Increasing Chinese economic activity in South Asia will lead to greater influence. But, India should not get into a debilitating competition. While China is moving according to a well-crafted strategy, India is only reacting.
Chinese Checkers: A Pakistani soldier stands guard as a Chinese ship is readied for departure at Gwadar port. Pakistan's top civil and military leaders opened the new route. AP
CHINA has been interested in South Asia for quite some time. Initially, this Chinese interest in South Asia was described by some western analysts as the "string of pearls" strategy. Subsequently, a number of Indian analysts also subscribed to this approach. These pearls were supposed to be around India with an objective to harm Indian strategic and security interests. This approach served the western purpose of inciting India against Chinese activities. While the growing Chinese activity in South Asia did cause unease in India, soon it became obvious that South Asia is not the only region where the Chinese are active but the Chinese footprint is growing in every part of the globe. The Chinese objective is not limited to strategically constraining India. China is looking to achieve a global power status and wants the only remaining super power, the US, to acknowledge this by engaging in talks.
China seems to have a well-crafted strategy for its global ambitions. Deng Xioping was responsible for the economic transformation of China and to give the slowing Chinese economy another major thrust, China's current president Xi Jinping came out with a new strategy in 2013, One Belt One Road (OBOR) initiative. This is also known as the Belt Road Initiative. Trade between China and Belt and Road countries exceeded $600 billion in the first eight months of 2016. This was 26 per cent of China's total foreign trade volume during this period. Moreover, the Chinese exports to this region are increasing every year. The initiative intends to bring together countries in Asia, Europe and Africa via overland and maritime networks.
Investment and financing of infrastructural projects is a cornerstone of the Belt Road Initiative plan. China is selling the idea that countries can connect their domestic development plans to the Belt and Road in a bid to bolster growth and explore further opportunities. For instance, it wants Bangladesh to align its seventh plan with the 13th plan of China.
China has launched a number of economic corridors which are actually part of OBOR. The prominent ones are the China-Pakistan Economic Corridor (CPEC), the China-Mongolia-Russia economic corridor, the new Eurasia land bridge and the Bangladesh-China-India-Myanmar (BCIM) economic corridor. CPEC in Pakistan is regarded as the first Chapter of Belt and Road initiative. The Chinese describe it as one plus four cooperative structure. This means CPEC has four components - Gwadar port, transport infrastructure, energy and industrial cooperation. The Gwadar port recently become operational. Now China is trying to get the BCIM corridor moving. To achieve this objective, it has granted $24 billion credit line to Bangladesh, the highest credit line the latter has received from any foreign country. This leaves India's credit line of $2 billion far behind. Bangladesh and Chinese firms also signed trade and investment deals worth $13.6 billion.
Bangladesh has been a strong supporter of the BCIM economic corridor. This initiative was earlier known as the Kunming initiative. Bangladesh has also actively participated in the Trans-Himalayan Development Forum - an initiative launched by China last year. Bangladesh sees Chinese funding of projects as a way to break free from the clutches of the low-level equilibrium trap. China is engaged in similar economic activities even in Sri Lanka, Nepal and the Maldives. All these countries have endorsed OBOR.
China is moving in a systematic way to fund projects under OBOR. It is developing institutions like the Asian Infrastructure Investment Bank (AIIB) and Silk Road Fund. However, the Chinese funding is not cheap but comes at the rate of 2 to 4 per cent. Despite the high interest rate, the Chinese have somehow managed to persuade these countries to accept loans. OBOR has been couched as the Marshal Plan of China. These projects help the Chinese to invest their surplus foreign exchange reserve and get project contracts for Chinese companies facing the problem of surplus capacities.
There is no doubt that increasing Chinese economic activities in South Asia would enhance Chinese influence. Then should India, itself a country with infrastructure deficit, start doing similar projects in these countries. Should India get into a debilitating competition with China? As far as Chinese are concerned, they are acting according to a well-crafted strategy but India is mostly reacting. The Chinese are looking to park their funds for profit and are funding mostly those projects that are part of OBOR.
On the other hand, India is funding projects that are of no special significance to it. Moreover, despite India doing some projects in these countries it still can't stop countries from going in for Chinese funding. China is using AIIB to serve its objective. A number of countries, including some of the western countries, don't know why they are into it. Initially, they thought their companies would get some projects if they join AIIB. However, it appears unlikely that they would get project contracts while competing with Chinese companies who have an undue advantage. In a situation like this, it would be much better for India to focus on its own infrastructure development rather than waste scarce resources in counter-balancing China. India's effort should be limited to persuading countries in South Asia from not giving projects to China that can imperil the security of the region.
The writer is Associate
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