For the present, China’s New Silk Road, also known as the “One Belt, One Road” initiative from 2013, with numerous projects under construction, has been making uninterrupted progress towards implementation with more or less ease. However, China’s largest neighbour, India, to which Beijing would give a great role in its plans due to its very location, has categorically rejected it. We are presenting below the concerns raised by India against the positive, mainly economy-oriented narrative of the New Silk Road, and the possible alternatives it may have in fear of being isolated from its direct sphere of influence.
In his speech delivered at Nazarbayev University, Kazakhstan in September, 2013, Chinese President Xi Jinping announced the Silk Road Economic Belt, forming the continental part of the One Belt, One Road (OBOR)/ Belt & Road Initiative (BRI), within the framework of which China would link Asia, Africa and Europe again with overland trade routes just like the ancient Silk Road did. In addition to the network of large-scale infrastructure investments, developing trade and investment partnerships as well as cultural and people-to-people relationships are given a high priority. One month after Xi’s speech in Kazakhstan, the maritime route of the New Silk Road initiative was announced in Indonesia. The route named 21st Century Maritime Silk Road goes towards Europe along the South and Southeast Asian ports traversed by Admiral Zheng He in the 15th century while also passing through some African ports. Most of the financial background is provided by the newly-established Asian Infrastructure Investment Bank (AIIB), the Silk Road Fund (SRF) and the New Development Bank (NDB). In the official documents of the initiatives, the Five Principles of Peaceful Coexistence (Panchsheel), laid down jointly by Zhou Enlai and Jawaharlal Nehru in 1954, are used as a basic approach by China, and the goals of the cooperation such as harmonising regulations, promoting integration, cross-border free trade, financial integration and strengthening people-to-people relationships are named in this spirit. Although Beijing emphasises that the OBOR initiative will be beneficial for everyone, several criticisms have been made about that. The “New Silk Road” scheme – due to its vast dimensions and extension – implies numerous difficulties, not mentioning the questionability of the return on the economic investments in specific projects, but critics also claim that China seeks to increase its global influence and weight with this initiative, also keeping geopolitical advantages in view.
By controlling and linking strategic facilities in the Indian Ocean, China would be able to overcome the “Malacca Dilemma”, as currently 80 per cent of the oil imports of the country arrives through the Malacca Straits, which could easily become China’s weak point in case of potential conflicts. The initiative has other geopolitical connotations as well. As a result of the newly evolving Silk Road, the integration of the Eurasian areas, led by China, would rise to a new level, implementing both Halford Mackinder’s concept of ruling the Heartland and Nicholas John Spykman’s contradictory concept of ruling the Rimland. The dimensions of the grandiose initiative are well illustrated by the Belt and Road Forum held in Beijing in 2017, which saw the attendance of some 1,500 participants from more than 130 countries, including – without being exhaustive – António Guterres, Secretary-General of the United Nations, Jim Yong Kim, President of the World Bank, and Christine Lagarde, Managing Director of the International Monetary Fund. During the Forum, which was intended to give further impetus to the OBOR initiative, a series of agreements were made with the states participating in the initiative; 76 documents were signed on various investments and projects, China concluded agreements with 30 states on trade cooperation, and with 60 states on unimpeded trade.
Map 1: The routes and corridors of China’s New Silk Road initiative on sea and land (Source: HUG 2016/3)
However, the absence of one country was conspicuous in the event. Despite China’s expectations, India was not represented by any official delegation, articulating its concerns about Xi Jinping’s initiative. The New Silk Road is another source of conflict in the uneasy relationship between the two countries, India and China. The strengthening and development of bilateral relationships have been impeded by the border dispute still existing today and the memory of the resulting border conflict broken out on 1962, but for China, the presence of the Dalai Lama and the emigrant government in India still counts as a sensitive point, while India is objecting to the trade balance deficit and is concerned about China’s growing influence in the South Asian region. Despite its concerns, India would have a significant role in the Chinese plans about the New Silk Road, in three areas in total. On the mainland, India is involved in two economic corridors, while most of the 21st Century Maritime Silk Road stretches through the Indian Ocean, concerning India and its immediate neighbours. The purpose of the analysis is to present those parts of China’s New Silk Road initiative that directly concern India, also adding the related problems and possible solutions. After that, the other Silk Road alternatives concerning India and the role of the New Silk Road initiative in the relationship between the two countries are considered.
The China-Pakistan economic corridor
Prime Minister Li Keqiang first proposed the construction of the China-Pakistan Economic Corridor during his visit in Pakistan in 2013, the aim of which is to link the city of Kashgar in Xinjiang Uygur Autonomous Region with Gwadar Port in Southwest Pakistan, mainly by building road and railway routes, logistics and industrial centres and power plants. The ambitious project has become one of the flagships of the New Silk Road initiative and received further support in a Memorandum of Understanding of a total value of US$28 billion on Xi Jinping’s visit in 2015.
However, the plan of the CPEC as well as numerous other investments and initiatives now forming a part of the economic corridor can be dated earlier. The plan of the economic corridor itself was presented to Islamabad by Li Keqiang five months before the official announcement of “One Belt, One Road”. The Karakorum Motorway, built between 1958-78, can be regarded as a forerunner of the economic corridor, but the building of the oil pipelines between the two countries can be also dated earlier; the plan of the pipeline between Gwadar and Kashgar was put forward together with the decision on the construction of the Gwadar deep-sea port in 2001. The necessity of the economic corridor is closely linked with China’s Western Development Programme, in which Beijing has set the goal of developing less developed provinces being far away from coastal centres, in the proximity of Pakistan.
Map 2: The main direction of the China-Pakistan Economic Corridor (CPEC)
Most of the investments forming parts of the CPEC are planned to be implemented by 2030 by the two parties, which, with a slowly unfolding free trade agreement added, is expected to further expand improving trade relations of recent years and to decrease the trade deficit of the Pakistani party. As a result of a successfully operating China-Pakistan Economic Corridor, Pakistan would become a gateway between China and Central Asia, and would considerably strengthen the economy of the country. This is reflected by, among others, a wave of rating upgrades by the Japan External Trade Organization (JETRO), Standards and Poor’s and Moody’s in 2016. For the present, however, this positive trend does not seem stable: between 2017 and 2018, the Pakistan Stock Exchange (PSX), Asia’s best performing stock market has regressed to become the worst performing one, accompanied by a significant drop in the exchange rate against the dollar. For China, the economic corridor would offer an alternative supply route to import oil, and the project would greatly facilitate the integration of the region.
Beside numerous positive aspects, there are also several challenges that both Beijing and Islamabad have to face. In the list of problems, the necessity of security measures about Chinese people working in Pakistan comes first. China requires of Pakistan to take more vigorous action to mitigate the threat of terrorism and to make efforts to protect Chinese nationals. As a response, Pakistan has announced to train 12,000 security personnel to protect Chinese workers on the Corridor. Pakistan’s regional division and its periodically occurring political instability, as well as the Sinophobia of Baloch separatists pose other challenges. Apart from these problems, the economic return of investments must be mentioned from a Chinese perspective, as it is still questionable whether Pakistan will be able to repay the loans taken out, and even if it is so, whether this is the best environment regarding the rate of return on Chinese investments. A new phenomenon occurring about the New Silk Road, China’s “debt-trap diplomacy” must be mentioned here. Sri Lanka’s Hambantota port, built in 2007 from Chinese loans, had proven to be economically unsustainable, as a result of which the port was handed over to a Chinese company for 99 years in 2017, turning the economic loss into a geopolitical asset. Although such actions are not likely to form integral parts of the OBOR initiative, Beijing does not refrain from using unorthodox opportunities. Several other developing countries with significant loan burdens might be threatened with a similar way of repaying Chinese loans, including Pakistan and the CPEC discussed above, the amount of which has already exceeded US$62 million.
While Pakistan’s western neighbours, Iran and Afghanistan are supporters of the construction of the economic corridor, India is categorically rejecting it. If India were to support and join the Chinese initiative, the world’s largest democracy could gain considerable advantages, facilitating India’s often-mentioned but hardly realised fulfilment of its economic potential, but for reasons stemming from the past and the politics of the country, it is afraid of using this opportunity. On the one hand, India is anxiously watching the deepening of the security policy cooperation between its two neighbours along the CPEC, especially in the light of its still-existing territorial claims against both Pakistan and China, which have already caused several armed conflicts and wars. On the other hand, the China-Pakistan Economic Corridor under construction raises other problems related to India’s sovereignty. The corridor traverses through Gilgit-Baltistan in Kashmir, a territory claimed by both India and Pakistan. In the Kashmir issue, India has taken a strong stance; it has been engaged in war with Pakistan thrice for the territory. In addition, both the upper and lower houses of the Indian Parliament adopted a resolution in 1994, declaring that the State of Jammu & Kashmir has been, is and shall be an integral part of India and India will firmly counter all separatist efforts by all means, and calling upon Pakistan to vacate the occupied territories. Although Beijing has put forward some proposals to resolve problems, including renaming the economic corridor, the conclusion of a new agreement on the cooperation, re-launching negotiations about a free-trade agreement between the two countries, resolving the border dispute and aligning China’s New Silk Road initiative and India’s Act East policy, but so far they have not born any fruit.
The Bangladesh-China-India-Myanmar Economic Corridor
The plan of an economic corridor between China and India, first arisen on a regional level in the early 1990s, then on a state level as well, has a unique history of several thousand years. The Assam-Burma-Yunnan route, forming a part of the ancient Silk Road between India and China counts as one of the earliest routes, proven by archaeological artefacts from 15th century BC and historical records from 2nd century BC. The plan of the “new” economic corridor was devised at a scientific conference in Yunnan in 1999, where the delegates from the four countries signed the “Kunming Initiative”. The conference and subsequent meetings focussed on feasibility and the study of economic and infrastructural opportunities from the perspective of the 3Ts – Transport, Trade, Tourism. Forums became regular between 1999 and 2003, and they enjoyed state support from 2004, and the initiative, becoming increasingly diversified, took its present shape of an economic corridor in 2013.
The BCIM Economic Corridor initiative may have considerable advantages for all four participants. The construction of a more integrated transport network would significantly cut journey time between the areas concerned, as well as transport and transaction costs, the importance of which is enhanced by the fact that Southwest Yunnan, Northeast India and Northern Myanmar are struggling with serious infrastructural problems and poverty. By deepening economic ties, Bangladesh and Myanmar can reach the Chinese and the Indian market more easily with their products, and technological transfers, accompanying foreign investments may further boost economic development. Another area where the implementation of the economic corridor has great potential is the energetic cooperation, as the territory of the planned economic corridor is rich in minerals, natural resources and energy carriers. In addition to considering these viewpoints, the touristic opportunities of the region must be also mentioned, which would be better accessible through infrastructure developments, and economic ties, deepening through the initiative, may have a soothing effect on the existing security policy mismatches and challenges of the region.
Although the implementation of the economic corridor would bring several benefits, there are certain problems that considerably hinder the initiative of a history of almost twenty years. One of such problems is the lack of regional representation. Although the initiative initially had a regional nature, since 2013, negotiations have been led by institutions from New Delhi on behalf of India, while in China a turnaround
Map 3.: The main direction of the Bangladesh–China–India–Myanmar Economic Corridor (BCIM-GF)
in 2015 has brought about changes in this respect, when the BCIM Economic Corridor officially became a part of the New Silk Road, resulting in Beijing’s predominance in the negotiations. The above-mentioned security considerations also constitute a hindrance to the implementation of the economic corridor. The border dispute between China and India fundamentally thwarts the success of relationships and initiatives between the two countries, the hindering effect of which on the future of the economic corridor being discussed here is multiplied due to the proximity of the disputed border area to the economic corridor. In addition, the Rohingya crisis has also caused fissures in the relationship between Bangladesh and Myanmar. The greatest existing barrier to the realisation of the economic corridor, however, can be related to Beijing’s decision made in 2015. Since the tasks related to the BCIM Economic Corridor were taken over by the National Development and Reform Commission of China, the initiative has been handled and communicated together with the China-Pakistan Economic Corridor by the Chinese party. With this decision, the BCIM-EC has become unilaterally a part of China’s New Silk Road. Therefore, India, due to its problems related to the CP-EC discussed above and its distancing itself from the whole initiative, is unwilling to be involved in this economic corridor, casting doubt on its feasibility and success.
The 21st Century Maritime Silk Road and India
The purpose of the maritime route of the New Silk Road is to connect China’s coastal areas with Southeast and South Asia, traversing towards Western Asia and finally reaching Europe via the Persian Gulf and the Mediterranean Sea. This initiative of unprecedented size is expected to enable the evolvement of effective transport routes, linking developed ports to maritime and overland routes. The ports in which China’s state-owned companies have acquired significant stakes in recent years, such as Antwerp, Piraeus, Lomé, Suez, Djibouti, Gwadar, Karachi, Colombo, Hambantota, Chittagong and Kyaukpyu, form integral parts of the maritime section of the New Silk Road. Views on China’s plans in the Indian Ocean vary according to two main narratives. One of them emphasises the economic benefits of China’s New Silk Road project, while the other highlights its political-strategic significance and its adverse effects on India – this theory has become known as the String of Pearls. Beijing claims that China’s port construction activities in the Indian Ocean focus on shared economic growth. The initiative composed of new ports, logistics hubs, warehouses and free trade areas, would be supported by a Chinese financial background, already detailed above, which – in addition to its win-win nature, that is, being economically beneficial for all, could lay the foundation for new production and distribution chains. According to the String of Pearls theory, however, China is implementing a strategic plan by building ports, within the framework of which it would ensure Sea Lines of Communication (SLOC) by building naval bases, and would be potentially capable of obstructing trade routes, thus it could become such a dominant maritime power of the ocean as the USA and England used to be, encircling India with its new bases. This interpretation, which is, not surprisingly, rather wide-spread in India is grounded by ever more frequently appearing Chinese submarines in the region and the presence of the Chinese People’s Liberation Army in Djibouti’s Obock port, and similar opportunities in, among others, Gwadar, Hambantota and Kyaukpyu. Alfred Thayer Mahan’s connection between the navy and a great power status is still prevailing in both China’s and India’s strategic thinking, conjuring up the vision of another “great game” for the Indian Ocean between the two countries. Nevertheless, the development costs and the open location of the ports in question as well as India’s obvious geographical advantage in the region cast doubts on the viability of this concept.
Alternatives to China’s New Silk Road Initiative
In addition to the initiative promoted by Beijing and enjoying significant political-economic support, however, several other plans to facilitate infrastructural and regional connections along the ancient Silk Road have been proposed, each giving a considerable role to India, like the maps of the Chinese Silk Road. One of such plans goes back as far as 2009. The main purpose of this “New Silk Road”, which can be related to the USA, was to stabilise Afghanistan after the withdrawal of US troops, linking South and Central Asia. This US initiative received greater attention during Hillary Clinton’s visit to Central Asia in 2011, but was pushed into the background during the second Obama administration, while it has been recently given new impetus under Donald Trump’s presidency.
Map 4: String of Pearls
Another corridor in which India has a more active role is the North-South Transport Corridor (NSTC) between India, Russia and Iran, first arisen in 2000. The core of the Transport Corridor is a 7,200-kilometre-long corridor, linking Russia to India through the Indian Ocean, the Persian Gulf, the Caspian Sea and Azerbaijan. Plans and pilots suggest that the Transport Corridor would cut transport costs by 30 per cent, while required time would be reduced to half, and the corridor is expected to boost low volumes of trade between India and Russia, in which participants can see a greater potential.
The most recent plan, partly serving to counterbalance Chinese plans, is the Asia Africa Growth Corridor (AAGC). The plan, which greatly overlaps with the 21st Century Maritime Silk Road, would link Northeast, Southeast and South Asia through the Indian and Pacific Oceans. The goals of the document signed by Prime Ministers Narendra Modi and Shinzo Abe include establishing new production channels, promoting economic and technological cooperation, strengthening people-to-people relationships and long-term, sustainable development. Although the concept linking Africa and Asia is still at an embryonic stage, it has become a dominant element of deepening India-Japan relations and cooperation, serving the interests of both countries.
India and the Future of the New Silk Road
China claims that the New Silk Road is the result of globalisation and its own economic needs, which will be implemented as an open, inclusive and mutually beneficial international cooperation, in compliance with the goals and values of the UN Charter. For India, the OBOR initiative would promote bilateral trade, investments and people-to-people relationships, the transport and communications infrastructure would develop, and it would provide new fundamentals for the strategic cooperation between the two countries and the resolution of disputed issues. From China’s perspective, the benefit of good bilateral relationships is illustrated by the fact that 21 of 39 major Chinese air corridors are located above the Indian Ocean or that two-thirds of the Chinese crude oil imports arrive in the country on routes passing through the ocean.
Map 5: The direction of the North-South Transport Corridor
The security policy interpretations detailed above, however, make India cautious and resistant to the initiative. It is fuelled by the issue of Chinese bad debts, already described in relation to Sri Lanka and Djibouti, where the People’s Liberation Army established its first permanent naval port outside China and which is also accumulating considerable Chinese loans, thus, India is seeking other alternatives and cooperation opportunities, counterbalancing Beijing. However, the plans of economic corridors in various countries and the parallel “Silk Road” plans cannot be handled completely separately in reality, they are inevitably interrelated and interdependent, creating the “New Silk Road”, of which the initiative announced by Beijing is only one, although undoubtedly the most important, part. Despite India’s resistance, the construction of “One Belt, One Road” continues, New Delhi is going to be presented with a fait accompli in the Indian Ocean, regarded as its own exclusive sphere of influence.
Although earlier some experts in India have proposed a more pragmatic approach to Chinese relations, and the OBOR initiative in particular, akin to Japan’s recent foreign policy, this has not been reflected in New Delhi’s policy until very recently. In recent months, however, as a member not only of the Asian Infrastructure Investment Bank but also of the Shanghai Cooperation Organisation, a turnaround seems to have taken place in Prime Minister Modi’s policy. The summit held by heads of state Narendra Modi and Xi Jinping in Wuhan in May, 2018 has brought about a change in India’s attitude towards the New Silk Road. Although New Delhi is still consistently distancing itself from official participation, as the sovereignty issue of the China-Pakistan Economic Corridor fundamentally prevents any efforts in this direction, but an agreement has been made on China-India cooperation in Afghanistan in projects related to the New Silk Road, envisaging a certain degree of normalisation in their relations.
Map 6: Planned direction of the Asia Africa Growth Corridor
Author: Ádám Róma
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