilance and Economic Pragma
1987): 1109-26.
17 Chia Siow-Yue, "China's Economic Relations with ASEAN Countries", and Chin
Kin Wah, "A New Phase in Singapore's Relations with China", both in Joyce
Kallgren et al. eds., ASEAN and China: An Evolving Relationship (Berkeley:
University of California, 1988), pp. 189-214 and pp. 274-91 respectively.
18 Ibid; John Wong, The Political Economy of China's Changing Relations with
Southeast Asia (London: Macmillan, 1984).
19 Adapted from Schweller, "Managing the Rise of Great Powers"; Yuen Foong
Khong, "Singapore: A Time for Economic and Political Engagement", both
in Johnston and Ross, Engaging China, op. cit., pp. 13-15 and pp. 110-13,
respectively.
20 Ibid.

21 Schweller, "Bandwagoning for Profit", op. cit.

22 Ibid; Acharya, "Will Asia's Past Be Its Future?", op. cit., p. 151
23 Anthony Smith, "Thailand's Security and the Sino-Thai Relat
Rrief 5, Issue 3 (2005), p. 3.
24 Michael Leifer, "Indonesia's Encounters with China and the Dilemmas of
Engagement", in Johnston and Ross, Engaging China, op. cit., p. 99.
25 This term is adapted from "counter-dominance", as coined by Amitav Acharya,
"Containment, Engagement, or Counter-Dominance?", op. cit., pp. 129-51.
26 Ralf Emmers, Cooperative Security and the Ralance of Power in ASEAN and
the ARF (London & New York: Routledge, 2003).
27 "Soft balancing" is used as a contrast to "hard balancing", which refers to
formal and strict sense of military alliance. See Khong, "Coping with Strategic
Uncertainties", op. cit.
28 Abdul Razak Baginda, "Malaysian Perceptions of China: From Hostility to
Cordiality", in Yee and Storey, The China Threat, op. cit., pp. 227-47.
29 Wang Gungwu, "China and the Region in Relation to Chinese Minorities",
Contemporary Southeast Asia 1, no. 1 (May 1979): 36-50; Leong, "Malaysia
and the People's Republic", op. cit., pp. 1109-26; and J.N. Mak, "The Chinese
Navy and the South China Sea: A Malaysian Assessment", Pacific Review 4,
no. 2 (1991): 150-61.
30 Joseph Liow Chinyong, "Malaysia-China Relations in the 1990s: The Maturing
of a Partnership", Asian Survey 40, no. 4 (July /August 2000): 672-91.
31 Malaysia Trade and Industry Portal, Trade and Investments Statistics, available
at <http://www.miti.gov.my>.
32 Mohamad Sadik Gany, Malaysia's China Policy, M.A. unpublished paper (Bangi
& Kuala Lumpur: UKM-IDFR, 2001).

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 184 Kuik Cheng-Chwee

33 Kuik Cheng-Chwee, "Multilat

Southeast Asia 27, no. 1 (April
in Asia: The Aussenpolitik and I
Francis Fukuyama, eds., East A
University Press, 2008), pp. 10
34 Lee Lai To, China and the So
1999).
35 Liow, "Malaysia-China Relati
36 Joint Statement between the
the People's Republic of China o
31 May 1999.
37 Baginda, "Malaysian Perceptions of China", in Yee and Storey, The China
Threat, op. cit., p. 244.
38 Liow, "Malaysia-China Relations", op. cit., pp. 688-89.
39 Ibid., pp. 679-80.
40 Abdullah Ahmad Badawi, Prime Minister of Malaysia, keynote address to the
China-Malaysia Economic Conference, Sunway, 24 February 2004.
41 Liow, "Malaysia-China Relations", op. cit., pp. 682-83.
42 Zakaria Haji Ahmad, "Malaysia", in Evelyn Goh, ed., Betwixt and Between:
Southeast Asian Strategic Relations with the U.S. and China, IDSS Monograph
no. 7 (Singapore: IDSS, 2005), pp. 58-59.
43 "I Am Still Here: Asiaweek's Complete Interview with Mahathir Mohamad",
Asiaweek, 9 May 1997.
44 Mohd Najib Tun Abd Razak, Deputy Prime Minister of Malaysia, "Strategic
Outlook for East Asia: A Malaysian Perspective", keynote address to the Malaysia
and East Asia International Conference, Kuala Lumpur, 9 March 2006.
45 Khong, "Singapore", op. cit., pp. 109-28.
46 Allen Whiting, "ASEAN Eyes China: The Security Dimension", Asian Survey
37, no. 4 (April 1997).
47 Evelyn Goh, "Singapore's Reaction to a Rising China: Deep Engagement and
Strategic Adjustment", in Ho Khai Leong and Samuel C.Y. Ku, eds., China
and Southeast Asia: Global Changes and Regional Challenges (Singapore and
Kaohsiung: ISEAS and CSEAS, 2005), p. 313.
48 Michael Leifer, Singapore's Foreign Policy: Coping with Vulnerability (New York:
Routledge, 2000).
49 Whiting, "ASEAN Eyes China", op. cit., p. 308.
50 Ian Storey, "Singapore and the Rise of China", in Yee and Storey, The China
Threat, op. cit., p. 213.
51 Khong, "Singapore", op. cit., p. 121.
52 Ibid., p. 113.
53 Goh, Meeting the China Challenge, op. cit., p. 13.
54 Khong, "Coping with Strategic Uncertainties", op. cit., pp. 181-82.
55 Goh, Meeting the China Challenge, op. cit., pp. 13-15.

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 Th e Essen ce of Hedging 185

56 Goh Chok Tong, "Challenges for Asia", Speech Delivered at the Research
Institute of Economy, Trade and Industry (RIETI) Special Seminar, Tokyo,
28 March 2003.

57 Leo Suryadinata, China and the ASEAN States: The Ethnic Chinese Dimension
(Singapore: Marshall Cavendish Academic, 1985/2005), p. 81.
58 Khong, "Singapore", op. cit., p. 119; Goh, "Singapore's Reaction to a Rising
China", op. cit., p. 316.
59 Khong, "Singapore", op. cit., p. 119.
60 Liow, "Malaysia-China Relations", op. cit., p. 676.

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