How does the India-China rivalry affect secondary state behaviour in South Asia?

Saneet Chakradeo interviews Rohan Mukherjee and Darren Lim on their article “Hedging in South Asia: balancing economic and security interests amid Sino-Indian competition” published in International Relations of the Asia-Pacific, 2019.

Q. In your article [1], you write on the concept of hedging, which describes the behaviour of secondary states amidst competition between two regional powers. While most scholars have written about hedging in the context of the U.S.-China rivalry in Southeast and Northeast Asia, your article studies the effects of growing competition between India and China in the South Asian region. How would you compare your argument of secondary state behaviour in South Asia in the context of the India-China rivalry with traditional notions of hedging?

A. We define hedging as a secondary state’s strategy of pursuing contradictory policy choices or ambiguous security alignment with major powers. A small country makes a foreign policy judgment that going “all in” with a major power to the exclusion of others—whether that’s China or the United States in East Asia, or China or India (or the U.S.) in South Asia—is not an optimal strategy. This is not only because having positive relations with both major powers can bring benefits, but also because alienating one might result in specific punishments.

Hedging behaviour across both regions is actually quite consistent. In the words of former Sri Lankan foreign minister Mangala Samaraweera, governments adopt an “omni-directional” foreign policy, trying to be friends with everyone and alienating no one.

There are, however, two differences between East and South Asia. First, across East Asia several states have military alliances with the United States, which anchor them far more within Washington’s orbit in the security domain. This limits the extent to which they can cooperate with Beijing on security matters and typically puts a ceiling on how close bilateral relations with China can get.

Second, several states in East Asia have maritime territorial disputes with China, which are also direct points of contention. This leads to a broader point—sometimes a government will face a policy decision that is “zero-sum” in the sense that any decision will necessarily alienate one power and please the other. In such cases hedging is very difficult, as the government will inevitably be seen as picking sides. In South Asia however, there are simply fewer of these zero-sum cases or otherwise sources of more direct conflicts of interest. Governments generally appear to be succeeding in balancing warm ties with both major powers and indeed playing them off against each other.

Q. Your article uses Sri Lanka and the Maldives as test cases for your theory. How applicable do you think is your argument for other secondary states in South Asia such as Nepal and Bangladesh?

A. We picked Sri Lanka and the Maldives as test cases because they are the most likely countries where we might observe hedging behaviour. Although in absolute terms Chinese investment in Bangladesh is much higher and investment in Nepal falls in between the Maldives and Sri Lanka, the share of external debt in gross national income is much higher in Sri Lanka and the Maldives. Significant portions of these debts are owed to China. Therefore, the dynamic of a secondary state caught between two major powers is likely to be stronger in these two cases.

We find in both cases that either due to pressure from India or due to domestic backlash against Chinese investment, the governments of the Maldives and Sri Lanka have adopted a hedging strategy toward China and India in order to preserve their autonomy. In Sri Lanka’s case there is the additional problem of failed infrastructure projects, which then leads to the acquisition of strategic assets such as ports by China, an act that threatens Sri Lanka’s autonomy.

These dynamics are certainly present in the cases of Nepal and Bangladesh as well. Both countries have witnessed domestic protests against land acquisition for China-funded infrastructure projects, such as the Banshkhali power plant in Bangladesh and road-building in districts of Nepal bordering China. Consequently, both have fostered positive ties with India as a hedge against over-dependence on China. India for its part possesses some levers of influence over landlocked Nepal through the control of overland trade routes. In Bangladesh’s case, New Delhi’s approach has been to compete with China through investments of its own, enabling Dhaka to benefit substantially from playing the major powers off against each other.

The net result is that substantial Chinese investment does not automatically put small South Asian states in Beijing’s pocket.

Q. You have previously written on the security dimension of Chinese economic statecraft in South Asia [2]. How does China’s rising economic presence in the region affect India’s strategic relationship with its neighbours?

A. India has historically relied upon deep political, cultural and societal ties to exercise a high degree of influence over South Asian states. However, Beijing has very deep pockets, and has used state-backed financing, marketed in recent years as the Belt and Road Initiative, to offer the types of large-scale infrastructure projects that these countries are crying out for, and that India simply does not have the resources to match. Building roads, ports and power plants can win you a lot of support, both among political elites and the mass public, and can translate into the types of policy influence that would draw regional governments out of India’s orbit.

However, our research highlights the challenges China faces in using finance as a primary tool of engagement. First, large scale infrastructure is difficult to do. Projects can be delayed or fail to deliver a reasonable rate of return, they can cause harmful side-effects such as environmental damage, and they can cause or worsen local corruption. Voting publics see these missteps and not only punish their elected leaders, but typically see China in a poorer light as a result.

Thus, while China’s economic engagement is affecting the foreign policy alignments of India’s neighbours to some extent, in our judgment, this is unlikely in the foreseeable future to result in a radical realignment of the strategic balance in the region.

Second, India’s neighbours still value their relationships with New Delhi, and this has constrained the degree of security cooperation in return for China’s economic largesse. This is particularly true in Sri Lanka, where the government refused Chinese money to build an aircraft maintenance facility at Trincomalee because of Indian sensitivities, and continues to insist that the controversial Hambantota Port will never be securitised, despite high levels of debt and economic underperformance.

Thus, while China’s economic engagement is affecting the foreign policy alignments of India’s neighbours to some extent, in our judgment, this is unlikely in the foreseeable future to result in a radical realignment of the strategic balance in the region.

Q. Do you see any relation between the hedging behaviour of South Asian states and their incentives to either enhance or ignore regional institutions like SAARC or BIMSTEC?

A. Hedging essentially involves pursing a policy, e.g. closeness with China, as well as its opposite, e.g. closeness with India/the United States. In this manner, it is a mix of contradictory policy choices that smaller states adopt in the context of major-power competition for influence. Multilateral institutional cooperation, especially of an economic and technical nature, is not strictly the opposite of engagement with either India or China.

South Asia remains a very poorly integrated region in economic terms. Multilateral initiatives to harmonise regulations, develop last-mile trade infrastructure, and facilitate the movement of goods and people can actually help a smaller state seeking economic benefits from cooperating with India and China. These states may therefore invest in regional institution-building to better reap the benefits of economic engagement.

However, multilateral institutions are not innocent of power politics. More powerful states tend to have higher negotiating power and hence exercise greater influence in institutions. Therefore, regional institutions where China is not a member, such as BIMSTEC and SAARC, can be vehicles for Indian influence in setting regional standards for trade, investment, and other forms of cooperation. In theory, therefore, a smaller state may invest in these institutions as a hedge against bilateral Chinese influence, or it may ignore these institutions as a hedge against multilateral Indian influence.

Our argument suggests that, all else being equal, if the benefits and costs of cooperation with China are rising, states will hedge by leaning towards India in various ways, including investing in regional institutions where India plays a prominent role. But all else is rarely equal: SAARC, for example, does not match our expectations, for reasons unrelated to the logic of hedging.

Ultimately, given the extent of complications within South Asia, regional institutions are at best incidental to the hedging strategies of smaller states.

[1] Darren J Lim, Rohan Mukherjee, Hedging in South Asia: balancing economic and security interests amid Sino-Indian competition, International Relations of the Asia-Pacific, Volume 19, Issue 3, September 2019, Pages 493–522, https://doi.org/10.1093/irap/lcz006

[2] Darren J. Lim & Rohan Mukherjee (2019) What Money Can’t Buy: The Security Externalities of Chinese Economic Statecraft in Post-War Sri Lanka, Asian Security, 15:2, 73-92, DOI: 10.1080/14799855.2017.1414045

About the experts:

Rohan Mukherjee is an Assistant Professor of Political Science at Yale-NUS College, Singapore. Email: rohan.mukherjee@yale-nus.edu.sg

Darren Lim is a Senior Lecturer in the School of Politics and International Relations at the Australian National University, and co-host of the podcast, Australia in the World.

Email: darren.lim@anu.edu.au