Chinese investments and developmental loans to third world
countries are propitious and not a subject matter of debate. But the inimical
geostrategic assertiveness of China under ruse of trade diplomacy is posing a
grave threat to balance of power in South Asian region. Though critics might
take up cudgels for questioning the veracity of dissecting trade diplomacy of
China, veritable hegemonic aspirations of China have upended the harmony of
Indian sub-continent.
Pakistan
Systemic warming up Pakistan to China from the late 1950’s,
firming up of their relation which steadily graduated into “all-weather
friendship” is posing grave threat to India. Cementing ties, President Xi on
his visit to Islamabad in 2015, unveiled $51 billion CPEC connecting Kashgar in
Xinjiang passing through Gligit Baltistan region of PoK to Gwadar port along
the Arabian Sea. It is a common knowledge that Sino-Pakistan had its
foundations in geopolitical or strategic benefits and spear-headed by a common
anti-India agenda. With a panoply of 51 bilateral agreements and CPEC, China
wooed Pakistan for eternity. Substantial
opacity about the details of investments and bank credits are raising serious
doubts about the real intentions of China. But what emerges is that unlike
other projects, Gwadar port project worth $3.5 billion is financed by zero
percent China loans underlying the geostrategic significance of Gwadar port.
China even clinched 43-old lease deal of Gwadar port till 2059. Gwadar port was
opened in 2007 with initial Chinese funding of $200 million, but it wasn’t
commercially viable. Until 2013, China hasn’t seriously calibrated the
geostrategic advantages of the port. President Xi has resurrected the project
for its vital geostrategic position. He strongly backed Gwadar port development
to exercise control over Straits of Hormuz 400km away, overcome Malacca
Dilemma, gain accessibility to Indian Ocean and pivotally strengthens strategy
of “Containing India”. Akin to Chinese strategies of establishing close links
with resource rich regions, through CPEC, China has laid its eyes on the $70
billion Saindik copper and gold resource mining project in Chagai district of
Baluchistan. But Baluchistan would receive a paltry 1% of total earnings. Also,
local economy or employment opportunities are unlikely to improve as project
contract mandates employing Chinese labor. Chinese labor wages having gone up
several folds. The extra financial burden of employing 70-75% of Chinese
workforce for higher wages will be credited to project costs. Though China
continues to stubbornly defend its trade investments as an effort to uplift
under developed countries, docking of armed Chinese nuclear submarine at
Karachi suggests otherwise.
While Gwadar port development is making quick progress, there
is no news of infrastructure projects (mostly power plants) inked under CPEC.
Reports indicate that China’s FDI in Pakistan surged to 38.8% making it the single
largest investor. Other major investors-US, Norway, Saudi Arabia, UAE, and
Germany are now slowly withdrawing their investments. Senators of
Pakistan’s upper house are at logger heads with political establishment and
raised serious doubts about CPEC and its benefits to Pakistan. Senate
Standing Committee on Planning and Development expressed concerns saying that “Another East Indian Company is in offing; national
interests are not being protected. We are proud of the friendship between
Pakistan and China, but the interests of state should come first”. Small
and medium industries are feeling threatened as cheap Chinese goods are flooding
Pakistan markets. Besides, CPEC China now has stakes in premier bank-State Bank
of Pakistan. Common strategic interests herald Sino-Pakistan relations. Its
iron brotherhood is likened to US-Israeli ties. Friendship apart, China’s muscular
investment patterns should be taken with a bag of salt.
Reports are now emerging with China’s mouth piece Global
Times expressing concerns about increasing fiscal deficit of Pakistan. In a
veiled caution, it said “China may need
to diversify its way of financing the CPEC projects. Currently, many projects
are financed by Chinese government concessional loans. It is unrealistic and
unsustainable to pin hopes on government loans from China. Such lending model
is likely to drive up the debt level of the recipient country and toss it into
a vicious cycle of inflation and currency devaluation”. Clearly, this
suggests that Pakistan is heading towards a debt default as Sri Lanka.
Maldives
Timing of Chinese infrastructure projects on the Indian Ocean
archipelago followed a clear pattern. Ending the three-decade rule of President
Maumoon Abdul Gayoom, Mohammed Nasheed, stormed into power in 2008. President
Nasheed courted India, West and promised to reinforce democratic values in
administration. But was thrown out of power in a coup carried out by supporters
of Gayoom in Feb 2012. He was replaced by President Waheed, who cancelled the
single largest Indian investment of $511 airport construction deal awarded to
GMR. China was one of the first countries to support Waheed’s government and
since then Maldives pivoted towards Beijing. India reacted rather lately to
these developments and China in meanwhile, seized the opportunity and replaced
India. Reports indicate that China agreed to grant Maldives $500 million,
(equivalent to quarter of its GDP) in loans during President Waheed’s visit to
China. In Feb 2013, President Nasheed at the height of legal proceedings
against him took refuge in Indian Embassy at Male for 10days. But Delhi chose
to stay away with Opposition parties of Maldives alleging India’s interference
in their internal affairs. In a botched-up election of November 2013, President
Abdulla Yameen, clinched the reigns. He drastically reoriented the island by
reinforcing religious conservatism and Chinese engagement. Both Yameen and
Gayoom believed in indispensability of China as China is a supporter of association
of 56 Islamic countries, Organization of Islamic Countries (OIC). Yameen
accepted a $8.2 million Chinese grant towards implementation of developmental
projects. In Jan 2014, Chinese ambassador announced a plan for construction of
15,000 houses. Next day morning, a Chinese Naval ship, Peace Ark, reached the shores of Maldives to provide medical aid
across the country till July 5th.
After Sri Lanka, China has set eyes on Maldives which is ideally located
in Indian Ocean through which one-fifth of World’s trade is routed. Soon China
roped in Maldives under the MSR initiative, both Presidents exchanged visits in
early 2014. President Xi laid foundation stone for construction of 1500 houses
at Hulhumale, nick named China town on his visit to Male. Maldives awarded the
cancelled airport contract to a Chinese company, Beijing Urban Construction
Group (BUCG) for $800 million. In addition, China has clinched a contract to
build Gadhoo port, in the Southern Atolls, which will be a key addendum to MSR.
This period also witnessed a sudden spike in number of Chinese tourists
visiting Maldives by 44.5% replacing Great Britain.
In 2015, Maldives government passed a constitutional
amendment allowing foreign entities or companies to own land if they have made
investments of over $1 billion and could reclaim over 70% of land (for project)
to buy land. Implications of such irresponsible bill were discussed in detail
at https://myind.net/Home/viewArticle/india-wary-constitutional-amendment-maldives. Earlier, foreign entities could lease land
for 99 years. While President Yameen asserted that this will boost Male’s
economy, the bill is awfully biased towards China. Unlike India, China with its
deeper pockets can invest in commercially unviable but strategically important
projects to tighten its strangle hold over Maldives. Opposition is now worried
as Maldivian government owes 70% of external debt to China. With these fresh
overtures and pro-China posturing, Maldives is at the brink of falling into a
debt trap. Gadhoo Island would soon be another Gwadar or Hambantota as analysts
believe that Maldives can’t be a commercial hub. But China is determined as
Gadhoo is close to US base Diego Garcia. It is keen on turning the port into
China’s submarine dockyard.
Nepal
Due to historical, traditional, mythological, linguistic, and
religious connect, India and its Himalayan neighbor had close friendly ties
with no restrictions on movement of men and material. But the 2015 blockade
took a toll on long-standing bilateral ties and China milked these fissures.
Promising development through which it can challenge India, China wooed Nepal
with the OBOR initiative on a precondition that Nepal will uphold the One China
policy. Singing to the tunes of miffed Nepal post blockade, China condoned
India. Beijing affirmed that it understands how Nepal is suffering due to
Indian hegemony and thrusted incentives of OBOR. In 2016, Prime Minister K. P Sharma Oli signed
a transit agreement wherein a strategic railway link will be built between two
countries passing through Tibetan mountain terrain.
A close look at the surging Chinese investments in China
since 2008, clearly indicates that the economic cooperation has an underlying
strategic angle to it. As of 2015-16,
China accounts for 42% of Nepal’s FDI. Chinese Official Development Assistance
increased from $19 million to $38 million overtaking India’s $22 million.
According to reports, energy projects and infrastructure sectors topped the
list. China’s increasing presence in the region is in part facilitated by the
dominant political opposition which majorly include Maoists, Communists, and
Nationalists. This group which is averse to India’s investments heartily
welcomed China’s dubious hydropower dams. China has not only used its ilk in
Nepal to crackdown on Tibetans travelling to India but also obtained
disproportionately large stakes of 75% in the 750-megawatt West Seti Dam. Aside
the strategic value of Nepal (reducing Nepal’s dependence on India and coerce
South Asian nations to adhere to Chinese line) China wants to control bountiful
water resources of Nepal.
Numerous rivers originating in Tibet flow through Nepal.
China wants to build a cascade of dams in Nepal to control water flows of
Ganges into lower riparian countries India and Bangladesh. China is also
funding the Pokhara airport, Upper Trishuli hydropower project and investing
$3billion to develop birth place of Buddha, Lumbini into a cultural hub.
Afghanistan
Of all the investments and economic links forged by China,
Afghanistan’s case must be analyzed very critically. For all those, who vouch
for China’s symptomatic support to third world countries towards development,
Beijing’s support to Afghan Taliban dashes, all Chinese claims as a benevolent
power. China established ties with Afghanistan during Hamid Karzai’s
administration around 2001. Unlike other international donors China’s foreign
aid stands at $200 million (a fraction of its $25 billion global foreign aid).
China’s interest in Afghanistan is two-folds: to harvest the benefits of sizeable
chunk of Afghanistan’s abundant natural resources and integrate it with the
crucial five-country railway systems (China-Kyrgyzstan-Tajikistan-Iran). Through
this China wants to reduce transport distance between China and Iran or the
East which is a major oil supplier. Moreover, China is attempting to use its
investments (under its Western Development Strategy) in Afghanistan to offer
training to Afghan Police to secure its Western border and monitor the restive
Xinjiang region.
To foster its aspirations, China is heavily bidding for
mining natural resources. Two groups of China’s Metallurgical Group Corp.,
(MCC) won joint bid of $3.5billion undeveloped Mes Ayank Copper Mine field in
Logar province in Central-East Afghanistan. In addition, China is eyeing the
unexplored iron deposits in Herat Province; gold reserves of Badakshan, Takhar
and Ghazni; three copper, two gold deposits and oil basin in Mazar-e-Sharif. (Badakshan
is the headquarters for Turkistan Islamic Party, a militant organization of
Uyghars. Reports confirm that Chin is conducting joint counter-terrorist
operations with Afghanistan in this region).While mining operations which
include construction of roads, power generation units would boost employment
opportunities for Afghan youth, with American troops all set to withdraw,
Chinese plans might be hampered. Interestingly, China chalked out alternative
plans to brace the prospect of Taliban taking over crucial areas around
Kandahar. Chinese companies have started paying Taliban to prevent any attacks
on their mining investments. Further, Russia and China citing IS threat in
the region asked the UNSC to withdraw sanctions against select Taliban leaders.
But as of now, Mes Ayank, the largest copper deposits lying
beneath the ruins of blown out Bamiyan Buddha statues has become a bone of
contention. China won the contract in 2008 but the mining work hasn’t started
till now. While President Ghani is keen on tapping the $1 trillion worth
mineral deposits to mitigate the tapering foreign aid, there is stiff
opposition from environmentalists and archeologists from mining this region. In
the meanwhile, China is demanding slashing of royalties to begin the project.
But such an agreement would potentially dent Afghan government’s revenue. With
Taliban expanding their offensive and extending control over newer territories,
Afghan government is in tight situation and might give into Chinese demands.
Afghanistan is at cross roads of Central Asia and South Asia and gateway to the
Persian Gulf region. It is last straw in China’s great game, China’s renewed
interest in Afghan security and Afghan peace process testimonies the same.
India
India and China have been active trading partners for long.
But India must be wary of burgeoning bilateral trade imbalances that run close
to $53 billion. Cheaper Chinese products inundating Indian markets are stunting
India’s manufacturing industry. While splurging on profits from Indian markets,
China is not only restricting entry of Indian goods into their markets but
stifling Indian rise globally. China’s intransigence towards India’s entry into
Nuclear Suppliers Group and blocking sanctions against Masood Azhar mirror the
same. China is making strategic investments in Indian startups like Paytm, Snapdeal,
MakeMyTrip, Ola, Hike, Ibibo which rose of $2.3 billion. But experts suggest
that Chinese investors altogether have wider interests in India. Now they are
increasingly focusing on merger and acquisitions.
By and large, China is significantly expanding its foot hold
in South Asia through strategic investments pivoted on “China First” doctrine.
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