Prime Minister Modi and Chinese President Xi Jinping seem to have built a rapport
Prime Minister Modi and Chinese President Xi Jinping seem to have built a rapport

“India has to recognize that whether in Sri Lanka, Bangladesh or Nepal, the essential political thrust of Chinese economic support is to prop up regimes that are given to being anti-Indian. It is noteworthy that when President Xi was in Dhaka, he met Begum Khaleda Zia (who avoided calling on President Pranab Mukherjee) and even proposed party-to-party links between the CPC and BNP (China recognized Bangladesh in 1976, a year after Sheikh Mujibur Rehman was assassinated). It is evident that India does not have the resources to quantitatively match Chinese assistance even to its South Asian neighbor”, says the author.

The BRICS Summit in Goa had a salutary effect. For too long have people in India been carried away by the illusion thatChina will show better understanding of India’s strategic imperatives, if only we opened our doors to trade and investment and obliged Beijing, “accommodating” its wishes by diluting our relations with the US. Such illusions about China prevailed, despite the fact that we refrained from voicing concerns about its unprecedented assistance to Pakistan’s exclusively “India-centric” nuclear weapons and missile programs. President Xi Jinping made it clear in Goa that China would not countenance even any oblique reference to Pakistan’s sponsorship of cross-border terrorism, or its involvement in the Uri attack. To add insult to injury, China announced its intention to supply Pakistan eight submarines, barely a week after Xi left India!

Pakistan has been and remains Beijing’s principal tool in its “strategic containment” of India. China’s Mandarins have also been more than forthcoming in providing military and economic assistance to India’s South Asian neighbors to undermine India’s regional influence. Beijing has also sought to back leaders in South Asia, who are less than friendly to India – most notably recently in Sri Lanka and Nepal. India has to, however, recognize the reality that it just does not have the resources to match Chinese economic assistance to governments in its South Asian neighborhood and beyond to the shores of Africa. We should also understand the realities that shape Chinese economic assistance worldwide. The Chinese Export Import Bank and the apex China Development Bank providefunding for Beijing’s aid projects, with interest rates generally varying between 2 per cent and 3 per cent.

With its foreign exchange reserves now crossing $4 trillion, following double-digit economic growth over a decade, China’s Overseas Development Assistance has averaged around $174 billion annually in recent years. This poses a challenge to the US and Western/OECD aid organizations, including the World Bank and Asian Development Bank. But, unlike the terms of Western assistance, which are largely untied and concessional, Chinese assistance has conditions that give it an exploitative orientation. Chinese assistance is marked by very substantial use of Chinese labor, machinery and equipment, with very little transfer of technology or expertise. As much as 50 per cent of imports required for “aid” projects have to be sourced from China. Moreover, experiences in Africa have shown that while the large number of Chinese workers in infrastructure and mining projects are required to be provided comfortable living conditions, the Chinese are parsimonious in payments to local labor.

China’s dependence on imports of oil and gas is steadily growing. Chinese investments and economic assistance in minerals and energy-related projects are simultaneously growing significantly in Africa, the Gulf Region, Central Asia, and Latin America. China is involved in exploration for gold in Eritrea and Zimbabwe, for platinum and diamonds in Zimbabwe and South Africa, for uranium in Niger and aluminum in Egypt. China has secured a $2 billion contract for the Kingfisher oilfield inUganda. It has built the largest hydropower project in Africa, along the Ethiopia-Sudan border. China’s ability to move swiftly and act decisively in the wake of the shale revolution has led to its securing large investment opportunities in Iraq and Iran in the oil and gas sector. This is reportedly evoking Saudi concern.

Closer to India in South Asia, there is growing awareness of the mercantilist elements in so-called Chinese aid, where Sri Lanka realized that the Colombo Port City project was a Chinese rip-off. Likewise, in Myanmar, there is growing resistance to Chinese involvement in mining of precious stones and its callous disregard for environmental considerations in huge projects like the proposed Myitsone dam. Healthy skepticism about Chinese offers of aid is also evident in Bangladesh. During the recent visit of President Jinping to Bangladesh, China agreed to aid 22 projects, amidst calls for scrutiny of repayment liabilities.

Pakistan received $135 billion of Chinese financing between 2001 and 2014. It is now scheduled to receive $46 billion in financial assistance for its OBOR project. This project has become controversial because it primarily benefits only the dominant Punjab province. It has evoked criticism in both Khyber Pakhtunkhwa and Balochistan provinces. The Balochis are already not too pleased by the way their province has received virtually no benefits/royalty from the exploration of gold, silver and copper from the Aynak mine at Chagai Hills, where Pakistan’s nuclear tests were carried out. Moreover, while the Chinese would evidently like the Pakistan army to take over providing facilities and security for theproject, the Nawaz Sharif government does not relish the idea. Finally, the IMF has made it clear that the project is, in coming years, going to create new problems on debt repayment and current account deficit, given the way the repayment liabilities are structured.

Despite all these factors, India has to recognize that whether in Sri Lanka, Bangladesh or Nepal, the essential political thrust of Chinese economic support is to prop up regimes that are given to being anti-Indian. It is noteworthy that when President Xi was in Dhaka, he met Begum Khaleda Zia (who avoided calling on President Pranab Mukherjee) and even proposed party-to-party links between the CPC and BNP (China recognized Bangladesh in 1976, a year after Sheikh Mujibur Rehman was assassinated). It is evident that India does not have the resources to quantitatively match Chinese assistance even to its South Asian neighbor. But, we need to recognize our relative strengths and weaknesses and firm up our assistance programs accordingly. We also need to carefully study the strengths and weaknesses of Chinese aid programs. The agenda of the tripartite India-US-Japan dialogue should be expanded to discuss how best this grouping could pool its resources to meet the challenges posed by the growing economic clout of China. Japan and the US can, in turn, carry out a similar exercise with their OECD partners. Given Chinese hostility, it is imperative for New Delhi to devise a comprehensive strategy to protect and promote its interests across its Indian Ocean neighborhood and indeed across the entire Indo-Pacific Region.

(The author is a career diplomat)