China’s South Asia Policy in the ‘New Era’

Abstract

In recent years, there has been a rise in China’s profile in South Asia. It is no surprise that Chinese experts have used terms, such as ‘new springtime’ in China–South Asia relations, ‘rediscovery of the strategic status of South Asia’ and ‘most relevant region with regard to the rise of China’. The objective of this article is to examine the nature and drivers of China’s South Asia policy, especially under the leadership of Xi Jinping vis-à-vis China’s policy towards the region in the past. It is not sufficient to only examine international factors or foreign and security policy in the context of the neighbouring region, such as South Asia. China’s ‘domestic periphery’ presents a significant threat to its national security. These areas are linked to neighbouring countries of South Asia and Central Asia.

The announcement by Chinese President Xi Jinping of a ‘New Era’ or ‘third era’ in the history of Communist Party of China (CPC) represents a China which is known for its dictum ‘striving for achievement’ (fenfa youwei). This is different from the second era’s policy of ‘keeping a low profile and biding the time’ proposed by Deng Xiaoping. Of course, the name of Mao Zedong is synonymous with the first era beginning from 1949.

Keywords

China South Asia India,domestic international new era

Chinese Discourse on Neighbourhood and South Asia

The official Chinese sources do not specifically define the geographical extent of China’s neighbourhood, which has been cited by many as land and maritime areas adjacent to China. However, Chinese experts have written about the issue. Yuan Peng from the China Institutes of Contemporary International Relations (CICIR) defines China’s neighbourhood in terms of three rings. The ‘inside ring’ consists of countries, which share land borders with China. The ‘middle ring’ consists of maritime countries, which extends from the inside ring and includes areas in the West Pacific to the Indian Ocean and even parts of Central Asia and Russia, which do not share land border with China. The outer ring extends to Africa, Europe and America (quoted in Swaine, 2014). Scholars like Qi Huai and others provide more explicit definition in terms of sub-regions. These are located in the bordering and nearby regions. These are (a) Northeast Asia, (b) Southeast Asia, (c) South Asia, (d) Central Asia, (e) West Asia and (f) the South Pacific (Qi, 2014). There are other Chinese scholars such as Professor Yan Xuetong who prefers the term ‘periphery’ and defines it as East Asia, Russia, Central Asia, South Asia and Southeast Asia (quoted in Thomas, 2015). The re-definition of China’s neighbours in the context of ‘region’ is the current discourse in the era of ‘rising China’.

The rise of China has been debated and analysed from various perspectives. The Monroe Doctrine has been cited by scholars like Wang Yiwei to explain that China needs to focus on neighbouring countries because they are important in the context of its rise (Y. Wang, personal communication, December 25, 2013). The fact remains that China is surrounded by 13 continental and six maritime neighbours. Citing history, scholars like Zhang Yunling note, ‘China suffered if neighbouring areas are unstable and China benefited if those are stable and friendly’ (Zhang, 2008). Moreover, the leadership of Xi Jinping has attached greater importance to neighbourhood diplomacy while linking it with the People’s Republic of China (PRC’s) ‘two centenary goals’ and the Chinese Dream.

In the past, some scholars ranked South Asia third in importance after the Northeast and the Southeast Asian regions in China’s Asia policy (Malik, 2001). They argue that China has put economic interests as the main issue in its relations with many countries and regions, such as South East Asia, Europe and Africa since late 1970s. However, the relation between China and South Asia was quite traditional and focused on military and political issues (Ye, 2008). In other words, China considered South Asia as an important region for security reasons.

Recent Chinese literature suggests that China is rediscovering the importance of South Asia. The strategic significance of South Asia in China’s foreign and neighbourhood policy has increased in the New Era. The new initiative proposed by President Xi Jinping, namely, Belt and Road initiative (BRI) reinforced the strategic importance of South Asia, which is termed by a Chinese scholar as the ‘rediscovery of the strategic status of South Asia’ (Peng, 2014). An expert from the China Institute of International Studies (CIIS) has emphasised that China and South Asia ushered a ‘new springtime’ in their relations (Lan, 2014, p. 154). China has conducted frequent high-level exchanges with all South Asian countries. The strategic significance of South Asia in Chinese foreign policy has been noted ‘With the growth and development of India, the withdrawal of foreign troops from Afghanistan and China’s Western Development Strategy entering a new phase, South Asia has become an area of critical strategic significance to China’ (Lan, 2014, p. 155).

Further, an expert from CICIR has noted, ‘As a matter of fact, South Asia is not only the most volatile region around China, but also the most relevant region with regard to rise of China’ (Hu, 2010, p. 291). China’s South Asia policy is aimed to safeguard security and development of China’s western regions bordering South Asia. All these factors need to be analysed in proper context.

China’s Domestic Challenges and Neighbouring Countries in South Asia

Broadly, it can be said that China faces three different kinds of internal challenges. First challenge is the product of the political economy which China embraces in post-Mao China. The economic rise of China is an important development of the twenty-first century. China experienced a near double digit growth for over three decades, it became the ‘manufacturing hub’ of the world economy. However, the period of high-growth rate (1978–2011) was over and the Chinese government has committed itself to a ‘new normal’. The economy is currently undergoing crucial structural transformations and it witnessed a relatively slow growth of 7.3 per cent in 2014, and less than 7 per cent since 2015. The Chinese model of growth created wealth in China; however, it also resulted in creating serious developmental and social problems much evident in regional disparity as well as rising rural–urban inequality. While presenting report to the 19th Party Congress (October 2017), President Xi stressed, ‘the principal contradiction facing China is the unbalanced and inadequate development to meet the people’s ever-growing needs for a better future’ (Xi, 2017).

The second challenge comes from the minority areas like Xinjiang and Tibet. There are 55 recognised minority nationalities in China that account for 8.4 per cent of China’s total population. The significance of China’s minority goes beyond its population size. Though small in numbers, they occupy up to 64 per cent of China’s total land area. The disturbances and riots in Tibet in March 2008 and in Xinjiang in July 2009 signify the magnitude of the problem that haunts country’s ethnic policy. South Asian countries share border with Tibet and Xinjiang regions of China. The political and security instability of South Asian countries has palpable spill-over effects towards western region of China in particular. It has been reported that the East Turkmenistan Islamic Movement (ETIM) and other anti-China terrorist groups have found safe haven in Pakistan–Afghanistan tribal regions (Hu, 2010). This has been seen as a serious threat to the national security of China. China’s promulgation of a series of laws, especially the new National Security Law (July 2015) and the country’s first Anti-Terrorism Law (December 2015) were domestic measures to counter these threats to national security. The third challenge comes from instability or conflict in the neighbourhood like problems in Pakistan and Afghanistan. There is also a linkage between the second and third challenges facing China. Therefore, Xinjiang and Tibet factors play a significant role in shaping China’s policy towards the neighbouring countries in South Asia.

Western Development Strategy and South Asia

The Chinese government declared Western Development Strategy (Xi bud a kai fa) in November 1999.¹ The Western Development Strategy covers six provinces (Gansu, Guizhou, Qinghai, Shaanxi, Sichuan and Yunnan), five autonomous regions (Guangxi, Inner Mongolia, Ningxia, Tibet and Xinjiang) and one municipality (Chongqing).

The Chinese policymakers claimed that the implementation of the Western Region Development Strategy is an important move to carry out Deng Xiaoping’ strategic thinking of eliminating regional disparities gradually, consolidating the unity of ethnic groups, ensuring border safety and social stability (Golley, 2007). There have been various interpretations of the strategy. Some scholars have even questioned ‘whether the goal is to avert the separatist tendencies that exist among some of the ethnic minorities, particularly in Tibet and Xinjiang, or to extract natural resources in order for China to achieve a higher degree of energy and resource independence’ (Golley, 2007). The government sources suggest that the main components of the strategy include reducing regional inequality by increasing per capita income and development of infrastructure in the western region.

The Western Development Strategy was also important from the perspective of China’s national security. The Chinese government was worried about security since two-thirds of China’s international border touches central and western regions and 20 out of 55 minorities live in the western region. The fear of terrorism and separatism was also evident. The rise of religious fundamentalism and terrorism in Pakistan and Afghanistan as well as Central Asia might have spill-over effects in minority regions of China (quoted in Debata, 2007).

Developing China’s western regions has significant economic and geopolitical implications on China’s neighbouring countries. The territorial advantages of western region of China include a long border. The borderline of Xinjiang is around 5,000 km; that of Tibet is around 2,500 km and that of Yunnan is 4,060 km (Chen, 2004). One of the main thrusts of Western Development Strategy is to increase connectivity to western regions from inside China and from the neighbouring countries. In Xinjiang, the government has undertaken massive transportation infrastructure projects to build new highways to connect the Xinjiang region with Russia, Central Asia and South Asia. In Tibet, the government has undertaken transport infrastructure development with neighbouring country—Nepal.

Instability and Conflict in Pakistan–Afghanistan Region

Persistent instability and turbulent security situation in Pakistan and Afghanistan has created security challenges for South Asia as a region. The situation in Afghanistan is volatile. China’s strategic objective in Afghanistan is linked with a host of factors including: its special relations with Pakistan, stability in Xinjiang and the desire to play a larger regional role. Developments in Afghanistan coupled with growing instability in Pakistan are likely to cast a shadow on China’s western region of Xinjiang (Sharma, 2010). Professor Li Xiguang from Tsinghua University notes, ‘Any military policies and actions taking place in the region must serve the interests of national security, national unity, social stability, economic development and regional cooperation among the three countries: Pakistan, China and Afghanistan’. However, there is not much problem on this issue as China wants to tackle the Taliban problem through Pakistan, which is the source of terrorism in the region.

China’s Xinjiang problem is increasingly being connected with the network of cross-border and trans-national terrorism as cited in the White Paper on ‘Development and Progress in Xinjiang’ released by the Chinese government in September 2009. The extent of violence in Xinjiang, especially since the July 5 riots of 2009, indicates the magnitude of the ethno-religious separatist problem in the Xinjiang region. China is concerned about separatist forces, especially the ETIM, which took claim for some terrorist attacks within China. Therefore, China has set the ETIM as the major target when seeking international cooperation to counter terrorism (Xinhua, 2015).

BRI and Domestic Drivers

BRI is a strategic project of China to acquire a dominant global status through the implementation of economic, energy and connectivity related projects in countries of Asia, Africa and Europe.

The reform era saw growth concentrated in eastern or coastal areas in China, the issue of regional disparity and inequalities in income and wealth proved that the distribution of growth is not fair. Some scholars even termed it as a crisis. It is suggested that if the problem is not solved, the ‘middle-income trap’ could be a reality. In this background, it is logical that the document titled ‘Vision and actions on jointly building silk road economic belt and 21st-century maritime silk road’ (hereafter Vision Document) issued by the Chinese government in March 2015 noted:

In advancing the Belt and Road Initiative, China will fully leverage the comparative advantages of its various regions, adopt a proactive strategy of further opening-up, strengthen interaction and cooperation among the eastern, western and central regions, and comprehensively improve the openness of the Chinese economy. (NDRC, 2015)

This highlights the significance of BRI from China’s domestic perspective.

In February 2017, Yang Jiechi confirmed that BRI ‘adheres closely to China’s regional development strategy, new urbanisation strategy and opening up strategy and will provide a strong boost to China’s all dimensional opening up’. Therefore, benefit to China’s domestic economy remains a major driver for BRI. Moreover, BRI offers opportunities for China’s economic restructuring, industrial upgradation as well as ‘going global’ strategy. In the era of economic slowdown in China, the idea is to create new markets and get economic benefits by building infrastructure and industrial corridors as well as transportation and communication networks in the region. It is mainly about creating new market for Chinese companies (Kumar, 2017).

China’s State Information Center released a report titled Belt and Road Big Data Report 2017 in Beijing on 12 October, 2017.² According to the report, the five most active participants of the BRI in 2016 were Guangdong, Fujian, Shanghai, Zhejiang and Shandong. Among the top 50 enterprises taking part in the BRI among the provinces/regions in China, most came from three major cities/provinces: (a) Beijing, (b) Guangdong and (c) Shanghai. This evidence endorses that less developed regions of China or the western region of China has not been a major beneficiary from the BRI. This could be seen as a challenge to China’s regional development strategy. Thus, it can be said that China’s domestic context cannot be ignored while analysing BRI in the regional context of South Asia.

Evolution of China–South Asia Policy and the Emerging Discourse

China’s association with South Asian countries can be traced back to the 1950s. Although Mao was known for his ‘lean to one side’ policy, the Five Principles of Peaceful Coexistence (or Panchsheel) was formulated by China and India in 1954. This served the Chinese purpose as the world was divided into two camps and non-socialist countries were apprehensive about the emergence of the PRC. China was able to form relationship with non-socialist countries on the basis of Five Principles. It was after the Asian-African Conference at Bandung that Five Principles became widely used by China in Asian politics. Panchsheel has been quoted as the principle/core policy of China towards its neighbours since then.

Pakistan was the first Muslim country to recognise PRC in January 1950, although formal diplomatic ties were established on 21 May 1951. However, there was no high-level contact until Chinese Premier Zhou Enlai met Prime Minister of Pakistan, Mohammed Ali Bogra during the Asian-African Conference at Bandung in April 1955.³ Both leaders agreed to cooperate to increase their leverage against New Delhi (Singh, 2003). The China–Pakistan partnership developed with real momentum after the 1962 Sino-Indian border conflict. The main objective or guiding principle of the Chinese foreign policy was to change the distribution and relations of power in South Asia to the disadvantage of India in the name of regional stability.

China analysts regarded China’s South Asia policy before 2000 as ‘single dimensional’ and ‘limited’. To realise this strategy, China established very close relationship selectively with certain South Asian countries. Significantly, China’s South Asia policy was based on its ‘all weather friendship and all dimensional cooperation’ with Pakistan from the 1960s till 1990s. Chinese scholars, such as, Ye Hailin acknowledge that the strong relation between China and Pakistan was formed after India–China border conflict in 1962 and India–Pakistan war in 1965 (Ye, 2008). China’s special partnership with Pakistan was important in terms of geopolitical considerations in South Asia. China’s transfer of nuclear weapon and missile technology to Pakistan in the 1980s and 1990s is well known.

China used Pakistan to meet its broader foreign policy objectives. Pakistan was instrumental in facilitating Henry Kissinger’s secret visit to Beijing in 1971. It was a frontline state against the Soviet in Afghanistan not just for the USA, but also for China. Pakistan also provided a gateway to West Asia for China and helped in keeping Taliban and other terrorist groups out of China’s troubled Xinjiang region (Bhalla, 2011).

However, with the rapprochement in India–China relations, there was some rethinking in China about its South Asia policy in the 1990s. While addressing a special session of the Pakistani Senate on 2 December 1996, Chinese President Jiang Zemin said, ‘If certain issues cannot be resolved for the time being, they may be shelved temporarily so that they will not affect the normal state-to-state relations’ (Jiang, 1996). He was referring to the Kashmir issue between India and Pakistan. In the past, China had sided with Pakistan on the issue. This statement has been quoted by many experts to explain that this was the beginning of a phase when China started to show a kind of neutrality on sensitive issues between India and Pakistan. Nevertheless, the bilateral relationship between China and Pakistan was continuously strengthened. However, a distinct and different approach to South Asia by China has been much evident since the beginning of the twenty-first century.

Evolution of Principles to Frame a Neighbourhood Policy in the New Era

In November 2012, President Xi Jinping first talked about the idea of ‘Chinese Dream’ and defined it as the ‘great rejuvenation of the Chinese nation’. In May 2015, China’s Military Strategy stressed, ‘the Chinese dream is to make the country strong. China’s armed forces take their dream of making the military strong as part of the Chinese Dream’ (White Paper, 2015). The discourse on the Chinese Dream is not new; however, ‘the current definition of the Chinese Dream stands in stark contrast to the “century of humiliation” discourse, indicating a generational shift in China towards the country’s more assertive policies and larger presence abroad’ (Bhalla & Kumar, 2018). This has created anxieties among neighbouring countries.

A conference on the diplomatic work with neighbouring countries was held in Beijing on 24–25 October 2013. This was an extremely important conference held by the CPC Central Committee with the goal of guiding China’s relations with neighbouring countries under the fifth-generation leadership. In this conference, President Xi Jinping pointed out, ‘the strategic goal of China’s diplomacy with neighbouring countries is to serve the realisation of the two “centenary goals” and the great rejuvenation of the Chinese nation’ (Xi, 2013). His statement at the high-profile conference made the linkage between Chinese goal of economic development and geopolitical considerations in its neighbourhood policy more evident.

While addressing the fourth summit of the Conference on Interaction and Confidence Building Measures in Asia (CICA) on 21 May 2014, President Xi Jinping noted, ‘it is necessary to advocate common, comprehensive, cooperative and sustainable security in Asia’ (Xi, 2014, May). This was interpreted as ‘Asia for Asian’ by experts and media. The concept has received very little support. While speaking at the Boao Forum for Asia Annual Conference in March 2015, President Xi elaborated his idea of a community of common destiny.⁴ He noted that to build a community of common destiny, we need to make sure that all countries respect one another and treat each other as equals. However, in practice China has not followed this principle. In January 2017, China issued a White Paper titled ‘China’s Policies on Asia-Pacific Security Cooperation’. The white paper clearly warned small and medium-sized countries. It notes, ‘small- and medium-sized countries need not and should not take sides among big countries’ (White Paper, 2017). It is evident that China favours hierarchal relations in international relations and such a policy has alienated many of its neighbours.

In recent past, President Xi Jinping has talked about building a community of common destiny, especially while referring to China’s BRI. Professor Yan Xuetong, identify BRI as the key to realise Xi Jinping’s vision to ‘turn China’s neighbourhood areas into a community of common destiny’ (quoted in Thomas, 2015).

While speaking at the Central Conference on Work Relating to Foreign Affairs on 22–23 June 2018, President Xi stressed on enhancing ‘strategic confidence’ based on socialism with Chinese characteristics. This is in line with the message coming out from the 19th Party Congress that China has arrived on the world stage. Many statements by the Chinese leaders after the Party Congress have endorsed this. State Councillor and Foreign Minister Wang Yi said that China has ‘achieved a remarkable transformation—it has stood up, grown rich and is becoming strong. A sea change has taken place in China’ (Wang, 2018). The call to enhance strategic confidence needs to be understood in this context.

The combination of the Chinese Dream, the community of common destiny, strategic confidence and the BRI has spelled out an alternative geopolitical, geo-economic and ideational framework for China. However, this has also created concerns among neighbouring countries as some of the Chinese actions have fuelled apprehensions especially among countries which have land or maritime dispute with China.

International Factors in the New Era

Long-standing Issues: Land and River borders

It needs to be noted that China’s policy towards South Asia is linked to its focus on unifying its territories and consolidating its boundaries guided by its own notion of history. In early 1960s, Chinese foreign policy in general was engaged in resolving border issues. China settled the boundary issue with Myanmar recognising the McMahon Line in 1960. While dealing with India, China did not recognise the McMahon line, and India–China border dispute as well as Bhutan–China border dispute is still to be resolved.

The Doklam incident (2017) needs to be understood to understand a trend in the New Era. The face-off in Doklam area of Bhutan started when a large construction party of the People’s Liberation Army entered the Doklam area on 16 June 2017 and tried to change the status quo by building a road in violation of China’s existing understandings both with Bhutan and India. The matter was eventually resolved through diplomatic channels and the face-off ended on 28 August 2017. However, the incident reminded the geopolitical risks involved with unsettled borders in South Asia.

China’s decision to build dam on the major rivers originating from the Tibetan Plateau sparks anger and fear from people of neighbouring countries as this can ‘trigger natural disasters, degrade fragile ecologies, divert vital water supplies’ (Gray, 2011). China is famous for building hydropower dams and is the source of 10 major rivers flowing to 11 countries. It is not surprising that China’s downstream neighbours fear that it has a tight grip on ‘Asia’s water tap’ (Wall, 2013). In South Asia, there are issues between China and India, China and Bangladesh. These are inter-riparian issues involving international rivers that originate largely from the Tibetan plateau. River Brahmaputra is a hydrological life line for India’s north-eastern states. Building dams over Brahmaputra can have severe environmental consequences for north-eastern India.

Thus, option available for India, Bangladesh and China is to negotiate a common trans-boundary rivers water sharing agreement. China should enter into an institutional mechanism to deal with the concerns of its neighbours involving water issues in South Asia.

China’s New Activism in South Asia

In his address at a special event organised by the Indian Council of World Affairs (ICWA) on 18 September 2014, President Xi Jinping noted ‘with OBOR (One Belt, One Road) as wings, China wants to take off together with South Asia’ (Xi, 2014, September). It is perhaps the most explicit Chinese document providing details about assistance to South Asia. ‘The message then was that China is a neighbor to South Asia and India will not have a free run in the region’ (Surie, 2013).

Trade and Investment

After more than three decades of economic growth averaging 10 per cent a year, China is the second-largest economy and also the largest exporter in the world. As part of its growing influence, China is actively engaging in economic diplomacy through a wide range of means, including bilateral trade agreements and investment projects in different parts of the world including South Asian countries. However, China’s trade surplus with South Asia continues to rise (see Table 1).

Table 1.

Trade Between China and South Asia, 2013–2017 (in US$ billion)

Year	Chinese Imports from SAARC Countries	Chinese Exports to SAARC Countries	China’ Trade Surplus with SAARC
2013	21.247	75.247	54.242
2014	20.186	85.829	65.642
2015	16.962	94.243	77.280
2016	14.846	95.840	80.993
2017	19.385	107.360	87.942

Source: The World Bank.

In his address at a special event organised by the ICWA in September 2014, President Xi Jinping said that China will join hands with South Asian nations to strive to lift China’s two-way trade to US$150 billion by 2019. Table 2 suggests that the two-way trade reached US$126 billion in 2017. From the Chinese perspective, bilateral trade with South Asia is on right track. India with its fast-growing economy has become China’s strongest economic partner in South Asia. Bilateral India–China trade crossed US$84 billion in 2017 compared with US$20.08 billion for Sino-Pakistan, 16.04 billion for Sino-Bangladesh and US$ 4.39 billion for Sino-Sri Lanka in the same period.

Table 2.

Trade Between China and South Asian Countries in 2017 (in US$)

	Export to China	Import from China	China’s Trade Surplus
India	16,345,370	68,042,252	51,696,881
Pakistan	1,833,219	18,250,788	16,417,569
Bangladesh	875,144	15,169,021	14,293,876
Sri Lanka	310,030	4,087,995	3,777,965
Nepal	17,853	966,954	947,100
Afghanistan	3,427	541,205	537,778
Maldives	620	295,626	295,005
Bhutan	176	6238	6,061

Source: The World Bank.

But from the South Asian perspective, there are serious problems regarding trade deficit. Each country of South Asia is in disadvantaged position in terms of bilateral trade. Table 2 suggests some simple facts. Chinese exports to Pakistan were almost 10 times the value of China’s imports. Exports to Bangladesh were more than 17 times the value of China’s imports. Exports to Sri Lanka were more than 13 times the value of China’s imports. Exports to Nepal were 54 times the value of imports. An expert from CIIS has recommended ‘China needs to change the imbalances through optimization of trade structure… For the neighbouring countries having a huge trade deficit with China, China should pay attention to their concerns and take relevant measures to improve their deficit situation’ (Song, 2013).

In September 2014 at the ICWA event, Xi Jinping informed that China will invest US$30 billion in South Asia and offer preferential loans of US$20 billion to the region. China is now the largest overseas investor in the Maldives, Myanmar, Pakistan and Sri Lanka (Bhandari & Chandani, 2018). Chinese penetration is the highest in the economy of Pakistan. Figures for the year 2016–2017 suggest that Chinese investment as well as contract projects in South Asia were around US$40 billion. It needs to be noted that China is increasingly doing contract projects in South Asia without bringing much investment from China. Such a trend is not healthy for the overall growth of the region’s economy. There is evidence that Chinese model of investment may lead to debt trap for a recipient county. In the past few years, China gave Sri Lanka big loans to build infrastructure. However, Sri Lanka was unable to repay these loans. Consequently, a state-run Chinese company got 99-year lease on the port and about 15,000 acres of land for building an industrial zone.

BRI and CPEC

The plans for a China–Pakistan Economic Corridor (CPEC) preceded China’s BRI. The project was first announced during the visit of Pakistan’s Prime Minister Nawaz Sharif to Beijing in July 2013. However, CPEC was officially launched during the visit of Chinese President Xi Jinping to Pakistan in April 2015. The Vision Document noted, ‘The China–Pakistan Economic Corridor and the Bangladesh–China–India–Myanmar Economic Corridor are closely related to the Belt and Road Initiative, and therefore require closer cooperation and greater progress’. (NDRC, 2015). In other words, CPEC was not treated as a part/component of BRI in March 2015, although close relationship was noted in the official Chinese document. However, various Chinese official statements/documents as well as Chinese media publications especially since April 2015 treated CPEC as an important/major flagship project of the BRI. For example, Chinese Foreign Ministry Spokesperson, Hong Lei, noted that CPEC is ‘a major project of the “Belt and Road” initiative’ on April 20, 2015’.

Initially, the CPEC was seen as a window of economic opportunity by many in Pakistan. A scholar from Pakistan notes, ‘The CPEC aspires to put Pakistan on a new trajectory of high growth through infrastructure development and subsequently transfer part of its labor-intensive industries to other countries’ (Iqbal, 2017). However, some other experts from Pakistan including some economists strongly argue against such hypothesis. Dr Kaiser Bengali, a senior economist, stresses, ‘CPEC is not a game changer, its game over’. He stresses on the shortcomings of Chinese model of investment in Pakistan. He noted:

….since Chinese companies are tax-exempt they will bring everything from China and hence they will have no reliance on Pakistani businesses to fulfill their demands. This has shattered the dreams of many local companies that planned to expand their production facilities in anticipation of receiving orders from these Chinese companies. (Bengali, 2017)

In other words, the lack of Pakistani input into the CPEC adds to concerns that its benefits will not be distributed fairly. Further, Dr Kaiser Bengali stresses that the environmental cost of CPEC will also be huge as several coal-powered projects have been launched in Pakistan (Bengali, 2017).

A recent study by experts from Pakistan acknowledges that the CPEC enthusiasts are mainly Pakistani political leaders belonging to the former ruling party (PML-N [Pakistan Muslim League (Nawaz)]), government officials and journalists, who built the narrative for CPEC as a ‘game changer’. It divides the CPEC opponents in two groups (Saeed & Saba, 2018). The first group contests the CPEC because as they think:

It would lead to the exploitation and ‘stealing of Pakistani resources’. They argue that the CPEC is China’s instrument to expropriate Pakistan’s economic resources and is likely to lead to cultural, social and political subjugation. …Moreover, they fear that an influx of Chinese goods and services will crowd out local producers and enterprises that will lose out as the CPEC materializes. (Saeed & Saba, 2018)

The study notes that the second group of opponents consists of Pakistani, Indian and international experts who argue that the BRI in general and the CPEC in particular is China’s instruments to ‘contain’ India (Saeed & Saba, 2018).

The debate in China and Pakistan built around the ‘game changer’ narrative is losing its ground as some credible evidence has raised serious questions over this narrative. The fact remains that Pakistan had withdrawn its request to include the US$14-billion Diamer-Bhasha Dam in the CPEC framework. It raises a number of questions regarding CPEC and the Chinese model of investment in Pakistan. Mr Muzammil Hussain, Chairman, Water and Power Development Authority of Pakistan has been quoted saying that ‘Chinese conditions for financing the Diamer-Bhasha Dam were not doable and against our interests’ (Shabhaz, 2017).

A study from the Centre for Strategic and International Studies (CSIS) in 2018 based on its Reconnecting Asia database suggests that Chinese projects are less open to international participation. Out of all contractors participating in Chinese-funded projects, 89 per cent are Chinese companies. These findings suggest that infrastructure projects have short- and long-term implications for Chinese exports. These projects are aiding Chinese exports of construction-related goods in the short term. The study suggests that Chinese exports to Pakistan, for example, increased 77 per cent between 2012 and 2015. Chinese producers of construction materials such as steel, concrete, as well as Chinese engineering and construction firms are expected to get benefit from these projects (Jonathan, 2018). In other words, China is able to get a market for its surplus capacity products.

Another study by the Nikkei Asian Review and the Banker examined how BRI projects are unfolding in eight countries of Asia and Europe.⁵ It included four South Asian countries: Sri Lanka, Bangladesh, India and Pakistan. It needs to be noted that India is not a part of China’s BRI. They also collaborated with Reconnecting Asia Project of the CSIS to aggregate key BRI infrastructure projects worldwide. Main findings of the study include: (a) besides Pakistan, concerns about owing unmanageable debts to China have been raised in Sri Lanka and the Maldives; (b) China’s takeover of a port has raised questions regarding loss of sovereignty in Sri Lanka and (c) after initial display, projects experience serious delays in some cases (Yamada & Stefania, 2018). These findings explain the reasons behind BRI facing increasing criticism in the year 2018.

Further, the evidence from Sri Lanka has added more concerns regarding Chinese projects and its strategic dimensions in South Asia. Therefore, China needs to note that all major international projects must be consultative and include views of all stakeholders in the recipient country when a project is being planned and implemented in the region.

In the era of ‘new normal’ and economic slowdown in China, the CPEC and the whole BRI create a perception that the initiative has been launched to create new markets for Chinese companies and get economic benefits by building infrastructure and industrial corridors as well as building transportation and communication networks in the region and beyond. The role of India has also been an issue of debate in the context of BRI as well as CPEC. It may be underlined that India will not accept CPEC as the project impacts on India’s core concerns on sovereignty and territorial integrity.

China and South Asia: Bilateral Dimensions

China has tried to highlight that the country favours a new diplomacy based on alternative geopolitical, geo-economic and ideational framework in the New Era. BRI was seen as Xi Jinping’s vision to turn China’s neighbourhood into a community of common destiny. But the Chinese model of investment is under serious scrutiny in South Asia as evident in the case of Sri Lanka. Further, it needs to be noted that the earlier objective to change the distribution and relations of power in South Asia is still core of its foreign policy objective. This is primarily because China’s unsettled borders with India; the fact that Tibet and Xinjiang regions of China remains vulnerable to internal conflict and instability in its immediate neighbourhood like Pakistan and Afghanistan. Therefore, India, the dominant state in the region, has been viewed by China with an ‘element of distrust’.

The visit of Chinese President Xi Jinping to India (September 2014) and Prime Minister Narendra Modi’s visit to China (May 2015) strengthened ‘closer development partnership’ as a core component of the ‘strategic and cooperative partnership for peace and prosperity’. However, the bilateral relationship has also witnessed some major irritants, such as India’s membership to NSG (NSG Nuclear Suppliers Group) and the issue of source of terrorism in South Asia. While economic relationship between the two countries has been described as ‘a stabilising force’ by some experts, China also tried to change the status quo in the border areas. This has negatively affected the relationship.

While the informal summit in Wuhan has created a forward looking momentum in India–China bilateral relations, major differences on strategic issues remain a stumbling block. India has been a victim of cross-border terrorism from Pakistan. Professor Yan Xuetong, a leading expert from Tsinghua University once said, ‘China has only one real ally, Pakistan’ (Yan, 2016).

China has tried to strengthen and deepen relations with smaller countries in South Asia. China is a major investor in Bangladesh, and it upgraded bilateral ties with Bangladesh to a strategic partnership during President Xi Jinping’s visit to Dhaka in October 2016. China has also been successful in significantly expanding its foothold in countries such as Nepal, Sri Lanka and the Maldives. The relationship is also extended to the defence and security domain. Professor Zhao Hong notes, ‘in the face of India’s growing strategic influence, China’s approach is to develop economic and strategic ties with South Asian nations, ensuring that India is surrounded by countries friendly towards China’ (Zhao, 2010). Despite China’s inroads into the smaller states in South Asia, the bilateral relationship between India and China is one of the most significant bilateral relationships for both countries in the twenty-first century.

Options for India

China has been making inroads into India’s neighbourhood for some time. India needs to play a pro-active diplomacy on the one hand while significantly augmenting the delivery and efficiency of its development assistance in South Asian region on the other. It is time that India should accelerate its own connectivity projects in South Asia. India has begun to follow a ‘demand-driven process’ while offering loans or a mix of grants and loans to South Asian countries to execute projects in the region (Lok Sabha Secretariat, 2018). This consultative process has advantage over Chinese projects which have faced a backlash in South Asian countries in recent past. Further, ‘China’s ties with some of the countries in the region have come under strain and this presents India with the right opportunity to develop counter pressure on China’ (Lok Sabha Secretariat, 2018).

There is evidence that India has drastically ramped up its commitments in South Asia. In Bangladesh, India had committed to projects of about US$800 million till 2014, which rose US$8 billion by 2017 (quoted in Lok Sabha Secretariat, 2018). India’s model of assistance is more favourable to the interests of the recipient countries in South Asia and beyond but is sometimes short on timely delivery. India needs to work on this aspect.

Further, India needs to plan and implement more result-oriented cooperation in South Asia. India has made a difference in the past and is poised to make a big difference to deliver benefits to people of South Asia. Indeed, knowledge partnership and capacity building are India’s strengths.

South Asian countries can stimulate their economic development by leveraging their strength in human capital, skills development and information and communications technology (ICT) services through investments in sectors such as higher education and ICT. India has proved its potential to become leading knowledge based economy in the world with its youth population, world class higher institutions and thriving ICT industry. India’s experience suggests that ICT can bring positive changes to the social and economic lives of people.

India’s role in making quality, safe and effective drugs more accessible and affordable globally has been praised by world organisations including World Health Organization (WHO). India can take a lead in delivering more cost-effective and sustainable solutions for some of the common health challenges facing South Asian countries.

Thus, it can be said that South Asia has become an area of critical strategic significance to China. During the first and second era, China’s policy in South Asia was largely based on a single pillar—it is all weather and all dimensional friendship with Pakistan. China’s special partnership with Pakistan is continued to be most important in terms of geopolitical considerations in South Asia. However, a different Chinese approach to South Asia has been in making since the beginning of twenty-first century.

China’s South Asia policy has increasingly been driven by domestic factors or the factors, which influence China’s internal stability and development. The beginning of India’s rise has also impacted China’s equations in South Asia. China has tried to strengthen and deepen relations with smaller countries of South Asia. Nevertheless, long standing unsettled issues of South Asia involving China, such as border and river continue to play their role.

In the new era of Xi Jinping, China has tried to emphasise that the country favours a new diplomacy based on alternative geo-political, geo economic and ideational framework, however, China’s activism and assertiveness is also evident in the region. Moreover, it needs to be noted that the earlier objective to change the distribution and relations of power in South Asia is still a core principle of its foreign policy objective.

Footnotes

Declaration of Conflicting Interests

The author declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.

Funding

The author received no financial support for the research, authorship and/or publication of this article.

Notes

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