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Ms. H. V. D. Soysa South Asian Studies PGD/12/A/39/E Dr. Sinharaja Tammita Delgoda 01 (Written) Rising Chinas growing presence in South Asia and the Indian Ocean. Will this affect Indian hegemony in the region? 2011/2012 (B)

ACADEMIC YEAR

Rising Chinas growing presence in South Asia and the Indian Ocean. Will this affect Indian hegemony in the region? There is no doubt that this century is the Asian Century and super power crown is transforming from West to the East and crown is floating in between China and India. China will take over USA in 2018 as the worlds largest economy, says an economic game published in December 31st edition of the economist. India is nowhere near the two; interestingly at least, nowhere near China. The Economic barometer is pointing towards a Chinese economic world no later than 2020. 1 And it is important as both of the countries are finding stand up against West. By the time it will decide whether it is China or India but as an Asian nation we can be in high spirits because at the end of the day it is anyway Asia. China and India have come long way since 1962, fought for brief boarder war. Both countries are rapidly growing there economies, not only that but also they are increasing mutual trade and bilateral relations. Both countries have different political systems, India is the worlds largest democracy and China is still under communist government control. China and India, as the fastestgrowing of the BRIC economies and making substantial and rapidly growing out put to the world. 2.4 billion people or 40% of the world population live in India and China and with such a human power both countries are leading to become the world powers. China is the fourth largest country by landmass and has a population of 1.3 billion people. It was originally a sate-run economy, but after the death of Mao Zedong, Deng Xiaoping introduces major economic transform that changed it from a state-run economy to a more capitalist economy. And this influence China in magical way for its development. China is the worlds fastest-growing major economy, with an average growth rate of 10% for the past three decades years. (Wikipedia) GDP (purchasing power parity): US$9.872 trillion (2010 est.) GDP global rank : #3 (behind the European Union and the U.S.) GDP, real growth rate : 10.3% (2010 est.) GDP, per capita : US$7,400 (2010 est.) Labor force : 819.5 million (2010 est.), #1 global ranking Population below the poverty line: 2.8%
[ Source: CIA World Fact Book, accessed 2011 ]

Bishwajit Okram. India vs. China the elephant can not fly the dragon unless winged, 12 January 2012

Figure 01: GDP (in trillion), Source World Bank: CIA Fact book 2010

As shown in the figure 01, in 2000, China topped Italy to become the worlds sixth-biggest economy. In 2005, China overtook France to become the fifth-largest. In 2006, it moved up again by knocking off the U.K. In 2007, China became the third-largest economy by topping Germany. During 1978-2006, China achieved an average annual growth of 9.6% in real GDP. Two different ways are currently used to measure GDP: in nominal dollars using official exchange rates and in PPP dollars using the actual buying power of currencies. Measured in PPP dollars, Chinas GDP in 2006 was $10.5 trillion, compared with $12.9 trillion for the US, $13.0 trillion for the EU, $4.1 trillion for Japan, $3.9 trillion for India, $2.6 trillion for Germany and $1.9 trillion for the UK. China is the third largest economic bloc after the EU and the US and the second largest economy after the US. 2 China is the worlds largest consumer and producer for many industrial and agricultural products such as steel, cement, coal, television, cloth, cotton and etc. China has a drastic development in infrastructure development and educational sector as well. To develop a country far most important thing is to invest in countries education system. In 1978 China had only 598 Universities and it was only sufficient to facilitate 0. .4 Million student, but in 2006 it had 1,800 universities and eligible to facilitate over 5 million student and sending another 120,000 students abroad.

Shujie Yao, Can China Really Become the Next Super Power, The University of Nottingham, China Policy Institute, April 2007

Figure 02: Top three countries by the Economic dominance Most of the economist are predicting and forecasting that the China will over take US economy power in the near future and will be the economic giant in the world. According to the Arvind Subramanian of the Peterson Institute for International Economics argues that China's economic might will overshadow America's sooner than people think. As per Arvind Subramanian in 2030 Chinas economic power will be equal to the US economic power was in 1973 and Indias economic power will matches the Japans was in 2010.

Indian Ocean

Indian Ocean is the Eastern boundary of the African continent reaches out to the Middle East by the Persian Gulf washes the shores of the Indian sub-continent and links up with the South China Sea. There is no secret that the Great Game of the century is playing and will play in the Indian Ocean and for the Indian Ocean. Both emerging super powers are trying to dominate their power in the Indian Ocean to gain the maximum benefit of it. But, why Indian Ocean? Indian Ocean is the key to the seven seas. Indian Ocean has tremendous geo-strategic importance. Its the lifeline of international trade and links Atlantic with the Pacific Oceans and critical for global economic prosperity. It carries the half of the worlds container ships, 1/3 of bulk cargo traffic and 2/3 of the worlds oil shipments. Both India and China are running there trade with high volume with the support of Indian Ocean. Indias mercantile trade is concerned almost 90% of it by volume and 77% of it by value carried by sea. Chinas rapidly growing economy has made it increasingly dependent on foreign imports of fuel and other raw material. China became the net oil importer in 1993, second largest consumer oil in 2003, and the largest importer of oil by 2004. 3

Erica S. Downs and Jeffrey A. Bader, Oil -Hungry China Belongs at the Big Table, Brookings Institution, September 8, 2006, at http://www.brookings.edu/opinions/2006/0908china_bader.aspx

In 2010, Chinese oil imports are expected to total 210 million tons, a 5.5% increase over2009 imports.4 Much of this oil is brought to china by tankers from Persian Gulf via the Indian Ocean and the Strait of Malacca. So the Indian Ocean is becoming more important to Chinese economy and security interest. Strait of Malacca which runs for 600 miles between Thailand, Malaysia and Singapore to the east and Sumatra to the west in Indonesia. Some estimates that more than 50,000 ships pass through the Malacca strait annually, transporting 30% of the goods traded in the world including oil from the Persian Gulf to major East Asian nations like China, Japan and South Korea. As many as 20 million barrels of oil a day pass through the Strait of Malacca, an amount that will only increase in the near future. More than 50% of Indians trade while more than 80% of Chinas oil needs go through the Malacca Strait; this makes the Strait one of the worlds most vital strategic water passages.5

Figure 03: String of Pearls China is into the strategy of String of Pearls with the mission of to protect its economy and security interest and as well as to balance the rising India. This string of pearls (Figure: 03) strategy of bases and diplomatic ties includes the Gwadar port in Pakistan, naval bases in Burma, electronic intelligence gathering facilities on islands in Bay of Bengal, funding construction of a canal across the Kra Isthmus in Thailand, a military agreement with Cambodia and building up of forces in the South
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China expects 5% Growth of Net Oil Import in 2010, China Daily, March 22, 2010, at http://www.chinadaily.com.cn/china/2010-03/22/content_9625216.htm 5 Johannes Dragsbaeks Schmidt, India China Rivalry and Competition in Southeast Asia at https://docs.google.com/viewer?a=v&q=cache:DQAzxQnvWGsJ:vbn.aau.dk/files/61143145/India_China_Rivalr y_and_Competition_in_Southeast_Asia_pres_in_Delhi.vbn_version.docx+india+china+rivary+and+competition +in+southeast+asia&hl=en&gl=lk&pid=bl&srcid=ADGEESheRUOoCpywE0yCZJM9PbvrELpb_dOZhx6sIJRYnrGPEji arRl4nQiAzlg4951J_Trd8dPM8c-8gItfL7FkEZBW3LtqnMB-yPXenpfaW6-jCY-Rto-E70WCeveaTOwwp1z7fnH&sig=AHIEtbSHKzrm6hCLC3il__23Bi8q3HWJxA

China Sea.6 These pearls are to help to build interconnection with several countries along the sea lines from Middle East to the South China Sea in order to strengthen the strategic ties in between China and other related countries as well as to protect Chinas security objectives and energy interest. China is built or building whole range of ports under the rim of the Indian Ocean. All these ports are in the Indian Ocean and meet Indian Ocean. So China eventually through building these ports, will gain the commercial maritime access along the round of the Indian Ocean and they bring the energy, oil and natural gas from the Middle East all the way to Asia. China made a wise decision with inverting in Gwadar port (in Balochitan) which could connect china with oil routes in Western Pakistan. Pakistans highway in Karakoram provides the shortest route from Gwadar to the western regions of china. This route is short, safe and can serve as alternative to the sea route through the pirate prone Strait of Malacca, where currently China transports most of its crude oil imports.

Chinas growing presence in South Asia As a result of String of Pearls strategy of China, it has improve the involvement and presence in the Indian Ocean rim countries. It is a geo-political as well as a geo-economical strategy. China is improving its trade and investment relations with South Asian countries through treaties and bilateral cooperation. Countries like Pakistan, Bangladesh, Maldives, Burma and Sri Lanka are especially heighted under the Chinas relations with South Asia. Sino - Pakistan Pakistan establishes its formal diplomatic relations with China in 1950, and Pakistan is the very first countries to recognize the Peoples Republic of China rather than the Republic of China. Since 1950s Sino Pakistan relationship still remains in a stable path. Once Sino Indian relations deteriorated, China and Pakistan had a further reason to bring into line against their common enemy.

While the two states have not formally aligned against India, both sides clearly benefit from a relationship that can tie down significant Indian assets along multiple fronts and force Indian planners to divide their attention. Thus there are reports that, in the midst of the 1965 IndoPakistani War, China repeatedly charged Indian with violating the Chinese border near Sikkim, at the other end of the Sino-Indian border from Pakistan, raising the specter of an armed response.7 China is an arms supply for many Asian countries and so in a same way China helped Pakistan with arms
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For a detailed explication of the security ramifications of the Chinese string of pearls strategy, see Gurpreet Khurana, Chinas String of Pearls in the Indian Ocean and Its Security Implications, Strategic Analysis, Vol. 32, No. 1 (January 2008), pp. 1-22. 7 For example, see Claude Arpi, 1965 War: The China Bluff, Rediff, September 30, 2005, at htt://www.rediff.com/news/2005/sep/30war.htm

development and access. China has provided the Pakistani military range of military systems, including tanks, naval combatants and combat aircraft. For example, china and Pakistan currently coproduce the K-8 trainer and the JF 17 Thunder/FC 1 Xiaolong. More than that Chinese assistance with missile and nuclear weapons are in to the greater concern. China has supplied Pakistan with the M-11 series of short range ballistic missiles. China has helped Pakistan build two nuclear reactors at the Chasma site in the Punjab Province and is considering building two more nuclear reactors at the same site. One of the first planks of Sino-Pakistani relations was economic, with trade relations started in 1950. China and Pakistan signed a Free Trade Agreement (FTA) in 2006, as well as other numerous agreements and MOUs, including Bilateral Investment Treaties (BIT) to increase the mutual trade and investment between two countries. Pakistan provides china with cheap raw materials and the use of Pakistani ports in return for access to Chinese markets through preferential treatment under FTA. By 2002, bilateral trade amounted to some $ 1.8 billion, and has since grown to some $7 billion as 2008.8 Same time china provided both financing and labor for the Gwadar ports development. (Further discuss in the next secession). Pakistan has a potential to become a hub in the region and china may get more opportunity to grab the benefit from that.

Sino Sri Lanka China also has a long history of peaceful relations with Sri Lanka. Sri Lanka was one of the first noncommunist countries to establish relations with China by signing the Rubber Rise agreement (1952). In 2005 China and Sri Lanka signed a Joint Communiqu to further bilateral relations and provide each other Most Favored Nation (MFN) treatment.

It is not surprising that China has provided Sri Lanka with military and political support during war era, including significant supplies of fighter aircraft, naval combatants and a variety of other military equipments. China has offered Sri Lanka funds in the form of Aid and Preferential credit for various development purposes. China is the first foreign country to have an exclusive economic zone in Sri Lanka and is involved in a range of infrastructure development projects (constructing power plants, modernizing railways, providing financial and technical assistance in launching of communication satellites). China is the leading investor in Sri Lanka and involved in building highways, bridges, a new shipping port and airport as well as a high tech theater. In the post war period, improvements
8

Peoples Republic of China, Ministry of Foreign Affairs, China Pakistan Relations, China Daily , November 14, 2006, at http://www.chinadaily.com.cn/china/2006-11/14/content_732562.htm

in infrastructural development and investments from China in Sri Lanka have been seen to increase. These commercial transactions have created a win-win deal for both countries. Significantly, Beijing has decided to grant Sri Lanka dialogue partner status in the Shanghai Cooperation Organization (SCO) (Growing Chinese influence in Sri Lanka, The National, 8 June 2011). China has been continuously in economic cooperation as well. Two main ongoing projects are Norochcholai Coal Power Project and construction of a large container port at Hambanthota, with $ 300 million in funding from Chinas Export Import Bank. Equally important, Chinese support has the added attraction that Beijing doesnt interfere in the domestic affairs of the nation receiving the aid. This appeal has been at work not only in Sri Lanka, but also in Pakistan and Burma. 9

Relationship with Other South Asian Countries China and Bangladesh, both countries granted each other Most Favored Nation (MFN) treatment in 1984. China doesnt have a FTA with Bangladesh. China provides duty -free access to a list of Bangladeshi products under the Asia-Pacific Trade Agreement, and Bangladesh had offered oil exploration rights to china at Barakpuria. China had also gained naval access to the Bangladeshi Chittagong port, which will bring china closer to Myanmar oil fields and the seas around India.10 China has constructed six friendship bridges, one of the bridges completed in 2008, is very important because it connects the northern and southern part of Bangladesh. China is one of the few states who are willing to support Burma. Burmas Irrawaddy Valley has been a strategic path to China. More than that Burma has potential oil and natural gas reserves. The ability to access those oil reserves would gain limit Chinese vulnerability to interdiction of its sea lines. Not surprisingly, china is helping to construct oil pipelines across Burma and into China. It is also helping to construct new port facility in Sittwe, Dawei and Mergui.11 China has been engaged in numerous security cooperation measures in Burma and China is the largest source of arms for military, supplying a variety of systems, including trucks, artillery and communication equipments. Burma is lying to the east of India and one of the potential area to worry about the involvement of China.

Dean Cheng, Chinas view of South Asia and the Indian Ocean, Heritage Lectures, Published by the Heri tage Foundation, August 31, 2010 10 Pravakar Sahoo,IEG and Nisha Taneja, ICRIER, Chinas growing presence in Indias neighborhood, East Asia Forum, February 5,2010 at http://www.eastasiaforum.org 11 Sutirtho Patranobis, China Creates a Pear in Sri Lanka, Hindustan Times, September 16, 2009, at http://www.hindustantimes.com/special-news-report/News-Feed/China-creates-a-pearl-in -Sri_Lanka/Article454644.aspx

India is highly concerned about chinas growing relations with South Asian countries because India feels it as a threat for their journey towards the super power. There was an era that India was seen as the guardian who would lead South Asia to the growth but not anymore. Some of the South Asian countries have unsolved issues and problems with India. Especially Pakistan and Bangladesh have unresolved issues regarding multilateral trade and economic relations. Some of the issues are geographical, like land boarder sharing or territorial water issues and some are political. As an example Sri Lanka has many issues with India, such as territorial water issue, Tamil Nadu factor and also it is not a secret that India supported LTTE in many ways during the war period. Also there are some economic issues between India and its neighbors. Countries like Bangladesh and Sri Lanka have accused India of creating barriers against their exports. Although Sri Lanka has an FTA with Sri Lanka, Sri Lanka has issues with India over easier entry, caps on imports and Rules of Origin. Bangladesh accuses India of non-traffic barriers to trade and protectionist ant-dumping measures against its exports. Bangladesh also complains against restrictions on trade due to allotting deferent goods to specific ports for Custom clearance, as well as discrimination against Bangladesh at Petrapole. 12 So its clear that India has unsolved issues with its neighbors and it makes negative impact towards India s relations in South Asia and directly it makes positive impact towards China. May be as a result of that Chinas trade with South Asian countries has been rapidly growing up though it was India who has been the major trading partner with its neighbors traditionally.

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Pravakar Sahoo, IEG and Nisha Taneja, ICRIER, Chinas growing presence in Indias neighborhood, East As ia Forum, February 5,2010 at http://www.eastasiaforum.org

Conclusion India and China both rising powers of the 21st century belong to the Asia, both struggling to dominate their power in the Indian Ocean. As motioned above Indian Ocean is playing the most important role in the century. Indian Ocean is the key of seven seas. Zhao Nanqi, former Director General, General Logistics Department of the Peoples Liberation Army(1993) We can no longer accept the Indian Ocean as an ocean only of the Indians. According to the geographical situation at a glance anyone would feel Indian Ocean as a part of India or property of India. It is true that the more than 2/3 of the Indian land is open and touching the Indian Ocean. But it doesnt mean that Indian Ocean is a property of India. Recently, an Asian scholar based in the West (Dr.Toshi Yoshihara) analyzing Chinese writings on Indian Ocean states that in China Mahan is quoted as having said Whoever controls the Indian Ocean dominates Asia. This ocean is the key to the Seven Seas. In the 21st century the destiny of the world will be decided on its waters.

China is already in to the great game with the goal of dominating the power of Indian Ocean. They have a geo-political and geo-economical strategy for that. This will affect Indian hegemony in the region. It is true and proven that some of the Asian countries, like Pakistan, Sri Lanka and Burma have many unresolved issues with India. The smaller nations (Sri Lanka, Nepal and Bhutan) need Indias assistance with development and solving internal problems, but if India doesnt proactively assume leadership in this area, and continues to protect its industries and businessmen from international trade, this opportunity will slip away and spur Chinese interference in the region. 13 So as a result of that China is successfully filling the vacuum. By building the pearls in the Indian Ocean China is decreasing its dependency in Strait of Malacca. And all these small nations are growing their good heart towards the China. More importantly China is not normally involved in domestic political issues when sometime India violating. So these small nations have the freedom to behave around there domestic political arena. One of the earliest strategic analysts known for his knowledge and understanding of Indian history, K M Panniker, wrote in the early 1940s, before India achieved its independence, that the peninsular character of the country and the essential dependence of its trade on maritime traffic would give Indian Ocean a preponderant influence on its destiny, and the economic life of India will be completely at the mercy of the power w hich controls the seas. He also held that India never lost her independence till she lost the command of the sea in the first decade of the sixteenth century, and thus the future of India would depend not on its land frontiers but on the oceanic expanse which washes the three sides of India. Ashok K. Behuria, Cooperation in Indian Ocean: An Indian Perspective, Galle Dialog , December 14, 2012
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Pravakar Sahoo, IEG and Nisha Taneja, ICRIER, Chinas growing presence in Indias neighborhood, East Asia Forum, February 5,2010 at http://www.eastasiaforum.org

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Indian Ocean is sorted as the Worlds energy inter-state and China will have maritime presence and perhaps even naval presence. In all these Asian counties most of them Pakistan, Myanmar and Sri Lanka, Chinese have given significant amount of military aid and economic aid as well as building above mentioned ports. As China will eventually have very close relationship with these countries and so the Beijing Navy can make regular port visits all of these countries and most of the times Chinese will able to use these ports maritime commercial facilities. This will give China two Ocean presence the Western Pacific and the Indian Ocean. India is still behind the China and long way to go to surplus in China as China also improving its power day by day. Chinas economy is roughly 3.5 times bigger than that of India and China is now Indias number one trading partner with bilateral trade increasing from under $ 3 billion in 2000 to almost $ 52 billion in 2008, and is growing almost three times the rate of US- China Trade (Hallinan 2010). Also India is depending on China, it is really important for India to balance the Ch inas rising power. It is a norm that to take something you have to give something. China is spreading its arms all over the Asian region, specially the Indian Ocean rim countries. So when the time comes there is a more probability for China to take the benefit of spreading the good relations among the Asian region. This is a threat for Indias hegemony. It is highlighted that India has lost its good handshake with most of these Chinese friendly countries. It is a good example that the decision of Myanmar to sell the gas from fields where India has made an investment. It made India really disappointed among its own region. India had only been looking at the possibility of routing the pipeline through the Northeast Region. Hegemony is depending on the power, perception and the leadership. There is no doubt that China has already gain the power; economic, military and energy and to be the super power in the world. In some cases India also depending on China. As motioned earlier great game of the century is playing in the Indian Ocean and who ever dominate the power in the Indian Ocean will be the winner. By spreading the friendly arms China already acquire the good perception all around the world especially from the Asian region and also China is leading by standing with the small nations where they really need the powerful hand where India highly ignored. So with the time China will dominate its power within the Indian Ocean with the support and help of the South Asian friendly nations.

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References Harsh V. Pant, Chinas new ties with Maldives, Seychelles, Sri Lanka sink Indias influence over Indian Ocean, YaleGlobal, January 9, 2013 Bishwajit Okram, India vs. China the elephant can not fly like the dragon unless winged, January 12, 2012 J. Mohan Malik, South Asia in Chinas Foreign Relation, Pacifica Review, Volume 13, Number 1, February 2001

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