China has an official and an unofficial agenda for the Indian Ocean.
The official agenda is to foster trade and economic growth for all countries in the region, from Pakistan to Sri Lanka, to India, and Bangladesh.
The unofficial agenda is to encircle India, something investors should keep a close eye on, as it is expected to raise geopolitical risks in the region.
To execute this agenda, China has been pursuing massive infrastructure projects -- like CEPC in Pakistan, and the building and modernizing of ports in both Pakistan and Sri Lanka, something these countries needed very badly.
“China has clearly responded to a strong demand from Indian Ocean countries for better maritime infrastructure and increased connectivity,” says Nilanthi Samaranayake, strategic studies analyst, CNA, a non-profit research organization in the Washington area. “Some countries see their ports as being too congested or unable to handle larger container ships, so projects by Chinese companies are seen as helping to build or modernize infrastructure and promote wider national development goals.”
There are clear signs that these projects are beginning to yield results for China's official agenda. The China-Pakistan Economic Corridor (CPEC) is changing life in China’s Northwest Xinjiang Uyghur region, bringing something special to the region: seafood from Pakistan.
This little bonus is being shipped by container trucks through the corridor, which currently accounts for 2 percent of the total trade between the two countries; and more goods are expected to come through CPEC from the Middle East and Africa.
“Regarding India, it’s important to note that some of China’s maritime infrastructure developments have facilitated India’s trade, such as through the port of Colombo,” adds Samaranayake.But China’s enormous investment in CPEC and port infrastructure in the Indian Ocean serves much more than trade. It advances Beijing’s “String of Pearls” strategy, as well as its unofficial agenda to encircle India through its arch-rival, Pakistan.
“Besides having investments that have purely commercial goals in Pakistan as they would in any other country, the Chinese have two main goals in investing in that particular country,” explains Dimitrijevic. “First is to continue the “String of Pearls” strategy of developing commercial and military outposts along their main maritime trading route. These include the Strait of Malacca, Sri Lanka, Pakistan, the Maldives, the Strait of Hormuz and Somalia.
There is a second reason for the Chinese to invest and that’s to make India feel China’s strong presence, in its neighbor and arch-rival Pakistan.”
That could explain India’s unease with China’s ambitious Indian Ocean agenda. “Despite the commercial benefits of this activity, India is concerned about the strategic implications of China’s increasing commercial and military presence in the Indian Ocean,” says Samaranayake. “China continues to deploy naval task forces in support of counterpiracy operations and is building a base in Djibouti. This is a region that India sees as its primary area of interest, so concern about China’s expansion of Indian Ocean activity is understandable.”
Understandable or not, China’s unofficial agenda to encircle India won’t work. New Delhi and its allies—the US and Japan—won’t let it happen. And they are prepared to send this message to Beijing with a joint naval exercise in the Malabar in the Bay of Bengal this coming July.