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China’s One Belt, One Road Initiative And Asia Is A Crucial Trade Route Starting Point, Part 2, India Is A Problem

ArmchairTechInvestor, May 28, 2018, by Brad Peery

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Below are summaries of the OBOR initiatives in the countries covered in the Asia Part 1 Region.


*“India’s exports expanded by 9.9% year-on-year (YOY) to US$191.3 billion in the first eight months of 2017, while imports grew 27.2% YOY to US$288.8 billion in the same period. India’s major export markets included the UAE, the U.S. and Hong Kong. Major import sources were China, the UAE, Saudi Arabia, Switzerland and the U.S.”

India’s technology services sector is a very important export source. A “Make in India” initiative was launched in September 2014 to make India into a world class manufacturing hub through attracting foreign direct investment (FDI). India recorded an FDI inflow of $100 billion between October 2014 and June 2017, up 64%. As of June 2017, India’s cumulative inward FDI amounted to $342 billion. Mauritius was the largest FDI source for India, followed by Singapore and Japan Cumulative FDI from Chinese mainland amounted to $1.7 billion.

China expressed an interest in setting up economic corridors with many countries in the region, including the Bangladesh-China-India-Myanmar (BCIM) Economic Corridor, which was jointly proposed by China and India in 2013. However tensions with China have increased.

India has concluded several free trade agreements (FTAs) with countries and regions including Afghanistan, Bhutan, Ecuador, Singapore, Malaysia, Sri Lanka, Nepal, Korea, Chile, Japan, Africa, the ASEAN and the MERCOSUR (Brazil, Argentina, Uruguay and Paraguay). India also engages in the Agreement of South Asia Free Trade Area (SAFTA), and the Asia Pacific Trade Agreement (APTA). Currently, India is negotiating FTAs with Australia, Canada, Egypt, Indonesia, Israel, New Zealand, Thailand, the Gulf Cooperation Council (GCC) and the EU.

China’s promotion and financing of its OBOR initiative is creating strains with India. An increase in tensions between these regional heavyweights is not an outcome China advertises.

“A quadrilateral meeting was held between senior officials from the United States, Japan, India, and Australia on the future of a ‘free and open Indo-Pacific.’ India’s participation in the dialogue is yet another signal that China’s method of implementing the OBOR is driving a wedge between China and India and creating an opportunity for the United States to strengthen its ties with New Delhi.”

One result of China’s OBOR initiative is that the Indian Ocean part of the Initiative threatens to surround India. So far that has not occurred.

******Beijing’s handling of territorial disputes in the era of OBOR has increased tensions in the region. The OBOR vision statement claims “Principles of Peaceful Coexistence” which include a “mutual respect for each other’s sovereignty.” Contrary to this principle, China has escalated sovereignty disputes by pressing territorial claims against its neighbors.

In the South China Sea, China has challenged Vietnamese claims by moving a state-owned oil-rig into disputed waters and constructed on disputed features in the Spratly Islands:
• Airstrips suitable for military aircraft; and,
• Other military installations,

On the Doklam Plateau in 2017, China challenged Bhutan’s sovereignty by attempting to extend a road into disputed territory. This lead to a military standoff with India, Bhutan’s protector. These actions directly contradict the OBOR vision statement and send a signal to China’s neighbors that it will aggressively use its power to assert claims over disputed territories. Neighboring states are now forced to consider how China’s OBOR investments may be leveraged to strengthen its position on competing territorial claims.

China’s OBOR Initiatives are challenging India’s territorial claims in Kashmir. The China-Pakistan Economic Corridor goes through territory in Kashmir that Pakistan controls and India claims. India believes that China has abandoned its neutral stance and sided with Pakistan. “China’s failure to address Indian concerns was the initial cause of New Delhi’s reluctance to join the One Belt, One Road Initiative. China’s unilateral implementation of its vision for the OBOR Initiative over Indian objections has increased bilateral tensions.

India has additional concerns in the Indian Ocean. “China has invested in port facilities in states surrounding India including Pakistan, Myanmar and Sri Lanka. Investment in these ports has given rise to the “string of pearls” theory which speculates that China will leverage these facilities for military use. When viewed on a map, these maritime investments represent the encirclement of India at sea. The Chinese docked attack submarines at a Chinese-constructed port in Sri Lanka. This indicates a militarization of these OBOR-related investments in India’s island neighbor. Naval encirclement is a significant security concern, as India depends upon sea transport for about 90 percent of its international trade.

“India is also concerned about shifting regional security alignments because of Chinese investments in its land and sea neighbors. Indian Foreign Secretary Jaishankar commented on New Delhi’s concerns about the potential consequences of the OBOR in March 2016: The interactive dynamic between strategic interests and connectivity initiatives … is on particular display in our continent… We cannot be impervious to the reality that others may see connectivity as an exercise in hardwiring that influences choices” they make.

India pundits have expressed concerns that countries such as Sri Lanka will get trapped in debt and servitude to China, as they did. Sri Lanka’s debt default resulted in China getting control of a deep-water port at Hambantota for 99 years in a debt for equity swap. In this exchange, the PRC gained a potential “pearl” to add to its string. Sri Lanka has actually renewed ties with India due to concerns about undue Chinese influence stemming from its debt. “If future trends align with the projections of OBOR critics, the PRC could parlay economic investment into puppet states that encircle India on land and sea. Unfortunately, if other potential puppet states turn toward India instead, it could still result in increased tensions as Chinese debtors become more entangled with India.”

India signed a bilateral logistics exchange memorandum of agreement (LEMOA) with the United States in 2016, which granted reciprocal logistics access to military bases. With Japan, India has increased security cooperation by selecting Japan as a permanent participant in the traditionally U.S.-Indian Malabar security exercise in 2015. These actions signal an active effort by New Delhi to address its security concerns with China by keeping friendly military powers engaged in the region.

India has also sought to increase its economic relationships with democratic regional powers to promote its own vision for connectivity development. Indian Prime Minister Modi has unveiled the Asia-Africa Growth Corridor (AAGC), a connectivity initiative conceived by India and Japan and seen as a potential counter to the OBOR Initiative. “If India chooses deepened cooperation with democratic powers in the wake of the initial “quad” meeting, it will be another sign of the ever-increasing tensions between New Delhi and Beijing due to the OBOR. More troubling, the ‘quad’ meeting portends a trend toward military and economic polarization in Asia.”
******China’s Belt and Road Initiative Is Stoking Tensions with India, The National Interest, Mitchell J. Hays, November 16, 2017

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