As it is known, all the states bordering with India are the zones of the Indian-Chinese struggle for the economic, political, and military dominance (except for Pakistan – a traditional opponent of India either with or without China). Even those that have traditionally cooperated with India, such as Bangladesh, the Maldives Republic, Nepal, and Sri Lanka, are gradually moving to the camp of the PRC allies.
Bhutan remains a reliable supporter of India so far. India actively supports it in its territorial dispute with China demonstrating it by sending its military to the Doklam Valley in the summer of 2017 during consequent escalation of this dispute.
However, India is inferior to China in other states of South Asia. China’s formula for success is the huge investment, which it does or promises to do in the economies of the cooperating countries. Being the world’s second economy, it can well afford it. China proposes participation in its global infrastructure project One Belt –One Road (OBOR) to all states of interest. The project is aimed at uniting the major transport routes of the planet in one system and promoting the global economic integration. In the framework of the project, China invests funds in the development of infrastructure of its partner countries and proposes assistance in implementing their own economic projects.
In 2017, China continued working on Port City close to the main harbor of the capital of Sri Lanka Colombo. Port City is not just a seaport but a new residential area with the developed infrastructure, which is being built by China since 2016. It was reported that the Chinese party would invest about $ 1.5 billion in this project and that this would be the largest foreign investment in the history of Sri Lanka.
In December 2017, Sri Lanka transferred its south port Hambantota to China for the period of 99 years. This port is considered a strategically important site in the Indian Ocean. China will pay Sri Lanka $1.2 billion by installments for its lease. The first down payment in the amount of $292 million has been made already. At the same time, the Sri Lankan leadership stated that the transfer of the port to China would help the country pay its old debts.
Soon after, the media reported that China might invest $1 billion in the construction of Colombo International Financial Centre in the territory of Port City.
China states that it will develop Hambantota port and will turn it into the major logistics centre. However, India fears that China will create a military base there due to the port’s strategic importance. Given the close location of Sri Lanka to the Indian coast, the situation is very unfavourable for India.
After the transfer of Hambantota to China, New Delhi accused Beijing of wanting to drive all the developing countries participating in OBOR into the debt slavery. According to the Indian party, China intentionally distributes huge loans to them, which they are not able to return, and a story with the port of Hambantota, which Sri Lanka had to lease because of debts to the PRC, is a bright example. In the same way, according to the Indian representatives, China has leased land from the government of the African state of Djibouti for its first foreign military base opened in August 2017, and in the same way PRC plans to acquire and use the Kenyan port of Mombasa, which is the “gate” to the East Africa.
Nevertheless, none of China’s partners has complained yet, and more and more countries cooperate with it and join the OBOR project.
In late 2017, the PRC concluded a free trade agreement with the Maldives. The Maldives Republic (MR), like Sri Lanka, is an island state off the coast of India. Just like Sri Lanka, the MR has long-standing cultural ties and friendship with India, but China controls the two main sources of income for the Maldives acting as the main supplier of tourists and the leading importer of the Maldivian seafood. The MR expects that free trade with the PRC will lead to a significant increase in its revenues under both items. Thus, the agreement on the FTA was signed despite India’s indignation.
China is actively developing cooperation with another close Indian neighbour Nepal, a small state squeezed between India and China. As with the other countries mentioned, Nepal has a long-standing and developed relationship with India. The entire geographical location of the country suggests it as the country is separated from China by the Himalayan mountain range. The border of Nepal with India runs on a more passable terrain. However, China, as usual, started to build a railway in the Himalayas sparing neither trouble nor expense. In November 2016, trains began to travel regularly from the PRC to Nepal.
From July 2016 to January 2017, the volume of direct foreign investment of China in Nepal increased three times and reached $34 million. The Indian investment in Nepal reduced by 76% to $4 million over the same period.
In early March 2017, the capital of Nepal Kathmandu hosted the Nepal Investment Summit 2017, at which representatives of business from different countries could learn about the possibilities of investing in the economy of Nepal. Representatives of 89 Chinese companies attended the event. As a result, the Chinese party promised to invest $8.3 billion (about 40% of Nepal’s GDP) in various projects introduced at the Summit.
Financial assistance could not have come at a better time for Nepal, which is one of the poorest countries in the world and has besides suffered the devastating earthquake in 2015. Thus, despite the centuries-old ties of Nepal with India, China now has the greatest weight in this country.
In April 2017, the first in the history Chinese-Nepalese military exercise Sagarmatha Friendship 2017 took place in Nepal, at which the militaries of the two countries practiced methods of countering terrorism. Representatives of the Nepalese Army reported that these exercises could become annual. Undoubtedly, it was sore news for India.
At the end of 2017, elections were held in the lower house of the Parliament of Nepal. The first round was held on November 26, and the second – on December 7, 2017. The “Left Coalition”, which included the Communist Party of Nepal (united Marxist-Leninist) was ranked the first, and the United Communist Party of Nepal (Maoist) was ranked the second. The communist China will probably find it easy to agree with the new government of Nepal. The media reported that India hoped for the victory of the ruling social-democratic party Nepal Congress but its expectations were not met.
So, China is rapidly increasing its influence in countries bordering with India. This is an alarming situation for India. Many years ago, Mao Zedong planned to weaken its position by surrounding it by a ring of Chinese allies. He did not succeed at that time. Probably because he acted by force of arms. However, modern China is confidently moving towards the dream of the “Great Helmsman” using economic methods. Perhaps, India understands it, but judging by the decline in Indian investment in Nepal, it does not have enough funds to compete with China, although it has the third economy in Asia. Nevertheless, now the growth of China’s influence in neighbouring countries with India is not as dangerous for it as it was in the times of Mao. At present, India has more developed international relations and it is able to maintain influence and economic power by cooperating with countries such as Singapore and Japan, which are also dissatisfied with the growth of Chinese power. In addition, the development of relations with Iran and Russia promises India great prospects. However, the loss of positions in South Asia should help India understand that inaction and savings on investment lead to a loss.