The Sino-Indian rivalry continues to play out. In December last year, India accused China of attempting to “unilaterally change the status quo” regarding their disputed Himalayan border following clashes in Arunachal Pradesh (South Tibet in China). The growing Sino-Indian competition has manifested in many areas, including competing military presence and infrastructure construction in disputed areas, governance of shared resources, space ambitions, and development projects. This is further exacerbated by both countries seeking to contain the influence and presence of the other, competing to expand into new areas of strategic interest alongside quests for dominance in neighbouring areas in South Asia and the Indian Ocean Region, the latter in which China aims to challenge India’s position as the regional naval hegemon.
Despite having much in common as rising powers with nuclear weapons and large populations alongside a shared ambition of multipolarity, India and China regard each other as a counterbalance to their aspirations. China aims to expand its presence and influence in South Asia for domestic and foreign policy goals, such as accessing a large market and the Indian Ocean. Meanwhile, India is concerned about China’s growing presence in the region, especially via the China-Pakistan Economic Corridor, which includes a port in Gwadar, Pakistan, as it poses a threat to New Delhi’s goals. As a result, India and China compete for regional strategic presence by expanding their rival spheres of influence.
Competition in South Asia and the Indian Ocean Region
Home to almost two billion people and some of the world’s most dynamic economies and important shipping routes, South Asia, is crucial to the geoeconomics and geopolitical ambitions of a number of countries, including China and India.
Sino-Indian competition has intensified throughout South Asia, as both countries vie for influence in the region and control of the Indian Ocean, one of the most important global maritime routes with choke points like the Strait of Hormuz and Strait of Malacca. Using the ambitious Belt and Road Initiative (BRI), Beijing has strengthened relations in South Asia through infrastructure investments and greater connectivity (via sea, road, and rail), which supports its ambition of building a community of common security in the neighbourhood. Most of India’s South Asian neighbours (aside from Bhutan) have joined the BRI, under which Chinese investment has grown considerably through soft power (such as education) and hard power, with China’s People’s Liberation Army (PLA) Navy having an increasingly greater presence in the Indian Ocean.
This competition is particularly evident in the financing, infrastructure projects, and connectivity plans in smaller South Asian countries. For instance, the Maldives has flip-flopped between supporting Beijing and New Delhi over the decade. In Sri Lanka, a major player in China’s Maritime Silk Road, China is one of Sri Lanka’s top trading partners (along with India) and one of its largest creditors. In Bangladesh, another key point in China’s Maritime Silk Road, China is currently the country’s biggest trading partner and was the site of a recent midnight stopover. Meanwhile, China has granted Nepal, another BRI signatory, access to some of China’s seaports, and Chinese experts have begun a feasibility study into the proposed trans-Himalayan 75-kilometre (km) railway from Kerung (Southern Tibet) to Kathmandu (Nepal).
India has become increasingly wary of China’s presence and influence in South Asia and beyond, fearing that it may significantly impact New Delhi’s own sphere of influence and potentially encircle India with a ‘String of Pearls’ (similar to Beijing’s fears of the ‘Malacca Dilemma’). This is particularly true in the Indian Ocean, as India views it as ‘India’s Ocean’.These concerns are exacerbated by China’s establishment of a military base in Djibouti and Sri Lankan authorities allowing a Chinese military surveillance ship to dock at the island’s Hambantota port. In this context, China’s growing presence and influence in the region has placed Beijing in competition with New Delhi, thereby pushing New Delhi to reconsider its foreign policy and engagement in the region.
In response to this perceived threat, India has implemented the ‘Neighbourhood First’ Policy to counter Chinese commercial activity in South Asia. This policy is further supported by the ‘Act East’ Policy, under which India seeks to improve relations with Southeast Asian countries and the vast Asia-Pacific region. In addition, Indian conglomerates like the Adani Group have greatly increased their presence in Asia (and beyond), supported by India’s concessional loans for “strategically important infrastructure projects abroad”.
In addition to these policies, India has also engaged in ’vaccine diplomacy’ with countries in the region(excluding Pakistan), and extended 37 lines of credit worth US$14.27 billion and covering 162 projects, to five countries in the region – Bangladesh, Maldives, Myanmar, Nepal, and Sri Lanka. India has also invested in infrastructure projects (such as energy and connectivity projects) and signed bilateral agreements with Kathmandu, provided lines of credit worth $8 billion to Dhaka. New Delhi has also deferred import payments and granted almost $4 billion in loans and grants to Colombo. By mid-2021, India was also undertaking 45 major development projects worth more than $2 billion in the Maldives.
Implications for smaller countries
For South Asia’s smaller states, the BRI and opportunities for greater engagement with China can provide a (potential) counterweight to Indian regional hegemony. In this context, the growing Sino-Indian rivalry in Asia against a backdrop of systemic China-United States (US) competition means opportunities to maximize the strategic competition for economic benefits by playing China and India against each other.
While India may have long held the upper hand in South Asia as the traditional hegemon, China’s rise and concomitant growing sphere of influence in the region offers the smaller countries a viable alternative, particularly for countries which are concerned about the asymmetry of power in India’s favour. In the past decade, China has committed or invested over an estimated $150 billion in the economies of Bangladesh, the Maldives, Myanmar, Pakistan, Nepal and Sri Lanka (and Afghanistan). China is now the largest overseas investor in the Maldives, Pakistan, and Sri Lanka. Meanwhile, countries traditionally close to India, like Bangladesh and Nepal, have attempted to find a balance between engaging with Beijing and New Delhi.
For Sri Lanka and the Maldives, Chinese interest has resulted in greater strategic autonomy and diversification. Yet, in the case of the Maldives, despite significant Chinese investments in the nation and media reports highlighting China’s investment in the country, research suggests that it is Indian companies rather than Chinese companies which acquired the larger infrastructure and development projects.
Nonetheless, neither China nor India’s efforts to increase their spheres of influence are without challenges. For China, the BRI has faced significant criticism for ‘predatory’ loans and for trying to legitimize China’s model of government and economic development to the rest of the world. Some note that expanding trade deficits in China’s favour, alongside the absence of strong institutional mechanisms to protect the debt sustainability of borrowing and the scale of China’s lending, do pose risks. Nevertheless, others argue that China’s “debt trap” is a myth, and based on available data, fears of Chinese investment and related projects (such as in the Maldives) are exaggerated.
India’s foreign policies have also come under scrutiny. Aside from territorial disputes and New Delhi’s inconsistent engagement in the region, there is also distrust of India and concerns over asymmetrical power in India’s favour from smaller neighbours. This leads to fears that India’s rise may result in New Delhi using regional cooperation mechanisms as part of broader efforts to achieve regional hegemony. This is made worse by anti-India sentiment in South Asia, including in Bangladesh, Nepal, and the Maldives, where India has been accused of meddling in their domestic affairs. For countries like Bhutan, close relations with New Delhi have made attempts to strengthen bilateral ties with other countries challenging.
With the Sino-Indian rising competition extending throughout the region with both Asian powers seeking to reduce the influence of the other, South Asia’s smaller states try to use the Sino-Indian rivalry to their advantage by pursuing their foreign policy and economic goals as well as securing their independent interests. They may also try to balance China and India but end up drawn into more regional and global geopolitics, facing pressure from all sides. As the example of Nepal shows, achieving a balancing act is difficult.
Other factors like domestic political elections in the smaller states, stronger US influence in the region alongside (in)direct Russian and Japanese influence could play a more significant role in shaping both Sino-Indian rivalry and related dynamics as well as the response by South Asian countries to this rising competition and regional geopolitics.
Although the Sino-Indian rivalry has the potential to destabilize South Asia and beyond by undermining peace and socio-economic development, opportunities for cooperation and dialogue with Beijing, including through regional cooperation mechanisms (such as BRICS, made up of the world’s five leading emerging economies and potentially more economies soon) and related forums, should not be overlooked. However, New Delhi may also seek stronger engagement with the other members – Australia, Japan, and the US – of the US-led Quadrilateral Security Dialogue (QUAD) and elsewhere, such as Egypt and others, to create a West Asian system.
In an era of bifurcation of the global order, whereby countries will be forced into siding with the West or a China-Russia partnership, India’s rise and potential choosing of sides, or seeking to become a ‘third pole’, will impact not only the Sino-Indian rivalry but also the Indo-Pacific and much of the world. However, it remains to be seen in the long-term whether the US and India will work together to reduce China’s growing influence against the Sino-Russian partnership as part of broader efforts to “contain” China or if decreased tensions between the US and China will result in India treading carefully between both countries without aligning itself to either the US or China. Yet, with India and China facing an increasingly complex external geopolitical environment combined with a number of internal concerns (like economic issues and water insecurity), both countries may end up seeking coexistence with cooperation and rivalry.