The Pulse | Diplomacy | South Asia

It’s Advantage China in the Indian Ocean

Wang Yi’s visits to the Maldives and Sri Lanka signal Beijing’s priorities fairly clearly: it’s focusing on South Asia and the Indian Ocean.

It’s Advantage China in the Indian Ocean

Chinese Foreign Minister Wang Yi, left, poses for the media before his meeting with Sri Lankan Prime Minister Mahinda Rajapaksa in Colombo, Sri Lanka, Sunday, January 9, 2022.

Credit: AP Photo/Eranga Jayawardena
across its vast expanse.

But in 2022, the Indo-Pacific will prove equally significant – if not more – in China’s geopolitical contest with the United States and its allies. By stopping by in the Maldives and Sri Lanka on his way back from Africa this year, Wang has spelt out Beijing’s priorities fairly clearly: China’s focus is on wresting control in South Asia and the Indian Ocean, even as it faces conflict and hostility in Taiwan, Hong Kong, and the wider Pacific.

This is a sensible strategy. Politically, China enjoys friendlier waters in South Asia and the Indian Ocean than it does in Southeast Asia and the Pacific. In the latter realm, Beijing faces Taiwan, in the South China Sea and East Asia, and myriad frictions with and .

By contrast, much of South Asia and the Indian Ocean has been relatively more benign. In Sri Lanka, the dominant clan led by President Gotabaya Rajapaksa – which swept back to power in 2019 – has been than its domestic political rivals. While Rajapaksa’s predecessor had tried to maintain a more delicate balance between India and China, the new government has been more willing to , even in the face of opposition from its rivals.

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In the Maldives, the pro-Chinese former president, Abdulla Yameen, was ousted from power in 2018 and then jailed, but since then. The coalition government that succeeded Yameen has been beset by internal squabbles, and Yameen himself was acquitted of his crimes and freed from prison last month. Shortly afterwards, he was seen with the bluntly-worded “India Out” campaign, which has been protesting against India’s military presence in the country (the government says that there is no such presence).

Yet, in the midst of a pandemic, economics can trump politics – and that is where China has both headaches and opportunities.

In few countries is Chinese investment more contentious than in Sri Lanka. Opposition leaders about the “debt trap” that they argue has been caused by Beijing’s Belt and Road Initiative (BRI). Those concerns have only gotten shriller as COVID-19 . Foreign reserves are now down to about $1.6 billion – barely enough for a few weeks of imports, according to the Associated Press. In 2022 alone, Sri Lanka faces foreign debt obligations to the tune of over $7 billion. Inflation rose to over 12 percent by the end of December and food inflation has increased to over 22 percent.

Similar problems have ravaged the Maldives, which owes a whopping 40 percent of its GDP to China. The pandemic shut down much of the tourism sector, which for 30 percent of Maldivian GDP and over 60 percent of its foreign earnings. Both countries have been downgraded by various ratings agencies for their pandemic woes. When Wang visited Colombo over the weekend, Rajapaksa to restructure Sri Lanka’s debt.

But the problem for Sri Lanka and the Maldives is that China’s rivals haven’t quite been able to step up either.

Ever since Yameen left office in 2018, India has made some important inroads into the Maldives’ dependence on China. India the Maldives’ largest infrastructure project – the Greater Male Connectivity Project – and some 45 major development projects worth over $2 billion. It has also the biggest share of tourists arriving in the Maldives over the last couple of years – nearly 300,000 in 2021 alone.

But as its own economy reels under the pandemic, New Delhi’s ability to compete consistently with Beijing’s economic influence is suspect. Far before Rajapaksa made his plea to Wang this weekend, Sri Lanka India for a debt moratorium in February 2020. New Delhi did not respond to that request. Sri Lanka also made for emergency lines of credit to import food, fuel, and medicines, and also a currency swap arrangement. New Delhi did not respond to those either.

Despite its historical advantages, India has also lost its primacy on trade to China more recently. Between September 2020 and September 2021, trade between China and Sri Lanka increased by , according to the Observatory of Economic Complexity. Trade between China and the Maldives increased by during the same period. India’s trade ties, meanwhile, have remained relatively flat.

As the virus continues to spread, countries will seek to align more strongly with regional powers that can meet their economic needs. In 2020, when asked why Colombo keeps going back to China for more debt, a Sri Lankan minister simply that China has the “most amount of cash now.” That fact puts the advantage firmly in favor of Beijing.