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International relations

Belt and Road Initiative stokes India-China confrontation

Beijing's infrastructure plans are making big Asian neighbors nervous

| China

Chinese warships recently entered the Indian Ocean, with some heading for the Maldives Islands, where a constitutional crisis has been playing out. China wants to keep India away from the islands, which New Delhi sees as within in its own sphere of influence. China has built port facilities in the Maldives as part of its "string of pearls" scheme -- road and sea infrastructure projects that encircle India. Sino-Indian tensions intensified after the Maldives president signed up to China's Belt and Road Initiative. Even in the BRI's infancy, we are watching in real time how BRI is promoting as much confrontation as commerce.

The conflicting trends of confrontation and commerce are closely connected. Both have evolved from China's rising economic heft. China's growth has been quite uneven, so the BRI was designed partly to address domestic regional imbalances. Yet, the country's reliance on imported energy and commodities dictates a strategy to shorten and secure supply lines on land and sea. Building power and transportation infrastructure outside China is a way of alleviating excess capacity at home, rebooting Chinese manufacturing, bolstering state-owned enterprises, and establishing China's own technologies and product standards. From an economic point of view, the BRI is very much a Sinocentric strategy from which small countries might benefit, while provoking resentment among larger ones.

The BRI's geopolitics is not just about the romance and myths of the old Silk Road. It is also about China's presenting an alternative authoritarian model to the world, and trying to influence the political environment in its expanded neighborhood. In 1990, Edward Luttwak, the political scientist, described "the logic of conflict in the grammar of commerce" in writing about the apparent change in emphasis from geopolitics to geo-economics in the post-Soviet world. The phrase fits the BRI to a tee. This does not figure in descriptions of the BRI by the Chinese or anyone else, but trade and investment have a purpose.

Although one can read thousands of articles on BRI projects and financing, the key question is cui bono (who benefits)? Apart from China, that is. The most relevant neighborhood for China is Central Asia, which is rich in energy and serves as a strategic conduit between western China and Europe and the Middle East. But it is neither populous nor at the cutting edge of global development.

Northern Asia is fully developed. Though Southeast Asia is highly developed, there are certainly projects that China can do in Indonesia, the Philippines and Thailand. But China's projects in the region are now mainly with smaller, poorer countries such as Cambodia, Myanmar, Nepal and Vietnam. This goes for the African continent too. Central and eastern Europe and Greece offer BRI opportunities, but EU laws on procurement and data mean that China's opportunities are limited, just as they are for foreign companies in China.

The potential jewel in BRI's crown is southern Asia, where China is already heavily involved in promoting projects with its longstanding ally, Pakistan, as well as in Sri Lanka and Bangladesh. But India is absent. And here's the rub. India, along with Japan, the U.S. and Australia, is starting to push back against China, possibly with important implications.

Japan is important, not least because of its troubled history with China and lingering distrust on both sides. In view of U.S. policies under President Donald Trump, Prime Minister Shinzo Abe is leading a Japanese rethink about alliances, national interests, and above all, defense budgets and strategy. In 2016, Abe outlined a new development and security plan for Asia, which included proposals for "quality" regional infrastructure, as a sort of riposte to China. Last year, the Ministry of Foreign Affairs announced that its official development assistance program would be used to promote a "Free and Open Indo-Pacific Strategy," in a subtle dig at China. Since then, Japan has also signed up to the revised Trans-Pacific Partnership trade agreement, which excludes China.

India was the only invited country that did not show up at China's Belt and Road Forum in 2017 in Beijing. There is latent mistrust between India and China, not least over the latter's courtship of Pakistan, which is contesting India for disputed lands in Kashmir and Gilgit-Baltistan. India also does not like China's encroachment into its natural sphere of influence in Sri Lanka, Nepal and Bangladesh; its activities in the shared border areas in the Himalayas; or the encircling "string of pearls" of port facilities that link China to Myanmar, Bangladesh, Sri Lanka, Pakistan and Djibouti. India's former national security adviser, Shivshankar Menon, declared last year that the China-Pakistan Economic Corridor is "not acceptable to us".

Although it lags behind China in terms of economic strength and infrastructure reputation, India is forging closer ties not just with its regional allies in the Indian Ocean region, but also with the U.S. and Japan. It is working with Japan to develop energy, power, port and transport infrastructure projects in Sri Lanka, Bangladesh and Myanmar. India is also engaged in a four-way dialogue with the U.S., Japan and Australia to develop an alternative strategy to BRI that would appeal to Asia.

Closer cooperation among these four nations would be an important signal to Southeast Asian countries, which are closely tied to China on a trading basis but are also natural political and military allies of the U.S.

China's BRI narrative is that rising trade and infrastructure financing will foster stability, development and growth in the region. But as the case of the Maldives Islands shows, there is another narrative in which commerce and competition can result in confrontation. And where there is no infrastructure for dialogue, we must be vigilant.

George Magnus is an associate at Oxford University's China Centre and former chief economist at UBS. He is author of the forthcoming book, "Red Flags -- Why Xi's China is in Jeopardy" (Yale University Press).

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