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U.S. and Chinese tensions cause economic worries in the Indo-Pacific region

SCOTT SIMON, HOST:

Chinese and U.S. officials have been discussing a meeting possibly between President Xi Jinping and President Biden. If that happens, it would be their first in-person encounter since Joe Biden took office, and it could be a relief to countries around the region in Asia, where there's concern that the friction between the U.S. and China might upend decades of profitable stability. NPR's Julie McCarthy reports.

JULIE MCCARTHY, BYLINE: Singapore's Prime Minister Lee Hsien Loong has warned his country of a looming danger due to the deepening rift between the United States and China.

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PRIME MINISTER LEE HSIEN LOONG: Around us, a storm is gathering. US-China relations are worsening with intractable issues, deep suspicions and limited engagement between them. Furthermore, miscalculations or mishaps can easily make things much worse.

MCCARTHY: As he spoke, Beijing was winding up its largest military drills yet near Taiwan after House Speaker Nancy Pelosi's visit to the island. However, Singapore-based foreign policy and security analyst Aaron Connelly says countries in the region worry not about war but about the economic damage from an unchecked U.S.-China rivalry.

AARON CONNELLY: And it is more about how they manage that rivalry that matters.

MCCARTHY: Connelly says Southeast Asia has enjoyed ever greater prosperity as its economies have become more integrated with the United States and China. He says the recently signed U.S. CHIPS Act, aimed at reducing reliance on the region for semiconductors, could be seen as a sign that the U.S. is decoupling from an interconnected system that has helped to maintain stability.

CONNELLY: And if that world that we have lived in for the last 50 years and which has made this region much wealthier - if that is now coming to an end, that is a cause of deep concern for Singapore and the region.

MCCARTHY: By contrast, Philippine President Ferdinand Marcos Jr. expressed no alarm at China's recent show of force. Amid the clatter of shuddering cameras...

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PRESIDENT FERDINAND MARCOS JR: I do not think, to be perfectly candid...

MCCARTHY: Marcos told Secretary of State Antony Blinken in Manila this month that he saw no rise in the intensity of U.S.-China tensions. The Filipinos have gotten used to the strains. He did acknowledge the volatility. But Manila-based defense analyst Jose Antonio Custodio says the Philippines relies on its ally, the United States, to handle external threats while it battles its own local insurgencies. Custodio also says a policy that conceives of the Philippines as straddling the middle between China and the U.S., a friend of both, as Marcos puts it, is undercutting the country's readiness and is, quote, "delusional." In the South China Sea, he notes, China sank the Philippine fishing trawler and is ignoring an international ruling that protects maritime rights of the Philippines.

JOSE ANTONIO CUSTODIO: It's not caught in the middle. It's actually being victimized by China itself, regardless of our alliance with the United States.

MCCARTHY: Custodio says the Philippines dithers in contrast to neighbors like Japan and Korea, whose ties to the West are unambiguous. U.S. ally Australia is conducting a landmark review of its own defense capabilities as China strengthens. Australia's Defense Minister Richard Marles told Australian Public Broadcasting that China's military expansion is shaping the strategic environment of the region, arguably the world.

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RICHARD MARLES: And that buildup is not being done in a way which is transparent. It's not being done in a way which gives any sense of reassurance to its neighbors in the region. And it's of enormous concern.

MCCARTHY: Beijing's growing influence among Pacific Island nations and its aggressive policy toward Australia itself - Beijing slapped tariffs on Australian goods after a row over the origin of the coronavirus - raise the stakes. While China remains Australia's biggest trading partner, public opinion has taken a sharp turn against China. Natasha Kassam analyzes public opinion at the Lowy Institute, an Australian think tank.

NATASHA KASSAM: In Australia, up until 2018, 88% of Australians saw China as more of an economic partner to Australia rather than a security threat. This has now completely tipped the other way. Most Australians see China as a security threat, as a military threat, and there's almost no trust left in China.

MCCARTHY: Kassam says the Australian public's anxiety reflects a dilemma shared by many governments across the region.

KASSAM: Not wanting to give in to a bully and to an aggressor, which is how most Australians do see China at this point, and between not wanting to give up peace and security in our region.

MCCARTHY: Analysts agree countries don't really care who started the tense standoff in the Pacific or who has to back down. They just want it to end.

Julie McCarthy, NPR News.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

Julie McCarthy has spent most of career traveling the world for NPR. She's covered wars, prime ministers, presidents and paupers. But her favorite stories "are about the common man or woman doing uncommon things," she says.