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Economy

China’s Southeast Asia Ascent: How Economic Power Plays Out, Surpassing US Influence

China is the most influential power in SE Asia, due to economic leverage, surpassing the US.

byAndres Castro

September 25, 2025, 8:00 AM

Executive Summary

China has emerged as Southeast Asia’s leading external partner and the “most influential power” in six of the region’s 11 countries, according to a Lowy Institute study.

China’s sustained economic leverage, particularly its role as the region’s primary export market and an increasing source of private investment, is the main driver of its growing influence.

The United States is struggling to compete with China in several Southeast Asian nations, with President Trump’s tariffs and reductions in aid cited as factors eroding US influence.

The Story So Far

China’s growing influence in Southeast Asia is primarily driven by its substantial economic leverage, making it the region’s leading trade partner and a significant source of investment. This rise has coincided with a decline in United States influence, particularly impacted by President Trump’s tariffs and reductions in aid, prompting the region to actively diversify its partnerships to manage the intense rivalry between the two powers.

Why This Matters

China’s escalating economic leverage has solidified its position as Southeast Asia’s preeminent external partner and most influential power in several nations, signaling a significant shift in regional geopolitical dynamics. This growing reliance on China, partly fueled by a decline in US influence due to factors like President Trump’s tariffs and aid reductions, poses challenges for the United States to regain its competitive standing and could limit the strategic autonomy of Southeast Asian countries attempting to balance their external relations amidst intensifying US-China rivalry.

Who Thinks What?

The Lowy Institute’s report indicates that China has emerged as Southeast Asia’s leading external partner and the “most influential power” in six regional countries, primarily driven by its sustained economic leverage.

The study also points out that the United States is struggling to compete effectively with China in several Southeast Asian nations, attributing this in part to President Trump’s tariffs and reductions in aid.

The broader Southeast Asian region is actively diversifying its partnerships to avoid over-reliance on any single power and mitigate risks stemming from the intense rivalry between the US and China.

China has emerged as Southeast Asia’s leading external partner and the “most influential power” in six of the region’s 11 countries, according to a new study released Wednesday by the Lowy Institute. The Australian think tank’s report attributes this shift primarily to China’s sustained economic leverage, alongside a noted decline in United States influence, particularly impacted by President Trump’s tariffs and cuts to aid.

China’s Growing Influence

The Lowy Institute’s Southeast Asia Influence Index assigned China an overall score of 65 out of 100, placing it one point ahead of its closest rival, the United States. This lead designates China as the most influential power in Cambodia, Indonesia, Malaysia, Myanmar, Thailand, and Vietnam.

The report highlights China’s economic clout as its “strongest card” in the region, driving its increasing prominence across Southeast Asia. This growing influence comes as the broader region is actively diversifying its partnerships to avoid over-reliance on any single power and mitigate risks from the intense rivalry between the US and China.

Economic Dominance

China has solidified its position as the region’s primary economic partner. It serves as Southeast Asia’s leading export market, absorbing approximately 20 percent of all regional exports, compared to 16 percent directed to the United States. Furthermore, China is responsible for around 26 percent of the region’s total imports.

Beyond trade, China is also an increasingly vital source of private investment. Over the past decade (2015-2024), China accounted for 21 percent of new project investment in Southeast Asia. This marks a significant increase from the 13 percent recorded in the 10-year period leading up to 2017, when Japan held the position as the largest foreign investor in the region.

US Competitive Challenges

The report indicates that the United States is struggling to compete effectively with China in several Southeast Asian nations. These include Brunei, Cambodia, Indonesia, Laos, Malaysia, and Myanmar, where China’s economic engagement continues to deepen. The study points to President Trump’s tariffs and reductions in aid as factors that have eroded US influence across the region.

Key Takeaways

The Lowy Institute’s findings underscore China’s enduring economic leverage as the primary driver of its expanding influence in Southeast Asia. While the region seeks to balance its external relations, China’s robust trade and investment ties continue to solidify its position as the preeminent external partner, with the United States facing challenges in regaining its competitive edge in key sectors and countries.