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Can the Dragon and Elephant Dance Together? Sri Lanka as a Case Study
Published Date: 10/08/2018 (Friday)

Key Points

  • Despite concerns to the contrary, China and India are not necessarily at loggerheads with each other in Sri Lanka. There is enough space in the Indian Ocean Region for both to grow.
  • Sri Lanka can benefit in its overall growth story by carefully balancing its relations with India and China simultaneously.
  • It is imperative for both India and China to overcome their long-standing trust deficit; a stable region is a key element if both are to enjoy continued robust economic growth.
  • A direct, large-scale locking of horns between the two Asian giants does not appear likely in the near future, although both will strive to maintain equally assertive stances.


From the Rohingya refugee crisis in the east to the Islamic State (ISIS) in the west, the evolving political crisis in the Maldives, diplomatic crises and the brewing signs of a Cold War 2.0 between Russia and the United States, and recurrent ceasefire violations along the Lines of Control with China and Pakistan, India, by virtue of its centrality and strategic vantage point at the heart of Indian Ocean Region, is at the locus of many of the world’s most pressing geopolitical developments.

For India, the most pressing issue of all, however, is the sense of a rising tide of Chinese influence that, it feels, now extends all the way into its backyard. As one report notes:

From all accounts, India’s encirclement has begun with ruthless efficiency. Pakistan is gone. Maldives is about to fall. Nepal is almost there. And Sri Lanka is under an understandable hypnotic trance. India genuinely faces its most serious security challenge.

India, therefore, feels an acute need to secure its periphery and its neighbouring states from failing and, perhaps, falling under Chinese influence due to the latter’s seemingly bottomless funds. To prevent a further reduction in trust due to mutually heightened suspicions, it becomes more important than ever for India and China to work together to reduce their longstanding trust deficit while enhancing co-operation and building an environment of regional stability.


In Sri Lanka, India’s Loss Is China’s Gain

China, by virtue of its economic strength, has expanded its global influence and built strategic ties across Africa, the Pacific, Asia and other regions. It has managed to leverage support for its China–Pakistan Economic Corridor (CPEC), which is part of its One Belt, One Road (OBOR) initiative, to fulfil the “China Dream”, as the Communist Party leadership calls it, of turning China into a global superpower and the world’s pre-eminent state.

Under the guise of connectivity projects, one objective of the CPEC could be to alleviate China’s “Malacca Dilemma”:

These straits are important, as roughly 80 per cent of China’s Middle Eastern energy imports pass through this narrow stretch of water. Most of the oil that China imports has to go through the Malacca Strait and then via the South China Sea, which not only costs time and money, but, due to the volatile nature of the region, if tensions were to flare, the Chinese economy could be heavily affected. With projects like OBOR and CPEC, the hope is that China will be able to pump its oil supplies from the Middle East through pipelines to Xinjiang thereby cutting short the trade route for China’s oil imports.

Sri Lanka, which is a major component of the so-called “string of pearls” strategy, assumes great significance in its plans. The ninety-nine-year lease granted to China for the Hambantota port could cost India dearly. The Sri Lankan Government had first approached India to develop the port but, back then, the Indian Government showed little or no interest. China, however, was willing to step in. That lack of economic foresight has cost India heavily, with threat perceptions in New Delhi growing at an alarming level given the proximity of Sri Lanka to India.

One analysis puts it in stark terms: ‘China has for decades invested in Sri Lanka, particularly during moments in recent history when much of the international community held off. China supplied the Rajapaksa government with military aid and it promised to spend to rebuild the country’s damaged infrastructure’. In 2012, Sri Lanka launched its first communication satellite with Chinese assistance from the Xichang Satellite Launch Centre in western China after it refused India’s offer to launch it.

The Sri Lankan Government, furthermore, announced that a Chinese-led consortium would build three 60-storey office towers next to the main port in the capital of Colombo, the region’s only deep-sea container facility. The possibility of Chinese warships and submarines docking in Sri Lankan ports is, for New Delhi, an obvious point of concern. That China has also earmarked US$1.4 billion for reclamation work for the wider Colombo International Financial City development project only increases apprehensions in India that the so-called string of pearls is being placed around its neck. The hoisting of the Chinese and Sri Lankan flags over the Hambantota port on New Year’s Day 2018 will have done little to reassure India. Neither will a recent report that states:

The decision by Sri Lanka to move a naval unit to the Hambantota port, now leased to the China Merchant Ports Holdings Ltd for period of 99 years, [which] isn’t good news for New Delhi. With reports [appearing elsewhere] in the media that China is considering “gifting” a frigate to the Sri Lankan Navy, it seems clear that a process for the creation of a Chinese naval outpost in India’s near-neighbourhood has just begun.

China’s growing economic and military presence in the Subcontinent and the Indian Ocean Region are making India increasingly anxious. That anxiety has the potential to result in prolonged friction between the two Asian giants. As one analyst notes, ‘The overarching reality is that China’s absolute and relative power vis-á-vis India (and all other powers in the world) has dramatically risen, thanks to decades of economic reform and sustained high growth rates.’ China has also recently upped its military budget by 8.1 per cent, according to the latest report by the Stockholm International Peace Research Institute. While New Delhi has looked on nervously, China has effectively displaced India’s commercial and strategic interests in Sri Lanka, eroding India’s sphere of influence.

But China’s Mismanagement is India’s Gain

The importance of Sri Lanka in India’s strategic calculus is undeniable. India and Sri Lanka share common cultural connections, along with a shared security space and the concerns that emanate from it. India, as a prominent actor in the “Asian Century”, has a special responsibility to ensure peace and stability in its immediate neighbourhood. It is time for India and Sri Lanka to recognise the validity of each other’s concerns and to operate in ways that are mutually beneficial. Therefore, India is again reaching out to its island neighbour with economic and cultural diplomacy tools, while Sri Lanka is simultaneously trying to bring India in to balance China, as a certain sense of unease towards China grows within the government of President Maithripala Sirisena.

The rising debt burdens now being experienced by such countries as Sri Lanka, Pakistan and the Maldives have raised questions about the viability of cheap Chinese infrastructural loans that appear to be accompanied by land grabs: ‘though touted as a global partnership by China, OBOR is actually an exploitative, colonial stratagem to gain vital assets in small countries’. A case in point is the Mattala Rajapaksa International Airport in Hambantota, built with Chinese assistance. Unable to repay the China EXIM Bank, Sri Lanka has now entered into a joint venture with the state-owned Airports Authority of India to manage the airport and enable it to repay the Chinese loan. ‘BRI raises the risk of debt distress for 68 countries identified as potential borrowers if the programme follows Chinese practices for infrastructure financing, which often entail lending to sovereign borrowers.’

It does, however, present an opportunity for India to propagate an alternative with the help of other likeminded countries such as the United States, Japan and Australia by making the local population of the country concerned the main stakeholders of their development. India’s Economic Times makes the point that:

Interest rates of India’s line of credit to the neighbouring countries are as low as one per cent, or even less in some cases, whereas Sri Lanka’s estimated national debt is US$64.9 billion, of which US$8 billion is owed to China – this can be attributed to the high interest rate on Chinese loans.

India cannot match China’s deep pockets but could utilise its experience of enhancing human resource development and its contributions to the building of democratic institutions in countries like Afghanistan, Bangladesh and Sri Lanka. From military modernisation to extending the “Buddhist Circuit” in Sri Lanka, India can help to improve people-to-people contacts among those who may already be experiencing stress as a result of China’s ambitious projects.

Sri Lanka today presents India with an opportunity to renew and strengthen its ties to its island neighbour. Even so, there are some in Sri Lanka who fear – perhaps not entirely without reason – that, to balance both India and China, it is selling its national assets; something which does not come without risks. Nevertheless, while India is determined to check Chinese ambitions in South Asia, Sri Lanka can benefit from cultivating closer ties with India without compromising those that it has with China. Ideally, China’s economic heft and India’s human resources could be synergised to build a new Sri Lanka and the two giants’ tug-of-war could be replaced by the shaking of hands.

As Indian Prime Minister Narendra Modi has correctly observed, ‘India and China are bound by history, connected by culture, and inspired by rich traditions. Together they can create a bright future for the entire mankind’. As he enjoys doing, Mr Modi employed an anagram to characterise the future possibilities of the bilateral relationship as: “INCH (India and China) towards MILES (Millennium of Exceptional Synergy)”. India and China are indeed trying to reset their relations and inch closer after the Doklam standoff through various bilateral channels and such multilateral forums as BRICS and the Shanghai Co-operation Organisation.

Nevertheless, irritants continue to loom. Among them are the boundary dispute, China’s growing engagement in the Indian Ocean Region and the CPEC, which runs through territory that is also claimed by India. The disparities in Sino-Indian military capabilities and China’s economic heft and infrastructural foothold in the global arena play well for China and leave India in an uncomfortable position. Consequently, as one analyst has observed:

Delhi must strive to retain its strategic space amid the expansion of the Chinese footprint and, at the same time, avoid the escalation of differences into disputes. Any reset would necessarily include an effort to widen the areas of co-operation that will provide some balance against the many negative factors that are unsettling bilateral relations.

For a truly Asian Century, the two giants need to replace their trust deficit with better engagement and build a future based upon co-operation to show that there is enough space for both India and China to grow. That can only be achieved in an environment of regional stability which will ultimately be opportune for both. The twenty-first century should be an era of “win-win” strategies, rather than a zero-sum game.



About the Author

Saloni Salil is an independent geopolitics and security analyst. She has held honorary positions in various organisations and has a number of published works among her credentials. She has also been associated with Future Directions International, as a Visiting Fellow in the Indian Ocean Research Programme since 2012. She authored a monograph titled ‘China’s Strategy in the South China Sea: Role of United States and India’, along with several other publications on maritime security and power struggles. Her research areas include the Indian Ocean Region, South China Sea and Indo-Pacific Studies. Ms Salil contributes to the growing discourse on the concept of the Indo-Pacific and major power intentions in that region.

Source: The Future Directions

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