Author: avia nahreen

Area of Work: Regional Cooperation Integration

The visit by Chinese President Xi Jinping to Bangladesh on October 14-15, 2016 had been dubbed as a ‘historical state visit’ poised to be a geopolitical game changer in South Asia and the Indian Ocean region. At the sidelines of Xi’s visit, Bangladeshi and Chinese firms signed USD 13.6 billion worth of deals in trade and investment in addition to the USD 20 billion in loan agreements signed by the two governments. The inevitable question is why the world’s second largest economy comprising of 1.37 billion people and an economy 67 times bigger than Bangladesh is cozying up to the world’s 47th largest economy? What geopolitical importance does Bangladesh have to receive such enormous bilateral assistance from a nation aspiring to be the next world leader? Bangladesh’s strategically important geographic location, physical and political proximity to India, availability of cheap labour, and proximity to the Bay of Bengal have considerable implications for Chinese regional geopolitics and geo-economics.

Consolidating sphere of influence in the Indian Ocean

The Chinese economy is heavily dependent on energy resources transported via the secure sea-lanes in the Indian Ocean. Around 80 percent of China’s energy import from the Middle East pass through the Strait of Malacca, which is a narrow stretch of water connecting the Indian Ocean and Pacific Ocean. Malacca provides China the shortest maritime route to Europe, Africa and Middle East. China’s ever increasing need for energy have increased the strategic importance of this maritime region and the importance of maintaining good relations with littoral states in and around the region. To consolidate influence in this critical trade route and at the same time shedding overdependence on it, China has been pledging investment to the littoral states around the Indian Ocean. It is due to this strategy, Bangladesh, owing to its geographic positioning in the Bay of Bengal, has been the recipient of investment pledges from China’s deep pockets. Bangladesh is an important factor in the much touted ‘string of pearls’ theory, which explicates how China intends to exert more influence around the Malacca Strait and Indian Ocean through investment in development and infrastructural projects around Indian Ocean rim states.

To cut down over-reliance on the Strait of Malacca, China is already building oil pipelines from the Burmese port Kyakpiu to Kunming. In this context, China is also keen on developing the Chittagong port in the hopes of building a parallel pipeline connecting Chittagong-Kyakpiu-Kunming. If India ever, with US support, blocks the Malacca chokepoint through the Indian base in the Andaman Sea, it can have dire repercussions for the Chinese manufacturing base. Hence, it is important for China to gain more influence in the Indian Ocean region through bankrolling infrastructural investment in the coastal nations.

Conduit to South Asia

For long, China has invested much of its attention towards South East Asia but has now diverted towards South Asia, a region comprising of one-fourth of the world’s population and housing the third largest economy by Purchasing Power Parity (PPP), which represents a lucrative market for Chinese products. Since connectivity at the moment is not feasible via the contentious Arunachal Pradesh or through Afghanistan or Pakistan, one way for China to reach mainland India is through Bangladesh, given the friendly relation the two countries maintain. Also, to activate the Bangladesh-China-India Myanmar (BCIM) sub-regional corridor, crucial for reaching South Asian markets, it is imperative to bring Bangladesh on board. China intends to draw in Bangladesh through massive infrastructural investment, an act touted by experts as China’s ‘checkbook diplomacy.’

Checking India’s regional dominance and market for arms sale

China has been quietly checkmating India’s regional dominance in South Asia through its arms sale in countries bordering India. While Beijing today is the third largest arms provider in the world, between 2011 and 2015, 71 percent of Chinese arms exports were to Pakistan, Myanmar, and Bangladesh – states proximate to both India and China. Although Bangladesh’s USD 195 billion GDP is a meagre 0.017 percent of China’s USD 11 trillion GDP, between 2011 and 2015 Bangladesh was the second largest recipient of Chinese arms in the world with Beijing supplying over 80 percent of the country’s arms imports over the past decade. When China sells heavy armaments like tanks and submarines to a country, the importing country becomes reliant on China for a long time for training, maintenance, and repair. This reliance inevitably results in certain degree of influence on the importing country. This makes it advantageous for China to be selling arms at low prices and on easy credit to countries bordering India as a way of checking India’s geopolitical ambitions in the region. For China, growing ties with Bangladesh serves the dual purpose of revenue from sale of arms and checking Indian dominance in the region.

Key player in the One Belt One Road interconnection

During the 1960s, China was hesitant in forging regional cooperation with its Asian neighbours which changed during the 1990s after the Asian Financial Crisis. Since President Xi Jinping has come to power, China has taken a leadership role in forging community based regional integration in Asia. The geographical focus of integration for China has earlier been confined only to East Asia which has now been expanded to encompass South and Central Asia. China is currently expanding on two fronts; westward towards Eurasia and southward towards the Indian Ocean.  Counterbalancing USA’s influence in Asia Pacific is also one of many reasons why China is so persistently pushing for mega projects such as the One Belt One Road (OBOR). Bangladesh is centrally situated along the BCIM Economic Corridor and retains a strategic position along the 21st Century Maritime Silk Road with Chittagong port as a major maritime pivot through the Indian Ocean, a very important factor for realisation of both the Economic Belt and Maritime Road initiatives.

Xi’s ‘One Belt, One Road’ is his most ambitious foreign and economic policy till date. To solidify his second term, rejuvenate a slowing China, and to assume political leverage over its neighbors, Xi has already begun to vigorously market this flagship project. OBOR will support China in becoming the new leader of free trade in Asia Pacific with the US abandoning the TPP. It would also geo-economically assist China in dealing with its excess capacity, upgrade its industry, and develop its less prosperous regions. To materialise all interconnections under OBOR, Xi Jinping now needs to woo former Indian allies in South Asia to commit to his projects.

Relocating Sunset Industries

As labour costs rise in China, its declining sunset industries will be looking for places to relocate. China will continue to move away from labour intensive low-tech industries owing to its rising labour costs and cooling markets. It will gradually move towards high margin and high-end manufacturing like IT, aerospace, and telecommunication. Existing Chinese companies, producing low-end labour intensive products will be looking for places with cheap labour to relocate their plants. With almost a third of its population between the ages of 15-30, Bangladesh provides a huge young workforce at one of the cheapest rates in the world to the Chinese manufacturers of sunset industries wishing to carry forward with many of their labour intensive industries.

From the bigger scheme of regional power play to the unexplored potential in commerce and connectivity, Bangladesh is one of the most vital countries for China in expanding its sphere of influence in South and Southeast Asia. Hence, it is no surprise that the 2016 visit by President Xi Jinping, first in more than three decades, saw China-Bangladesh relations elevated to ‘Strategic Partnership of Cooperation’ from ‘Comprehensive Partnership’. It is now for Bangladesh to gain leverage from China’s checkbook diplomacy while maintaining the delicate balance of regional geopolitics.

The writer is a Senior Research Associate at The Institute for Policy, Advocacy, and Governance (IPAG).



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