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China in the Indian Ocean Region:

Impacts, Prospects, Opportunities

Client: U.S. Government, Office of South Asia Analysis

Prepared by:

Nathaniel Barber Kieran Coe Victoria Steffes Jennifer Winter

Impact Analysis

Regional Security Energy Issues Non-Energy Economic Relations

Expansionist China Non-Expansionist China Trends to Obstruct or Encourage Opportunities for Future Action

Trends and Prospects

Opportunity Analysis

Impact Analysis: Regional Security

New Chinese partnerships with South Asian states come at Indias expense
Construction of port facilities
Hambantota, Sri Lanka Chittagong, Bangladesh Sittwe, Burma Gwadar, Pakistan

Economic and military aid

Impact Analysis: Regional Security

Issue Area China Diplomatic Competition Alliances Hambantota, Win Sri Lanka Chittagong, Win Bangladesh Sittwe, Loss Burma Gwadar, Win Pakistan India Competition Loss Loss Win Loss Relevant Regional Players Win Win Win Win Win

Impact Analysis: Energy Security

Definition of energy security:

Availability Reliability Affordability

China and India face three primary energy security risks

High proportion of oil imports Reliance on dominant oil exporting countries Dependence on vulnerable sea lanes

Impact Analysis: Energy Security

Impact Analysis: Non-Energy Economic Relations

Increasing Chinese Trade in the Indian Ocean region Indias Trade Deficit with China Foreign Direct Investment by China and India

Impact Analysis: Non-Energy Economic Relations

Prospects and Trends: Assumptions

Expansionist China
Non-Expansionist China Likelihood Scale
Very unlikely Unlikely Somewhat unlikely Plausible Somewhat likely Likely Very likely

Prospects and Trends: Regional Security

Prediction Outbreak of a major armed conflict China and India open and/or expand security partnerships and information-sharing agreements China engages India in a proxy war via Pakistan Expansionist China Non-Expansionist China 0-10 Years 10-20 Years 0-10 Years 10-20 Years Very Very Unlikely Very Unlikely Unlikely Unlikely Very Unlikely Somewhat Very Likely likely Very Unlikely

Very Unlikely


Somewhat Unlikely

Very Unlikely

Prospects and Trends: Energy Security

Prospects and Trends: Non-Energy Economic Relations

Prediction China widens its trade surplus with India China seeks to expand economic influence with India's neighbors China and India cooperate to reduce trade imbalance China and India sign a free trade agreement Expansionist China Non-Expansionist China 0-10 Years 10-20 Years 0-10 Years 10-20 Years Somewhat Somewhat Somewhat Plausible Likely Likely Likely Very Likely Very Likely Very Likely Very Unlikely Very Unlikely Very Unlikely Very Unlikely Very Likely

Plausible Somewhat Unlikely

Plausible Plausible

Opportunity Analysis: Trends

Trends to Obstruct
Chinese FDI to regional states Chinese-financed and built ports

Trends to Encourage

U.S.-India relationship Indias relationship with regional states Indian and Chinese acquisition of energy resources Chinese-Indian trade Membership in international energy organizations

Opportunity Analysis: U.S. Action

Strengthen U.S. relations with India Expand relations with Chinese-courted regional states Maintain naval superiority in the Indian Ocean Ensure energy security for South Asian states Pursue a less unequal trade balance with China