China-India Brief #142

Guest Column

China-India Competition: The Sri Lankan Perspective

By Chulanee Attanayake    

Photo by Mahinda Rajapaksa on flickr.com

China and India have historically been natural competitors. As the successor states of once-great empires, and home to two of the oldest civilizations in the world, both countries have heavily emphasised historical nationalist narratives to justify their nations’ modern greatness. While India’s nationalist narrative affirms it as a “great nation whose radiant influence molded a wide swathe of the world beyond its boundaries,” [1] China’s patriotic narrative emphasizes how it too was a great nation, and how, unlike India, its influence extended over wide regions of Asia.[2] Even though the two countries shared a friendly relationship in the formative years of the Republic of India and Peoples’ Republic of China, their perceived historical greatness, coupled with an increasingly contentious border dispute, resulted in mutual mistrust, suspicion, and competition. Today, India and China are rising Asian powers with high economic growth and rising geopolitical influence, competing for global leadership. Both, after a period of decline – China after a century and India after about two hundred years – are keen to assume great power status, which they believe is their right.[3] 

While they are competing in regional and global groupings such as the Asia-Pacific Economic Cooperation (APEC), United Nations Security Council (UNSC), and the Nuclear Suppliers Group (NSG), their mututal rivalry is also heating up in their respective backyards. As China moves towards the West and India towards the East, small countries in each other’s immediate neighbourhood have become the battlegrounds in their powerplay. Situated off the coast of India, the tiny island-state of Sri Lanka has become a key example of this emerging contest for influence.

The competition over Sri Lanka has only been a recent phenomenon. Historically, Colombo has maintained a cordial relationship with both countries. India is Sri Lanka’s closest neighbour and shares a legacy of cultural, linguistic, intellectual, and religious interactions. New Delhi’s constant involvement in the island’s domestic politics, as well as its previous intervention in the country’s decades-long civil war, have continued to raise concerns in Sri Lanka. However, the two countries have managed to maintain relatively close ties, despite the odds. Sri Lanka’s relations with China dates back to the silk road period when the island nation was one of the key stopovers in the ancient trading network. Even though relations faced setbacks during the colonial period, ties between the two countries revived soon after forming of the new nation-states.

China's Catalytic Effect

In today’s context, China can be seen as a catalyst for both regional and global affairs. Wherever China goes, and whatever it does, it draws international attention. Thereafter, other powers are drawn towards that sphere to balance Beijing’s influence. This is the case for Sri Lanka. 

Until the early 2000s, China was not a primary focus in Sri Lanka. During the 1990s, China was nowhere near the top of Sri Lanka’s list of trading partners. While Colombo’s main export market was in the US and Europe, its main sources of imported goods were Japan and India.[4] Yet, by the early 2000s, China’s gradually increasing exports to Sri Lanka had pushed it to become country’s fourth largest import supplier behind India.[5] Since then, bilateral trade has continued on its upward trajectory, and China today is among Sri Lanka’s top three trade partners.

Parallel to the expanding trade relationship is the bilateral development partnership between China and Sri Lanka which has been growing since 2005. That is the year that Mahinda Rajapaksa came to power and pushed for a decisive military solution to end the protracted conflict. Although victory was achieved, the measures taken isolated Sri Lanka internationally, and traditional donors withdrew support for post-war reconstruction and development. Even India had reservations in its support for Sri Lanka during and soon after the war.[6] Yet, China continued its support – during the war by providing both military and diplomatic support; and after the war by supporting post-war reconstruction and development – and emerged as Sri Lanka’s most trusted friend. China’s willingness to provide foreign aid without conditions, thereby gaining easy access to Sri Lanka’s domestic investment market, caused great dissatisfaction in New Delhi.

As shown in Figure 1 below, China had never been a significant provider of development aid to Sri Lanka before 2004. Since then, it has been a continuous donor, and today is the largest development partner of the country. Even though India has been a foreign aid donor for a long period of time, its contribution to Sri Lanka only became significant after 2005 – when China started pouring money into the country.



India’s Response

New Delhi believes that China is cultivating strategic relations with Sri Lanka and other South Asian countries in order to encircle India. As such, India has been vocal about Chinese activities in the region – be it the building of Hambantota Port or Chinese submarines docking at Colombo port. It is often pointed out that China was a strong factor that caused the deterioration of relations between New Delhi and Colombo during the Rajapaksa government.

In order to secure its influence in Sri Lanka, India has increased its development assistance and investment to the country. It is also believed that India supported the current President and Prime Minister in their 2015 election campaigns in in order to defeat Rajapaksa and deal a blow to Chinese influence in Sri Lanka. 

Impact on Sri Lanka

Competition between India and China impacts Sri Lanka’s economy. Sri Lanka has gained economic advantage, as both countries flex their economic muscle to gain influence in the island. For instance, with China’s growing investments in Sri Lanka’s port industry, India is showing keen interest in doing the same. Prior to China’s investments in the CICT terminal in the Colombo Port or Hambantota Port, India showed no interest in investing in Sri Lanka’s port industry despite the fact that the majority of Sri Lanka’s transhipments are to or from India. In fact, when China Merchant Ports first invested in CICT, there was scepticism among Indian experts to the effect that the deep port would not make much difference since Colombo port already provided transshipment traffic to and from neighbouring countries especially India. However, having seen how Chinese investments have constructively changed Sri Lanka’s entire port industry, India, together with Japan, is seeking to invest in the Eastern Terminal of the Colombo Port.

Conclusion

China and India’s growing competition is both an opportunity and a challenge for the small island nation. Over the past few years, Sri Lanka has succeeded in managing the challenges stemming from the competition, and has harvested opportunities to realize its economic interests. Colombo’s ability to use China and India has proven a success given the fact that both countries show keen interest in investing in Sri Lanka’s industries in order to maintain their influence. 

China’s increasing foray into India’s backyard has been a thorn in Sino-Indian relations. However, following the Wuhan Summit, both China and India signalled their interest in mending ties through a ‘reset’. Even though their relationship has not undergone any major changes since Wuhan , it is clear that China and India are at least making an effort to cooperate where possible. 

In this context, small countries like Sri Lanka would have to revisit their strategies in handling relations with China and India. On the one hand, an improvement in relations between the two Asian giants will minimize the ability of small countries like Sri Lanka to play them off against each other in order to secure its own interests; on the other hand, it reduces the pressure on smaller South Asian states to ‘pick sides’, and could perhaps open opportunities for joint funding from both China and India. Either way, it would be better for Sri Lanka to revisit its approach in furthering relations with both China and India.

[1]  John W. Garver, Protracted Contest: Sino Indian Rivalry in the 20th Century (Seattle: University of Washington Press, 2003), 11.

[2]  Ibid., 13.

[3]  J. Mohan Malik, “South Asia in China's Foreign Relations,” Pacifica Review: Peace, Security & Global Change 13, no. 1 (2001): 81.

[4]  Chulanee Attanayake, China in Sri Lanka (Lambert Academic Publishing, 2013), 7.

[5]  T. K. Premadasa, “Sri Lanka China Trade Relations,” Asian Tribune, October 20, 2007, http://www.asiantribune.com/node/7893 (accessed July 22, 2019).

Dr Chulanee Attanayake is a Visiting Research Fellow at the Institute of South Asian Studies (ISAS), National University of Singapore. Prior to joining ISAS, Dr Attanayake served as the Director (Research) of the Institute of National Security Studies Sri Lanka – the national security think tank under Sri Lanka’s Ministry of Defense. She was a visiting lecturer at the Bandaranaike Centre for International Studies on Politics in South Asia and Politics in the Indian Ocean, and at the Royal Institute of Colombo. 

The views expressed in the article are solely those of the author and do not necessarily reflect the position or policy of the Lee Kuan Yew School of Public Policy or the National University of Singapore.

News Reports

Bilateral relations

Wang Qishan: China-India relations showing good momentum
CGTN, August 12

"Under the leadership of the two heads of state, China and India have deepened and broadened practical cooperation and the bilateral relations have maintained good momentum," Chinese Vice President Wang Qishan said while meeting with visiting Indian External Affairs Minister Subrahmanyam Jaishankar in Beijing.

China tells India it is ‘highly concerned’ about situation in Kashmir
South China Morning Post, August 12

Wang Yi says move to strip the region of its special status will ‘trigger regional tension’ and calls for dispute to be settled ‘through peaceful means’.

China for early settlement of boundary dispute with India: Sun Weidong
The Times of India, July 21

China has signalled a strong desire to work with India in taking concrete steps towards “early settlement” of the boundary dispute. The signal comes from a senior diplomat ahead of Chinese president Xi Jinping’s visit to India in October. 

India, China to hold joint military drill in Meghalaya in December
The New Indian Express, July 20

The next edition of India and China military drill, that was resumed last year following a freeze over the Doklam stand-off, will be held later this year. An official said there that the joint military exercise "Hand-in-Hand" will be held in Umroi near Shillong, Meghalaya.

India, China maintaining peace on border: Rajnath Singh
The Hindu, July 17

Defence Minister Rajnath Singh on Wednesday informed the Lok Sabha that India and China had been maintaining “peace and tranquillity” on the border by respecting bilateral pacts, and added that the government was “fully alive” to the country’s security needs.

Next Dalai Lama must be chosen within China; India should not intervene: Chinese authorities
The Economic Times, July 14

In first clear assertion on the sensitive issue, senior Chinese officials and experts said the reincarnation of the Dalai Lama must be approved by the Chinese government and the selection should take place within the country based on an over 200-year old historical process.

News Reports

China and India in the Region

China asks for U.N. Security Council to discuss Kashmir this week – diplomats
Reuters, August 15

China on Wednesday (August 14) backed Pakistan’s request for the United Nations Security Council to discuss India’s decision to revoke the special status of Jammu and Kashmir, asking for the body to meet behind closed doors, diplomats said.

Russia backs India as China takes Pakistani line at UN
The Economic Times, August 15

Permanent members of the UN Security Council China and Russia are taking divergent positions on any consultations by the council on the Kashmir issue.

India, China are no longer ‘developing nations’, won’t let them take ‘advantage’ of WTO: Trump
The Hindu Business Line, August 14

Agencies US President Donald Trump has said India and China are no longer “developing nations”, and are “taking advantage” of the tag from the WTO. He will not let it happen any more, he asserted.

Two Nuclear-Armed States Accuse India of Harming Sovereignty
Bloomberg, August 6

India’s move to abolish the decades-long autonomy of Kashmir has drawn strong reaction from its neighbors, with China accusing New Delhi of undermining its territorial sovereignty and Pakistan’s army vowing to go to "any extent" to stand by the Himalayan state.

Vietnam briefs India on standoff with China in South China Sea
The Hindu, July 30

Vietnam has apprised India of its standoff with China in the South China Sea (SCS) where the two have overlapping claims, Vietnamese diplomatic sources said on Monday (August 29).

Indian warships to stay longer in Persian Gulf, but won't join U.S. coalition
Reuters, July 18

India’s navy, which has traditionally operated closer to home waters, has over past year or so begun deployments across the Indian Ocean stretching from the Malacca Strait in Southeast Asia to waters off Africa, largely as a response to China’s expanding weight across the region.

India elbowed out of Afghanistan peace talks
The Times of India, July 15

Pakistan joined the US, Russia and China over the weekend to craft a peace agreement with the Taliban, a development that shows how Islamabad has moved to the centerstage of the Afghan peace process, and how India has been dealt out of the future of Afghanistan.

News Reports

Trade and Economy

India beats China in fintech deals for the first time ever
Livemint, Aug 15

The number of fintech deals in Indian start-ups surpassed those in China for the previous quarter, despite a slowdown in lending in India, according to a report.

China warns India of 'reverse sanctions' if Huawei is blocked – sources
Reuters, Aug 6

China has told India not to block its Huawei Technologies [HWT.UL] from doing business in the country, warning there could be consequences for Indian firms operating in China, sources with knowledge of the matter said.

US and China investors battle over Indian digital payments boom
Financial Times, August 4

India’s booming digital payments sector has become a battleground between Chinese and American investors, but the market is likely to consolidate as a few winners emerge, according to Nandan Nilekani, co-founder of Indian tech giant Infosys and head of a government drive to boost online transactions.

China proposes united front with India and emerging economies to counter trade headwinds
The Hindu, July 20

Ahead of the next informal summit between Prime Minister Narendra Modi and Chinese President Xi Jinping, China has flagged its interest in partnering India for building a united front of emerging economies and developing countries to counter trade headwinds.

China promises greater market access to India if it improves RCEP offer
The Hindu Business Line, July 18

China has said that if India went beyond its current offer of eliminating tariffs on about 74 per cent items for the country, it would not only match it but commit to a higher number.

China second-quarter GDP growth slows to 27-year low as trade war bites, more stimulus seen
Reuters, July 15

China’s economic growth slowed to 6.2% in the second quarter, its weakest pace in at least 27 years, as demand at home and abroad faltered in the face of mounting U.S. trade pressure.

News Reports

Energy and Environment

Solar Power Now Cheaper Than Grid Electricity Across China, Study Finds
Caixin Global, August 12

The price of solar power has become lower than grid-supplied electricity in hundreds of cities across China, according to a new study, marking an important inflection point in the country’s deployment of renewable energy.

China’s pollution is so bad it’s blocking sunlight from solar panels
World Economic Forum, August 5

New research published in the journal Nature Energy suggests the country’s densely polluted atmosphere is blocking the sun’s rays, preventing solar panels from harvesting energy efficiently.

India Launches Mission To The Moon In Bid To Land At The Lunar South Pole
Forbes, July 22, 2019

India has successfully launched its second-ever mission to the Moon, and hopes with it to join a handful of countries that have landed on the lunar surface.

China To Add More Coal Power In 2019 And 2020 To Meet Energy Demand

Oilprice.com, July 18

In order to meet the growing demand for electricity, China's biggest power generator, China Energy Group is planning to build 11 gigawatts (GW) of new coal power during this and next year, according to senior official with the firm on Thursday (July 18).

Freak weather poses new risk to India's renewable energy goals
The Business Times, July 18

Freak climatic conditions are damaging renewable energy projects, threatening a business which survives on wafer-thin margins.

China greenhouse gas emissions soar 50% during 2005-2014: government data
Reuters, July 15

China’s climate-warming greenhouse gas emissions hit 12.3 billion tonnes in 2014, up 53.5% in just a decade, the environment ministry said on Monday, citing the country’s latest carbon “inventory” submitted to the United Nations.

Analyses

How India’s Kashmir move complicates the border issue with China
South China Morning Post, August 10

By Ankit Panda, Senior Editor, The Diplomat

While New Delhi’s revoking of Kashmir’s special status pleases both supporters and opposition parties, the move has opened ‘a geopolitical Pandora’s box’.

Russia-India-China grouping an interesting watershed in global politics
The Straits Times, July 22

By Preechapak Tekasuk, Independent Foreign Policy Analyst

Other than the trade tensions between Japan and South Korea, there was another absorbing development at the G20 Summit in Osaka, Japan, a few weeks ago: the emergence of a Russia-India-China (RIC) grouping, three leading regional powers in Asia that used to be spearheaded by Russia in the late 20th century.

Modi’s China challenge
East Asia Forum, July 16

By Kanti Bajpai, Director at the Centre on Asia and Globalisation and Wilmar Professor of Asian Studies, Lee Kuan Yew School of Public Policy, National University of Singapore

With the general elections resoundingly won, Indian Prime Minister Narendra Modi will likely maintain an accommodative realist policy towards China, largely because of ongoing difficulties with the United States and the country’s economic fragility.

Cooperation Against Competition: India and China in the Energy Sector
South Asian Voices, July 16

By Priyanshi Chauhan, PhD Scholar at the Centre for South Asian Studies (CSAS), Jawaharlal Nehru University

When countries are in competition with one another, it is necessary that any attempt at cooperation is based on the rules and norms of international governance with a focus on the market forces of demand and supply. To this end, Indo-Chinese cooperation in renewable energy may present an alternative to dependence on conventional forms of energy, thereby promoting sustainable solutions to the rising energy demand and enhancing energy security.

India should ignore US-China politics in making Huawei call
South China Morning Post, July 13

By Ananth Krishnan, Visiting Fellow at Brookings India, and previously China correspondent for India Today

India should be clear-eyed about the benefits and costs of engaging with the Chinese firm, rather than get lost in a debate about geopolitics. But it should be under no illusions about Huawei and its ties to the Chinese state.

The ‘Asian Age’ and role of China and India
The Global Times, July 14

By Ravi Bhoothalingam, Treasurer and Honorary Fellow at Institute of Chinese Studies based in Delhi

While India's and China's visions might be non-conflicting, could the actual steps taken by the two countries to attain their respective goals create friction between them.

Books and Journals

India and China in Asia: Between Equilibrium and Equations
Routledge Studies on Think Asia, April 2019

Edited by Jagannath P. Panda, Research Fellow and Centre Coordinator for East Asia at the Institute for Defence Studies and Analyses (IDSA), New Delhi, India. An expert on China, Indo-Pacific security and East Asian affairs, he is the series editor for Routledge Studies on Think Asia.

This book analyses the structure of the India–China relationship and the two prominent powers’ positions with and against each other, bilaterally and globally, in a complex Asian environment and beyond. India and China’s perceptions of one another are evaluated to reveal how the order of Asia is influenced by engaging in different power equations that affect equilibrium and disequilibrium.

Contributors address three critical perspectives of India and China in Asia which are increasingly shaping the future of Asia and impacting the Indo-Pacific power balance. First, they examine the mutual perceptions of India and China as an integral part of Asia’s evolving politics and the impact of this on the emerging Asian order and disorder. Second, they assess how classical and contemporary characteristics of the India–China boundary and beyond-border disputes or conflicts are shaping Asia’s political trajectory and leaving an impact on the Indo-Pacific region. Additionally, contributors observe the prevailing power equations in which India and China are currently engaged to reveal that they are not only geographically limited to the Asian region. Instead, having a strong global or intercontinental character attached to it, the India–China relationship involves extra-territorial powers and extra-territorial regions.