August 2023

Influence through commerce

The Democracy Forum’s latest virtual discussion focused on the nature and impact of Beijing’s growing inroads into South Asia

As China’s economic expansion in South Asia continues through strategic infrastructure projects such as the Belt and Road Initiative, London-based NGO The Democracy Forum hosted a July 26 virtual seminar titled ‘China’s growing inroads into South Asia’, at which a panel of experts assessed the nature and impact of China’s activities in the region.

This key geopolitical issue has been given added prominence, noted TDF President Lord Bruce, by the recent ASEAN conference in Indonesia, during which Indonesian foreign minister Retno Marsudi highlighted the systemic difficulties undermining trust between member states and the ‘sharpening rivalry’ that continues to divide the region. With the region also hosting numerous potential flashpoints, this challenge is becoming more complicated, and Marsudi encouraged participants to ‘strengthen preventative diplomacy’. Of the eight countries forming the South Asian bloc, all are undoubtedly affected by China’s growing inroads in this region, with the BRI in South Asia involving subsidiary programmes such as the China-Pakistan Economic Corridor (CPEC); the Bangladesh-China-India-Myanmar Economic Corridor (BCIM); the Trans-Himalaya Corridor; and cooperation with Bangladesh, Sri Lanka, and the Maldives under the 21st century Maritime Silk Road.

TDF webinar piece for Aug 2023
Panellists at TDF’s July 26 webinar, ‘China’s growing inroads into South Asia’

However, it is the relationship between India and China which continues to dominate any calculation of the balance of power in South Asia, said Lord Bruce, as each pursues policies aimed at building military, economic and political hegemony across the region. Attending the Jakarta forum, Indian foreign minister Subrahmanyam Jaishankar held a meeting with recently re-appointed Chinese foreign minister Wang Yi, at which he addressed the military tension along the Line of Actual Control in Ladakh, where frontier forces sustained many casualties following clashes in June 2020 and January 2021. As a prerequisite to returning to normalcy in bilateral relations, Jaishankar made it clear that China needs to demilitarise the LAC to prevent flashpoints from recurring. Lord Bruce also referenced a research paper published by the Stockholm Center, which details the methods used by China in pursuing its foreign policy, where its diplomats downplay any friction with India while the PLA ‘maintains protracted and calculated tensions over…disputed boundaries’. Thus the recent outbreak of aggression on the LAC provides clear evidence of a twin-track strategy, where in the first instance the Chinese government has attempted to ‘derail the boundary negotiation process as part of a calculated conflict that requires constant diplomatic attention from India…potentially distracting the country from other priorities in the region’, and secondly, where the CCP  ‘attempts to create a strategic divide between India and other South Asian countries…by trying to create dependencies on Chinese investment’.

The relationship between India and China continues to dominate any calculation of the balance of power in South Asia

Dr Sadia Sulaiman, an Assistant Professor at Islamabad’s Quaid-i-Azam University, addressed efforts to expand the China-Pakistan Economic Corridor project into Afghanistan, assessing both the potential benefits and challenges for all the stakeholders. While CPEC was initially expected to offer diverse economic, health and education opportunities – a ‘Marshall Plan’ for the Pakistan economy – today it is fraught with delays due to China’s reluctance to reschedule Pakistan’s debt, as well as prospects of civil war in Afghanistan. Although expanding the project could be good for Afghanistan, it faces four core challenges, namely the complex geopolitical scenario of the country and region, with numerous bilateral and multilateral tensions fomenting mistrust and hence preventing greater connectivity between states; persistent domestic instability in Afghanistan itself – including economic, political, and humanitarian crises, as well as rights abuses – which has led to the international community’s lack of engagement with Afghanistan (including even Pakistan, previously a main Taliban supporter); political and economic instability within Pakistan; and China’s lack of experience in engaging with values-based socio-economic situations in the region.

Beijing consistently underestimates India

If CPEC could bring a trickle-down effect for the people of the region, said Sulaiman, and were to be implemented in the true spirit in which it was instigated, it could reap real benefits in the fields of with health, education, transportation etc. However, she concluded, it has yet to be seen how it will unfold in the face of the aforementioned challenges.

China’s infrastructure diplomacy and growing influence in Sri Lanka was the focus for Asanga Abeyagoonasekera, a Senior Fellow and Executive Director of the South Asia Foresight Network (SAFN) at the Millennium Project in Washington DC.  He wondered at the extent of Beijing’s involvement in Sri Lanka’s ongoing political and economic crisis, arguing that, while China was not the only cause, it was a considerable one, due to three main factors: unsustainable projects, such as the Hambantota Port, with no revenue to repay large Chinese loans at high interest rates; no proper oversight, given the informality of the processes, which helps to capture political elites; and China’s ‘strategic trap’ in Sri Lanka, including funding for Sri Lanka’s corrupt political parties, military and security assistance, and reciprocal support regarding both countries’ human rights abuses. So, in fewer than two years, Sri Lanka has shifted from a democratic to an autocratic model.

CPEC was envisioned as a ‘Marshall Plan’ for the Pakistan economy

In Sri Lanka’s domestic political environment, large numbers of military appointments in the government has allowed for heavy militarisation. This is supported by only one country – China. Abeyagoonasekera also addressed how nations such as Sri Lanka, Nepal and Pakistan either support China on its stances re. Xinjiang policies, the Hong Kong National Security Laws, the South China Sea, etc, or remain neutral, since their dependence on, or indebtedness to, China means they do not take the route of values-based policies. So China has managed to gain influence in the region through its capture of political elites and soft power diplomacy.

Considering China’s influence, past and present, in South Asia’s two micro-states, Bhutan and the Maldives, was Aditya Shivamurthy of the Observer Research Foundation’s Strategic Studies Programme. While the Chinese presence in South Asia is not new, he said, its influence there has magnified since 2000 – except for in Bhutan, which has a long history of reluctance to develop a deep relationship with China, with alarms bells set off over Mao Zedong’s ‘Five Fingers’ policy, leading Bhutan to draw closer to India. Shivamurthy also addressed Chinese tactics in Bhutan, using its economic and military leverage, while, vis-à-vis the Maldives, he highlighted its important position in the Indian Ocean’s sea lines of communication, and how, given the significant relationship it has always enjoyed with India, growing Chinese inroads into the Maldives could offer China a chance to counter India’s influence. China has given loans to Maldivian businessmen against sovereign guarantees from the Maldivian government, thus indicating that Beijing is trying to bully the smaller South Asian countries. By making inroads into tiny states such as Bhutan and the Maldives, which pass through crucial sea lines of communication, Beijing has the opportunity to increase its pushback against large South Asian nations such as India.

Continuing the theme of smaller South Asian states, Raffaello Pantucci, a Senior Fellow at RUSI, stressed the under-appreciated fact that, small as they are, they are still countries and, as such, they all have a UN vote like every other. For this reason China is increasingly turning its attention to them, so it can build a larger body of nations that will vote for it, or at least not vote against it, at the UN, thus helping it to build greater strength and posture on the world stage. Pantucci stressed that China still venerates the United Nations as a structure of global order, and noted that its key foreign policy concern is still the United States – everything else secondary, as China looks at all its other relationships through the lens of the US.

On the subject of other South Asian countries, Pantucci believed that China should make an effort to invest more in Afghanistan’s infrastructure, as most of its economic activity there is not driven by the state, but by private business. So, while it talks a big game about bringing Afghanistan into the BRI etc, in reality Beijing’s aid to Afghanistan is far outstripped by that of Washington, as China is hesitant to get entangled in a commitment to Afghanistan, given its complex political and economic situation. This also plays out across the wider region – for example, despite its ‘all weather’ relationship with Pakistan, in reality problems that China has encountered there on the ground, and fear that Pakistan might be working with the US to undermine China, mean that lack of trust and a high level of paranoia affects its relationships. As for India, Pantucci argued that Beijing consistently underestimates India, regarding it as not much of a competitor. But this, he said, is a massive miscalculation. While China is a big player and an important economic partner for several South Asian countries, he concluded, it is not a region of main concern for China – the US is.

Rounding off the event, TDF Chair Barry Gardiner MP spoke of the importance, in the Chinese psyche, of not ‘losing face’, and how Beijing harks back to a time when its relationship with the US was much warmer, as demonstrated by President Xi’s recent hosting of Henry Kissinger in Beijing. This contrasts with the current administration’s Janet Yellen and John Kerry, who were not accorded the same honour – that is, made to lose face – since this US government is seen as more hostile to China.


Neville de Silva is a veteran Sri Lankan journalist who held senior roles in Hong Kong at The Standard and worked in London for Gemini News Service. He has been a correspondent for the foreign media including the New York Times and Le Monde. More recently he was Sri Lanka’s Deputy High Commissioner in London