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reflections

Sep 11, 2014 | 23:07 GMT

5 mins read

Beijing Takes a New Approach to South Asia

(Stratfor)
It can be difficult to separate the important from unimportant on any given day. Reflections mean to do exactly that — by thinking about what happened today, we can consider what might happen tomorrow.

China is beginning to view South Asia in a different light as the region becomes more economically and strategically valuable to Beijing. From Sept. 14 to Sept. 19, Chinese President Xi Jinping will visit the Maldives, Sri Lanka and India after a stop in Tajikistan. This will make Xi the first Chinese president to visit the two island nations in nearly 30 years. Moreover, Xi's visit to India will be the first official visit between the two continental giants since Narendra Modi's government took office in May.

Interpreting China in South Asia

To some extent, the implications of China's presence in South Asia have often been outweighed by discussions of China's strategic intent, particularly regarding India. Geopolitical principles provided the explanation for these concerns, given the historical, economic and political proximity of South Asia's smaller nations to India, and given the rivalry between India and China, from disputes over their 4,000-kilometer (about 2,500 miles) land border and maritime boundaries to their competition over resources and energy. There is also Beijing's "iron" political and military relationship with Islamabad and New Delhi's ongoing search for bilateral and multilateral defense and strategic alignment with Japan, Vietnam and others, with an eye on China.

India's relative geographic isolation — ringed by oceans and the Himalayas — and its decadeslong foreign policy focus on its South Asian neighbors enabled China to continue to expand in its periphery, from Central Asia to Southeast Asia, with little meaningful interference from New Delhi. Despite India's allowances, however, China's South Asia strategy often lacked integral focus and remained a low priority.

Stretching along China's most restive areas, South Asia hosts the largest number of China's land neighbors and numerous important emerging economies. Yet, perhaps with the exception of Pakistan, high-level diplomatic exchanges have been rare in recent decades. Aside from a few eye-catching infrastructure projects — especially the deep-water port facilities in Pakistan, Bangladesh and Sri Lanka and some transport construction in individual countries — China's investments in South Asia are far smaller than its investment portfolios in North America, Southeast Asia and, to a lesser extent, Africa.

The reasons for this are manifold. Before India began projecting power outside the region, South Asia was little more than the space between the Middle East's rich energy assets and the economic and manufacturing powers in East Asia. The region was constantly marred by political instability and internal chaos, and its limited strategic importance kept it low on China's priority list. Without substantial amounts of energy and resources — two key priorities in China's strategy to fuel its export powerhouse — the region is more of a long-term, gradual strategic matter than one of immediate significance. Additionally, more coherent relations with South Asian nations were often complicated by the distrust and rivalry between Beijing and New Delhi.

China's Strategic Needs

India's increasing economic heft, along with the integration of peripheral states such as Bangladesh and Sri Lanka into the global manufacturing supply chain, could change China's assessment of the region. This change comes alongside Beijing's domestic economic and strategic recalculations and the shifting perception of its global position.

In recent years, Beijing has been attempting to chip away at the low-end exports economic model and move toward higher value-added manufacturing. It has pushed aggressively to expand China's global market share in strategic industries such as automobiles, electronics and telecommunications. It has provided options for cash-strapped South Asian states seeking alternative sources of capital, trade and technology while adding to their new manufacturing base.

Xi's visit to India will bring $7 billion of investment into two industrial parks in Maharashtra and Gujarat focusing on automobiles and electricity, in addition to trade and investment agreements for pharmaceuticals and information technology services, among others. New Delhi hoped that the investment would offset its trade deficit and help India emulate its neighbor's success as a manufacturing powerhouse. Likewise, China will finalize a free trade agreement with Sri Lanka, giving Colombo free access to China's vast market. The deal will help Sri Lanka capitalize on its shift to low-end manufacturing, especially in its garment industry. The Maldives and China will sign a series of cooperation agreements ranging from tourism to trade and infrastructure construction. In short, while the South Asian nations still have a way to go to show they are viable investment destinations, and although they remain a relatively low priority for China, the region's sizable and expanding consumer market is something that Chinese investors could not neglect.

Amid Beijing's global push, China increasingly perceives South Asia as an important component of its more comprehensive, integrated overland corridor across the Eurasian land mass that will include roads, expressways and potentially railway projects. Thus, South Asia will become more important as China pays more attention to its own underdeveloped interior regions and as Beijing's need to hedge against security risks and supply disruptions off its coast grows.

Beijing has begun shifting from its focus on individual countries in South Asia and is starting to view the region as a more integrated economic and strategic entity. A series of initiatives has been launched accordingly, including the China-Pakistan Economic Corridor and the Bangladesh-China-India-Myanmar Economic Corridor, subcomponents of Beijing's envisioned Silk Road Economic Belt and Maritime Silk Road.

The centerpiece of Beijing's strategy is a more cordial relationship with New Delhi. Xi's visit will include a few landmark agreements that will allow China to assist with India's outdated railway system and potentially allow for an overland connection in the region. On many other fronts, although their competition endures, Beijing and New Delhi have appeared ready to move beyond decades of icy relations.

Notably, Xi's visit to South Asia followed a last-minute postponement of a trip to Pakistan, where domestic instability could delay $34 billion in much-needed investment deals for coal power, railways and road infrastructure. This is not to suggest that Sino-Pakistani relations are facing any challenges. Beijing simply seems to be signaling that its strong relationship with Islamabad will no longer override its desire to pursue more balanced connections in South Asia.

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