US-China Rivalry and Digital Connectivity in the Indo-Pacific

The Joe Biden administration identifies China as the only competitor potentially capable of combining its economic, diplomatic, military and technological power to mount a sustained challenge to a stable and open international system. In the Washington policy community, there is a bipartisan consensus that the single most important challenge facing the United States in the 21st century’s international order is the rise of China. It is, therefore, less likely that US-China relations will go back to the status quo before the Donald Trump administration. There is also a debate about whether China has become a revisionist power under President Xi Jinping’s increasingly authoritarian leadership. Whether Xi’s leadership specifically presents a structural challenge to the US-led liberal international system remains an open question, but it is widely accepted that the rise of China’s economic and military power, as well as the speed of technological advancement, profoundly impacts every major US national interest.

This poses a fundamental question to US allies and partners in the Indo-Pacific, as it shapes the current and future trajectory of their relations with the US and China, respectively. Do these countries, particularly China’s neighbors, also consider the rise of China itself as a major threat to their national interests? Or do they consider mounting US-China tensions to be the major threat? Apparently, some Asian countries tend to view the growing US-China tensions as a major challenging factor more than the rise of China itself. It is striking that this clear gap in terms of their views on the rise of China has not been widely acknowledged and discussed in the international policy community — or at least in the Washington policy community.

Understanding this gap has important policy implications, as each country makes foreign policy decisions depending on what it views as a major national security threat. Depending on how each country views those threats, its policy outcomes will be different. First, it is important to understand that Asian countries have different approaches and assumptions about the US-China rivalry and the rise of China depending on their national security calculations. Second, identifying major areas where Asian countries have different approaches to China from those of the US will help bridge the gap between the US and Asian countries in terms of understanding their policy responses to the US-China rivalry.

In order to understand how Asian countries make different policy choices with regard to the rise of China, it is also important to understand that Washington’s characterization of its relationship with Beijing has fundamentally shifted from strategic partner to strategic competitor. In particular, the US and China will likely decouple mainly in the areas of advanced and emerging technologies, as each country seeks to be self-sufficient (or, at least, not dependent on the other) in terms of technologies critical to national security.​

The Biden administration is committed to increasing investments in the industries that are critical to national security, in order to enhance self-sufficiency in technology and innovation. Its Interim National Security Strategy Guidance outlines a framework for the US to “build back better” at home and abroad. In order to do that, the Biden administration says that the US should break down boundaries between domestic and foreign policy so that the American middle class can benefit from its foreign policy. The main narrative is that the US should strengthen its core competence at home in order to out-compete China through increasing investments in domestic infrastructure from foreign countries and companies.

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Biden’s actions during his first year in office have indicated that enhancing supply chain resilience in critical technologies, as well as promoting domestic manufacturing and infrastructure, are among his top economic and political priorities. So far, the Biden administration seems to pursue competition in the prioritized areas that are more crucial and directly related to US national security. This could be translated as an approach of “targeted decoupling”on a set of key priority areas to reduce dependence on China in industries related to telecommunication technologies, semiconductor chips and pharmaceuticals that are crucial to national security.1 Focused competition on targeted areas could leave room for engagement in the areas of global goods such as climate change, but it is less likely to see any tangible actions in terms of bilateral co-operation given current US domestic politics and the timeline for the mid-term elections in 2022.

Digital Connectivity

I focus in this article on digital connectivity efforts through a brief snapshot of Indonesia and Vietnam — two of the fastest-growing economies in Southeast Asia — to show how China’s neighboring countries in Asia are taking different trajectories in responding to the US-China rivalry. Both the US and China have been making efforts on digital connectivity in Southeast Asia. It is becoming a region of strategic importance to the US, because it is not only an engine of world economic growth facing increasing Chinese political and economic influence, it is also a region being transformed by rapid industrialization, urbanization and digitalization. As the adoption of digital technologies through developing infrastructure and related networks is fundamentally transforming the region, it is a top foreign policy priority for the US to build a trusted, value-driven digital and technological ecosystem along with communications and digital infrastructure networks.

While in-depth case studies are beyond the scope of this article, a brief snapshot explains how different countries in the region are taking different paths to meet high demand for digital-related infrastructure and networks in the context of US-China competition. The two countries tend to follow different trajectories in terms of approaching the US-China competition concerning their digital connectivity efforts. While both the US and China are investing heavily in the two countries’ telecommunications and relevant digital infrastructure, China seems to have more influence over Indonesia’s digital-related activities as part of its Digital Silk Road efforts in the region. On the other hand, Vietnam appears to be on a different trajectory in the sense that it is moving toward Washington’s orbit and trying to gain benefits from intensifying US-China competition. Where countries in the region stand with regard to their digital connectivity efforts has policy implications for the US to work with its allies and partners.

Digital Silk Road versus US Digital Connectivity and Cybersecurity Partnership

Since the Digital Silk Road (DSR) was introduced in 2015 in an official Chinese government white paper, it has served as a top policy priority for China’s leadership. The DSR is becoming central to the Belt and Road Initiative (BRI), President Xi Jinping’s signature international initiative to support the expansion and internationalization of its technology companies.

In late 2020, the Chinese Communist Party (CCP) Central Committee published proposals for the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and Long-Range Objectives to 2035.2 It emphasizes information and telecommunication technologies (ICT) as an essential driver to boost the innovation of domestic Chinese technology firms and make them more competitive and self-sufficient globally. This concept has been outlined clearly through China’s “dual circulation” strategy, which will enable China’s DSR to link countries closer to China via ICT and expand its influence over Southeast Asia through Chinese-built telecommunications and digital infrastructure, as well as fiber-optic terrestrial and submarine cable networks.3 The Eurasia Group’s report on the DSR emphasizes that the geopolitical and technology landscape has significantly changed due to the coronavirus pandemic and intensifying US-China strategic competition; major changes include the arrival of next-generation 5G networks, as well as the development of new applications using artificial intelligence, such as smart city projects.​4

The US government announced a multi-year Digital Connectivity and Cybersecurity Partnership (DCCP) in 2018 to support digital infrastructure investment, technical assistance and cybersecurity building in the Indo-Pacific. Since former Secretary of State Mike Pompeo announced it, the Department of State and USAID funded US$26.5 million through DCCP as “an initial investment to improve partner countries’ digital connectivity and expand opportunities for US technology exports.” Digital connectivity is an area where we see more continuity than discontinuity from the Trump administration to the Biden administration. The Biden administration has been making visible efforts for DCCP in Southeast Asia through the Blue Dot Network with Japan and Australia, e-commerce, and smart cities, as we have seen from the Fact Sheet on US Support for the ASEAN Outlook on the Indo-Pacific.​5

Indonesia vs. Vietnam

Indonesia has been more receptive to Chinese investment, which is why some experts argue that China views Indonesia as an anchor for its economic, digital and political pathway to enhance its influence over Southeast Asia. In June 2019, President Xi and Indonesian President Joko Widodo agreed to continue bilateral co-operation on smart cities and the digital economy as new drivers for economic development. Major digital connectivity efforts in Indonesia include:

• In the context of Indonesia’s contracts with Huawei, Nokia and Ericsson on 5G-related infrastructure and services, Huawei is ramping up its activities by assisting the training of 100,000 Indonesian workers in 5G technology, providing technological co-operation to Indosat Ooredoo, the second-largest telecom company in Indonesia, in the installation of 5G infrastructure in Jakarta and other regions, as well as offering its equipment at prices 20 percent to 30 percent cheaper than those of Nokia and Ericsson. Indonesia for the first time signed an agreement on the training of human resources in digital technologies with Huawei, which was renewed in September 2021.

• Tencent Cloud and Alibaba Cloud, two of China’s technology giants, also established their first data centers in Indonesia. Jakarta possesses unique characteristics to convey data in the Southeast Asia region in terms of accessibility and infrastructure. Although proximity to end-users was initially referred to as a disadvantage, the announcement of the construction of the second data center by Tencent indicated how Indonesia has “a robust and prosperous” digital potential.6

• Jakarta has accelerated its partnership not only with the Chinese private sector but also with Beijing. Both countries signed an MOU on cyber security capacity and technology in 2021. This is the first such MOU that the Indonesian government has signed with a foreign government. It covers the internet governance system, data security, and the cyberspace order by upholding principles of state sovereignty in cyberspace. The day after the MOU was announced, Huawei officially launched the ASEAN Academy Engineering Institute in Jakarta.7 This co-operative partnership is likely to stem from recent “emergence of digital authoritarianism in Indonesia, including the imposition of the Job Creation Law and the increase of digital attacks on critic group.”8 Jakarta announced a regulation to deploy censorship on digital content, which provoked denunciations from human-rights advocates.9

• Microsoft will establish its first data center in Indonesia to deliver trusted cloud services locally, with world-class data security, privacy and the ability to store data in country. Microsoft also announced plans to skill an additional 3 million Indonesians to achieve its goal of empowering more than 24 million by the end of 2021, through its long-established skills programs designed to create inclusive economic opportunities in the digital era.

Vietnam seems to be on a different trajectory from Indonesia, as illustrated by its co-operation with the US and its allies and partners. While China’s economic presence in Vietnam is still large through such companies as Tencent and Alibaba, Vietnam’s government and people are much more suspicious of Chinese intentions across the region. Both US Vice President Kamala Harris and Chinese Foreign Minister Wang Yi visited Vietnam in August and September 2021, respectively, which shows the strategic importance of Vietnam for both countries. However, public opinion shows that only 25 percent of Vietnamese respondents believe that China has exerted a positive impact on their country, whereas the number goes up to 85 percent for the US, according to the latest Vietnam Asian Barometer Survey (ABS) data. Major digital connectivity efforts in Vietnam include:

• Samsung Electronics made a capital investment of US$220 million to build an R&D center in Vietnam by the end of 2022. This is Samsung’s first R&D center outside South Korea, and also the largest of its kind by a foreign-invested business in Vietnam.

• In August 2020, the Japan-Vietnam Joint Committee on Co-operation in Industry, Trade and Energy Facilitating Digital Transformation and Industry 4.0 confirmed the importance of promoting further co-operation in digital technology applications and transfer as well as smart production between Vietnamese and Japanese enterprises.

• USAID and Vietnam’s Office of the Government (OOG) signed a Memorandum of Understanding on Oct. 13, 2020, to help OOG accelerate administrative reforms, enhance national inter-agency co-ordination and transparency, and further develop its e-government platform, the National Public Service Portal, which will improve access to information, benefiting both citizens and businesses.10

• On Dec. 1, 2020, Japan’s Ministry of Internal Affairs and Communications and Vietnam’s Ministry of Information and Communications discussed their further co-operation in the cybersecurity, 5G, digital transformation, and postal fields for the future at the fourth meeting of the Japan-Vietnam Joint ICT Working Group.

• The industrial zone and high-tech park authority in Danang granted an investment license for a semiconductor project worth US$110 million by Silicon Valley-based Hayward Quartz Technology in January 2020. The plant will specialize in the production of semiconductor materials.

•Intel has invested US$475 million in its Vietnamese assembly and testing facility, pushing the company’s total investment at the local site to US$1.5 billion to enhance production of Intel’s 5G product line.

• On April 7, 2021, Vietnam entered into a partnership with South Korea’s biggest internet company, Naver, as part of a national strategy that seeks to transform the Southeast Asian country into a global player in artificial intelligence by the start of the next decade. Naver Group has teamed up with Hanoi University of Science and Technology (HUST), one of the country’s top institutions, to launch the nation’s first AI research center in the capital.

• On Aug. 25, 2021, the US government announced the Workforce for an Innovation and Startup Ecosystem (WISE), a USAID project providing up to US$2 million to support Vietnam’s effort to transition from an economy dominated by labor intensive, low-skilled industry to a workforce better equipped to participate in the global digital economy.

• A co-operation agreement between the Vietnam Posts and Telecommunications Group (VNPT) and Nokia Corp on the upgrade and development of VNPT’s digital infrastructure was signed during a visit by top Vietnamese legislators to Finland. Under the agreement, the two sides will strengthen strategic co-operation to upgrade the capacity of backbone and core networks, develop 4G, 5G, and Internet of Things (IoT) platforms, continue commercial testing of 5G services, and co-operate in developing and applying new networking technology.

• On Oct. 1, 2021, USAID announced it would help Vietnam to launch its first guidebook on digital transformation for businesses, as well as to link its small and medium enterprises (LinkSME) project to support Vietnam’s Ministry of Planning and Investment to carry out the digital transformation of businesses from 2021 to 2025, as part of its efforts to help Vietnamese enterprises boost productivity, resilience and global reach.

How countries are differently responding to US-China competition has important policy implications for US policymakers. Secretary Blinken said that “the US relationship with China will be competitive when it should be, collaborative when it can be, and adversarial when it must be. The common denominator is the need to engage China from a position of strength.” As we have seen from the Quad, AUKUS, and the Biden administration’s Summit for Democracy, the US is trying to form different types of informal frameworks of multilateral co-operation to manage the rise of China through a co-ordinated response. The US administration aims to achieve an end-state, which I believe would be coexistence of the two economies in a single international system, through maintaining its relationship with China differently depending on the issues. In order to better engage with likeminded countries, it also has to seek different approaches depending on different countries and different issues.


1 Miyeon Oh and James Hildebrand, "Enhancing US-Japan cooperation on global supply chains," Atlantic Council, May 27, 2021,

2 “中共中央关于制定国民经济和社会发展第十四个五年规划和二〇三五年远景目标的建议” [Proposal of the Central Committee of the Communist Party of China on the Formulation of the Fourteenth Five-Year Plan for National Economic and Social Development and the Visionary Goals for 2035], Xinhuanet, Nov. 3, 2020,

3 Dai Mochinaga, "The Digital Silk Road and China’s Technology Influence in Southeast Asia," The Council on Foreign Relations, June 2021,

4 “The Digital Silk Road: Expanding China’s Digital Footprint,” Eurasia Group, April 8, 2020,

5 “Fact Sheet: U.S. Support for the ASEAN Outlook on the Indo-Pacific,” Office of the Spokesperson, US Department of State, Aug. 4, 2021

6 “Indonesia’s data centre driving force,” Jones Lang Lasalle, June 25, 2021,

7 Jayanty Nada Shofa, “Huawei Affirms Support for Indonesia’s Digital Transformation with New Academy,” Jakarta Globe, Jan. 26, 2021,

8 “Digitalisation in ASEAN,” ISEAS-Yusof Ishak Institute, December 2020,

9 “Indonesia adds another weapon to its speech-suppressing arsenal,” The Economist, Jun 5, 2021,

10 “USAID Launches Assistance to Strengthen Vietnam’s e-Government Development,” USAID, Oct. 16, 2020,’s-e-government-development

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