How is the rise of China reshaping the regional order in South Asia?

South Asia is the geopolitical playground for the competing interests of two major powers, India and China. China’s economic and military rise in the past three decades has shown that it is indeed a force to be reckoned with. Despite China’s purporting that its rise is peaceful, a regional landscape marked by strategic rivalry complicates this claim. 

This essay will demonstrate that the regional order in South Asia is relatively weak, with a need for enhanced economic interdependence. China’s Belt and Road Initiative (BRI), its grand strategy of enhancing economic ties between Asia and Europe, fills this void. This essay argues that challenges, including the creation of financial stress and insecurity within the region, mar China’s pursuit of reshaping the regional order.

A Disconnected Region 

The regional order in South Asia faces weaknesses stemming from two primary factors: an unwillingness to acknowledge India as a regional leader and scarce intraregional economic ties. Historically, India is considered a regional powerhouse due to its vast territory, economic and military capabilities, and political stability. However, it has been unable to translate these attributes into significant political clout. 

The regional order is not only shaped by material factors but also by ideational forces such as norms, culture, and identity. Nation-building discourses in neighboring states have strong connections with India, as it is intertwined with the emergence of nations like Pakistan, Bangladesh, Sri Lanka, and Nepal. Notably, the partition of India played a pivotal role in the creation of Pakistan. These nations share linguistic, ethnic, and religious ties with India, and these elements significantly contribute to the political discourse in India and other South Asian countries. This interplay of factors has often led to instability, making it a complex challenge for India to establish itself as a dominant regional power. In addition, South Asia’s cultural, religious, and ethnic diversity often triggers political instability. This is evident in ongoing disputes, like those concerning river-sharing, where India and its neighbors struggle to unite on political matters. The internationalization of bilateral issues, such as the longstanding Kashmir conflict between India and Pakistan, which traces back to the 1947 partition, adds to the challenges faced by India in asserting its regional leadership. As a result, these combined factors significantly constrain India’s ability to gain recognition as a regional hegemon. 

South Asia has missed out on significant trade opportunities, particularly in agricultural commodities, which could have eased the existing geostrategic tensions. Neighboring South Asian countries could have easily exchanged surplus agricultural produce with each other, helping to stabilize prices. Unfortunately, this potential remains largely untapped. Several factors, including administrative inefficiencies (such as customs and port operations), political instability due to internal conflicts within various states, and logistical challenges (related to transport and storage), have all hampered the growth of economic interdependence within the region. To put it in perspective, intraregional trade in South Asia currently represents a mere 5% of the region’s total trade, a stark contrast to the 25% observed in the Association of Southeast Asian Nations (ASEAN). 

Compounding the issue is India’s inconsistent approach to its neighboring countries, ranging from limited and slow engagement to a tendency to shy away from cooperative projects to shield itself from foreign influences. What’s more, India’s domestic identity politics, encompassing factors like religion, caste, and ethnicity, have extended their reach into the political arena, negatively impacting regional trade. For instance, the support for the Tamil separatist movement in Sri Lanka by the Tamil community in the Indian state of Tamil Nadu serves as a telling example.

Another illustration is the 2015 India-Nepal blockade, which had adverse effects on bilateral relations, prompting Nepal to join the Belt and Road Initiative (BRI) to reduce its dependence on India. The blockade was imposed as a result of India’s displeasure with Nepal’s new constitution, which excluded the Madhesi ethnic community, who primarily reside along the Indo-Nepal border and share familial ties with India. These examples highlight that despite a shared colonial history and similar cultural values, the region lacks cohesion due to limited economic interdependence and a reluctance to accept India’s dominance. Consequently, South Asia finds itself in a relatively fragile regional order.

An Opportunity in the Making 

South Asia stands out as the world’s fastest-growing sub-region, yet its sustainability hinges on substantial investments in infrastructure. China recognized this economic opportunity. Historically, India perceived its neighbors primarily from a national security perspective while undervaluing their potential as an economic market. These perceptions, coupled with South Asian countries’ needs for infrastructure, generated a vacuum in a region lacking connectivity. 

China, in its pursuit of reasserting itself as a global power following what’s known as China’s “century of humiliation,” has embraced a “periphery diplomacy” approach that places a premium on diplomatic relations with its neighboring nations. Central to this approach is a focus on economics and trade, a key element of which was the unveiling of the Belt and Road Initiative in 2013. Within South Asia, the BRI functions to advance China’s interests by diminishing its reliance on the Malacca Strait and ensuring the security of its energy imports. Concurrently, the Maritime Silk Road, the sea-based part of the BRI, plays a crucial role in safeguarding China’s trade routes in the Indian Ocean.

China does not have the same historical “baggage” as India in its relationships with most South Asian states, making it a neutral player and attractive partner for trade, investment, and security. Accordingly, the BRI is an “impetus to connect” in a disconnected South Asia, offering a unique opportunity to address South Asia’s demands, which India has struggled to meet. China, therefore, positions itself to compete for a significant role in South Asia. 

Community of Shared Destiny 

The objectives of the BRI go beyond just fostering financial cooperation, trade, political ties, security, and people-to-people connections. They encompass the establishment of a Sino-centric community. China’s ability to reshape the global financial system through multilateralism demonstrates its potential on the international stage, underscoring its commitment to becoming a responsible rising power. 

According to American political scientist Robert Gilpin, when dissatisfied with the status quo, any rising power will attempt to change the regional order. The motive behind the BRI is to introduce a community centered on new ideas, institutions, and projects that would economically link Eurasia, thereby reshaping the regional order in South Asia to align with China’s preferences. 

Moreover, the BRI is seen as a manifestation of state capitalism, with projects tied to non-political conditions, such as the purchase of goods and services from state-owned companies. This perspective indicates that the “community of shared destiny” outlined by Xi Jinping is China’s attempt at reshaping South Asia’s regional order into a Sino-centric one. 

Debt-trap Diplomacy 

The geo-economic issue with the BRI revolves around its potential to burden financially strained states with debt and the intrusion of China’s interests into the South Asian sphere. The debt-trap diplomacy narrative describes the BRI as a project that makes states spend proceeds from trade on servicing its external debts, instead of internal development. The Centre for Global Development has identified Pakistan and the Maldives as countries likely to face debt stress due to BRI funding. Most of the BRI projects have not materialized, and those that have are often commercial or operational failures, generating minimal profits that make it difficult for those countries to repay their loans. Accompanied by rapid increases in trade surplus with South Asian states, BRI projects create mounting external debt for these countries. 

This situation creates an opening for China to advance its geostrategic ambitions in South Asia. For instance, when the Sri Lankan government was unable to repay the loans associated with the $1.5 billion Hambantota Port project, it opted to lease the port to a Chinese state-owned enterprise. Although some argue that there was no debt-equity exchange, the economic benefits of the port have not yet alleviated Sri Lanka’s balance of payment crisis. Therefore, China’s 70% stake in Hambantota Port suggests that the BRI project is more about geostrategic maneuvering than purely economic objectives. Some scholars have even raised the possibility of the port’s lease eventually leading to its utilization as a naval base by China. This raises concerns as there are considerable debates about whether the Maritime Silk Road is a precursor to China’s “String of Pearls” strategy and whether any of the “pearls” may be used for military purposes. 

Additionally, BRI financing extends accommodating China’s foreign policy and security interests in multilateral forums. For instance, Pakistan and Sri Lanka have supported Beijing’s “counter-terrorism and deradicalization” policy regarding Uyghurs in the Xinjiang region in the UNHRC. 

Collectively, these factors highlight that BRI-financed projects worsen financial stress in South Asian countries and make them more susceptible to Chinese influence in matters of foreign policy and security.

Security Concerns 

The China-Pakistan Economic Corridor (CPEC), a flagship project of the Belt and Road Initiative, spans over 3000 kilometers and involves extensive Chinese infrastructure development within Pakistan. This ambitious project has, in recent times, ignited geopolitical tensions in South Asia. 

CPEC’s primary objective is to connect Pakistan’s Gwadar Port with the Chinese city Kashgar thereby, helping China manage the “Malacca dilemma” and bolstering its energy security. However, geographic features of the northern regions of Pakistan present several obstacles, such as the construction and maintenance of pipelines. A similar project was also carried out in Myanmar, but it failed to yield substantial profits or improve China’s energy security. This observation suggests that the motivation behind CPEC is geo-positional balancing as opposed to a geo-economic one. Geo-positional balancing entails establishing long-term non-military footholds in a host country to counterbalance a regional rival. In this case, China wields soft power over Pakistan through economic engagement and infrastructure development, ensuring that India is acutely aware of its presence. 

Furthermore, India is deeply concerned about CPEC because the corridor passes through Gilgit-Baltistan, a contested region India claims as its own territory. Thus, it directly impinges on India’s core interests. India asserts that China has miscalculated the potential for CPEC to stir up geopolitical tensions, particularly since the issue is vital for India. Consequently, India contends that CPEC runs in opposition to the spirit of multilateralism and perceives it as a strategy aimed at countering India’s influence. 

In addition, CPEC encounters various obstacles, particularly security challenges. Balochistan, the economically disadvantaged province where Gwadar Port is situated, has seen widespread protests rooted in the perception that BRI projects exploit the region. China has carried out outreach activities with local Baloch leaders to demonstrate their interest in pursuing economic development in the region but still faces ongoing security issues. The most alarming concern arises from attacks on CPEC projects, resulting in the death of civilians, including two Chinese citizens, at the hands of the Balochistan Liberation Army. 

Additionally, China actively seeks to incorporate Afghanistan into the BRI fold, recognizing that CPEC’s economic potential is limited without the participation of both Afghanistan and India. Yet, the Afghanistan-Pakistan border remains plagued by instability and violence. These factors taken together indicate that despite China’s keen interest in promoting economic activities through CPEC, it has inadvertently contributed to the emergence of security threats that jeopardize the stability of South Asia.

Trust or the Lack Thereof 

China’s effectiveness in reshaping the regional order in South Asia depends on its ability to tackle security concerns and manage its relations with India. South Asia holds the potential for either conflict or peace and prosperity. Given the region’s diversity, the increasing importance of economic interdependence and multilateralism is clear. The stability of the regional order relies on a delicate balance of cooperation and competition and involves maintaining peace and avoiding potential triggers for armed conflict. 

Barry Buzan, an eminent British political scientist who has contributed to the conceptual aspects of international security, describes China’s ascent in South Asia as “China’s divided self,” signaling its engagement with the international order in positive ways while displaying exploitative attitudes in its projects and unabashedly aggressive tendencies. Recent border clashes along the disputed Sino-Indian border exemplify this dual nature. All in all, China’s growing influence in South Asia is marred by a trust deficit arising from security challenges posed by the Belt and Road Initiative and its military skirmishes with India along the border. 

Competitive Cooperation 

China’s efforts to reshape the regional order in South Asia through its BRI have set off a regional power struggle, with India countering China’s influential factors of soft power and multilateralism. Though India has not joined the BRI, it has displayed a willingness to enhance economic interdependence. For instance, India is the second-largest stakeholder in the China-led Asian Infrastructure Investment Bank (AIIB). 

China’s active involvement in the region has given smaller states more leverage and a platform for negotiation, particularly during the ongoing India-China rivalry. It has also provided an alternative to India’s sphere of influence, prompting India to adopt more collaborative approaches with its neighboring countries. Since the BRI’s announcement, India has intensified its engagement with neighboring nations, leading to bilateral discussions on river water sharing agreements, free trade agreements (FTAs), and extending lines of credit. 

CPEC has also spurred India’s involvement in the development of Chabahar Port. India’s “Act East” policy has strengthened its ties with Japan, and both countries are involved in infrastructure projects through the Asia-Africa Growth Corridor (AAGC). These developments illustrate that the BRI has compelled India to engage more actively with its neighbors, positioning it as an essential competitor in the South Asian sphere. 

The BRI is China’s attempt at reshaping the regional order in South Asia. It offers immense economic opportunities, provides smaller states with more agency, and has prompted India to become more active within the region. However, the projects have contributed to debt stress and enhanced geostrategic tensions in South Asia. Thus, while the BRI offers an opportunity for China to demonstrate its peaceful rise, it is fraught with risks owing to its potential sources of insecurity and instability.