TOKYO - Prime Minister Dr Mahathir Mohamad today predicted China was unlikely to veer towards militarism, but warned Beijing already constituted an economic threat to its neighbouring Asian nations.

Mahathir made the remarks in his speech at a two-day international conference, which drew other Asian leaders, including Philippine President Gloria Macapagal Arroyo.

"We don't think that China would indulge in military adventures," Mahathir told the conference held at a Tokyo hotel.

"There is therefore no reason for Southeast Asia to fear China's military might," the Malaysian leader said.

But "China is an economic threat for Southeast Asia," he said.

"It is already a threat in terms of attracting foreign direct investments and it is going to be a threat to Southeast Asia's world trade," he said.

"We can expect Chinese products to shoulder aside not only the Japanese and the Korean but also the products of Southeast Asia.

"While military conquest or even threat is unlikely, economic domination is possible," he said. "It will not be total, but it can be sufficiently damaging for the economies of the Southeast Asian nations."

Loyal citizens

Mahathir stressed the need for concentration by Southeast Asian nations on exploring an original market in a bid to survive the stiff competitive challenge from China.

"The race is already on and Southeast Asian countries are already looking for niche products and business involving hi-tech and IT (Information Technology)," he said.

"Some Southeast Asian countries do have certain advantages, including geographical location, good legal and educational system, values and practices with which the international business community is comfortable," he said.

In the speech, Mahathir was at pains to avoid alienating his own overseas Chinese constituency, expressing the hope that Chinese people living in the region would play a major role in solving economic conflicts between Beijing and Asean countries.

"Today the people of Chinese origin in Southeast Asian countries are loyal citizens ... We do not believe that the Chinese in Southeast Asia have any wish to contribute towards China's overseas territorial ambitions or adventures," he said.

"They are good bridges for the economic cooperation between China and southeast Asia."