23. Military modernization was the last among the four modernizations announced by Deng Xiaoping. However, the implicit connection between economic progress and military modernization, and their combined contribution toward China's CNP was evident. David Shambaugh identifies the threat of Taiwan's independence, US hegemony in Asia, China's desire to be a global power, growing energy demands, and the regional security environment as the contextual drivers of China's military modernization. Within the regional context, China appears more anxious with respect to its relations with Japan and a contingency arising in the Korean peninsula than with planning for an eventuality against India. [1] However, the Chengdu and Lanzhou Military Regions (MR) take India into account as a potential adversary. [2]
24. The PLA doctrine has evolved through five stages i.e. People's War (1935-1979), People's War Under Modern Conditions (1979-1985), Limited War (1985-1991), Limited War Under High Technology Conditions (1991-2004), and Limited War Under High Technology and Information Conditions (since 2005). [3] The revision in 1985 was based on Deng's assessment that China no longer faced a threat of a superpower invasion, but did not rule out regional confrontations. The last two evolutions have been motivated by China's study of the two Iraq Wars and the Revolution in Military Affairs. The Chinese military emphasizes Precision Guided Missiles, automating Command, Control, Communications, and Information (C3I) systems, Electronic Warfare (EW) capabilities, integrated joint operations, and the need to enhance logistics support and maintenance. [4]
25. Modernization is occurring in virtually every aspect of the Chinese armed forces. According to its 2006 defence white paper, China is pursuing a three-step strategy to modernize its armed forces. It seeks to create a "solid foundation" by 2010 and reach another phase of "major progress" by 2020. It then seeks to be "capable of winning informationized wars by the mid-21st century [5] . The trend analyses, however, show that faster progress is occurring in some areas while other areas prove to be more resistant to change. One must also not lose sight of the fact that the results of equipment modernization are strongly influenced by the PLA's ability to modernize its tactics, strategy, training, and communications networks.
Trends in Military Spending
26. Official Estimates. China has provided a detailed description of the formulation and control of its military spending in its 2010 defence white paper and also provided the rational for current trends:
"With the development of national economy and society, the increase of China's defence expenditure has been kept at a reasonable and appropriate level. China's GDP was RMB 31,404.5 billion in 2008 and RMB 34,090.3 billion in 2009. State financial expenditure was RMB 6,259.266 billion in 2008 and RMB 7,629.993 billion in 2009, up 25.7 percent and 21.9 percent respectively over the previous year. China's defence expenditure was RMB417.876 billion in 2008 and RMB495.11 billion in 2009, up 17.5 percent and 18.5 percent respectively over the previous year. In recent years, the share of China's annual defence expenditure in its GDP has remained relatively steady, while that in overall state financial expenditure has been moderately decreased''. [6]
27. Determining the Correct Estimates. There is a lack of consensus among military analysts regarding the real level of Chinese defence spending. What is clear is that Chinese government statistics do not include some outlays like Arms imports, foreign weapon procurement, military aid for and from foreign countries, Expenses for paramilitary forces, Expenses for strategic and nuclear forces, Government subsidies for military production, Expenses for military R&D and PLA's own fundraising. [7] Most outside experts believe that China's real military expenditures sharply exceed the officially stated numbers and that the announced Chinese defence expenditures of $106.4 billion for 2012 do not suffice to support an organization that maintains 2.3 million service personnel and an increasingly sophisticated and therefore expensive arsenal of weapon systems. The US DOD's pegs the estimates for 2012 between $120 billion to $180 billion. [8]
28. Future Predictions. A comparison of Chinese defence spending over time establishes that Chinese absolute military spending is on the rise. Annual average growth rates of over 11 percent over the past decade [9] (based on Chinese reported numbers) are certainly high by international comparison, yet they appear to be sustained by almost equally high GDP growth rates. Predictions for further military expenditure growth thus depend on continuously high GDP growth rates. Social unrest or other domestic problems may lead to a diversion of funds away from defence expenditures, yet currently there is no sign that military spending is slowing, especially given the emphasis that Chinese leaders place on the modernization of the armed forces.
PLA Army (PLAA) Modernization
29. Goals. Since the mid-1980s, the PLAA has steadily reduced its overall force size and developed modern capabilities and systems in critical areas of the future battlefield with the key goal behind these changes being to improve the PLAA's ability to fight "Local Wars under Conditions of Informationalization". This is envisaged to be accomplished by improving its ability to move quickly, deliver devastating blows without relying on sheer mass and defending itself from enemy electronic warfare (EW) and air attacks. The various aspects of PLAA force modernisation are discussed in succeeding paras.
30. Force Structure. A study of report titled Chinese Military Modernization published by CSIS in Jun 2012 reveals a number of key changes in force structure which include nearly 50% reduction in Group Armies (GA's) and significant decrease in army divisions within the PLAA. The focus has been on reduction of larger formations, the increase of smaller and specialized formations and the reduction in the number of GA's. These changes enable the creation of a leaner, more agile, and more mobile force capable of quickly moving from one Military Region (MR) within China to a contingency on any of China's borders. This skill would better enable the PLAA to win local contingencies and has a direct bearing on Indian security calculus.
31. Manpower. The study also reveals that there has been a nearly 50% reduction in PLAA manpower since 1985. This manpower trend, in combination with the increase in specialized and smaller formations, indicates a PLAA focus on agility and mobility over mass, a shift that necessitates higher human capital and higher quality equipment. In addition, manpower reduction indicates lower maintenance costs for the PLAA and thus greater resource availability for modernization efforts and improvements in human capital. Figure 2 displays this manpower trend over the years 1985-2012.
32. Quantitative and Qualitative Trends in Equipment Modernization. The PLAA's major weapon system modernization has occurred through a combination of discarding obsolete equipment and procuring modern, information technology-enabled equipment. Figures 3, 4, 5 and indicate that the relative reduction in major PLA weapon systems coincides with an overall increase in the number of modern systems in the PLAA inventory. Figure 7 displays the PLAA's procurement of modern main weapon systems. Figure 8 provides indicators of the PLAA's modernization progress. As the data indicate, the PLAA has experienced a sharp rise in the percentage of its equipment that is considered modern. Approximately 17% of all artillery is self-propelled, 31% of MBT's are third generation, and 45% of AIFV/APC's are modern. These numbers are in stark contrast to 9%, 0%, and 0.1%, respectively, in the year 2000. Consequently, the PLAA has engaged in an effective modernization program that has absolutely and relatively increased the modern equipment of the PLAA, thus significantly altering the composition of the PLAA.
33. Changes in Unit Training. The last decade has seen significant changes in PLAA training that indicate a shift towards more realistic training, joint operations, and trans and multi MR operations; the latter two are capabilities needed to fulfil the requirements of the Local Wars doctrine. The most recent edition of the Outline of Military Training and Evaluation has promoted unscripted training based on facing an opposition force, [10] and multiple PLAA exercises during the decade required forces to mobilize across long distances that involved multiple MR's.
The PLA Navy (PLAN)
34. Goals. In 1985, PLAN's strategic focus shifted from traditional coastal defence to active offshore defence and increasingly toward Mahanian concepts of power projection. PLAN has embarked upon a three-phase development plan to transform the PLAN into a world class sea power by 2040. By 2020, China is expected to complete the second phase and acquire the capabilities to project power along China's periphery and deploy naval forces in the Indian Ocean and. [11] PLAN now seeks new methods of logistic support for susutaining long term distant maritime missions while continuing nvestment in on shore based support systems. Thus implying that it is keen to acquire some of the tenets of a 'blue water naval force'. [12]
35. Shift in Force Structure, Equipment Composition, and Manpower. PLAN's modernization has focussed on increasing the categories of ships under its command and developing new capabilities and their necessary systems. PLAN has discarded large numbers of obsolete vessels, mostly coastal combatants, and replaced them by modernized imported and indigenously-manufactured ocean-going combatants. In stark contrast to their single-mission predecessors, the new PLAN frigates (Corvette class) and destroyers(Type 052) are multi-mission combatants capable of effectively conducting a variety of missions. Additionally, the PLAN is replacing its patrol craft with modern variants such as the Houbei, which has a wave-piercing hull design and can carry eight anti-ship cruise missiles. Furthermore, the PLAN's procurement of new diesel (Yuan class and Song class) and nuclear-powered submarines (Jin class SSBN and Shang class SSN) has significantly modernized its undersea combatant arsenal [13] . In addition, the sea trials of the Ex-Varyag carrier [14] , as well as flight-testing of the J-15 (Su-33) carrier-fighter [15] , indicate future PLAN developments toward greater power-projection capabilities. Moreover, in addition to reducing its manpower, PLAN has conducted exercises and deployments that are developing the skills necessary to perform offshore defence and producing experiences vital for a service that has little combat experience.
PLA Air Force(PLAAF)
36. Goals. The PLAAF is an air force in transition. Since 2000, the PLAAF has fully embraced a shift from a singular focus on air defence and interceptor fighter aircraft to a multi-mission force, capable of carrying out AD, strike, transport, Intelligence Surveillance and Recconnaisance and electronic warfare missions. These changes in force structure, as well as the procurement of modern aircraft, have augmented the ability of the PLAAF to conduct both defensive and offensive missions, thereby increasing the PLAAF's utility to the wider PLA in the context of the Local Wars doctrine.
37. Shifts in Force Structure. The shift in force structure has been decisive and has significant implications for the PLAAF's ability to conduct the missions required by the Local Wars concept i.e. precision strike, air defence, ISR, EW, and strategic airlift. The PLAAF has altered its force structure by proliferating the categories of aircraft in its inventory. Some aspects important to note are the significant drop in fighter aircraft numbers over the period, the absolute and relative increase in ground attack aircraft, the steady decline of bomber numbers, and the development of different aircraft categories. This trend indicates greater doctrinal emphasis on ground attack, transport, and training missions.
38. Shift in Equipment Composition. The rapid modernization of the PLAAF's aircraft inventory has augmented PLAAF combat power. The PLAAF has significantly reduced its holding of second and third generation aircraft while developing and purchasing fourth generation or near-fourth generation aircraft. Indigenously developed J-10, J-11, and JH-7 fighter and strike aircraft, as well as the continued development of the J-20 fifth generation aircraft, improve the survivability and effectiveness of China's air force. Likewise, the purchase of Su-27 and Su-30 aircraft quickly provided the PLAAF with a fourth generation fighter capability. Figures 8 and 9 show the numbers of modern PLAAF aircraft in comparison to overall PLAAF holdings. In the year 2012, with over 500 modern fighters or fighter bombers, the modern portion of the PLAAF outnumbers most air forces in the Asia-Pacific region. Moreover, the J-20 stealth fighter prototype indicates that the PLAAF is seeking a fifth generation combat capability. Figure 10 tracks the percentage of the PLAAF that is considered modern from the year 1985. The graph demonstrates the rapid modernization of the PLAAF since the year 2000 and displays the trends which are augmenting the PLAAF's ability to win Local Wars.
Second Arty Corps (SAC)
39. Goals. The SAC's force development and modernization efforts indicate that it is set to obtain both the conventional and nuclear capabilities necessary for fighting and winning Local Wars under Conditions of Informationalization in the 21st century.
40. Strategic Focus. The SAC has modernized its missile systems and obtained a conventional arsenal completely comprised of modern missiles that utilize solid-fuel and are road-mobile. Moreover, the SAC's conventional missile systems are increasing in accuracy, thus increasing the potency of a hypothetical SAC long-range precision strike. Capabilities such as regional conventional precision strike, which did not exist in 1995, now make up more than half of the SAC's missile launcher arsenal. It is within this context that new weapon systems such as the DF-21D Anti Shipping Ballistic Missile, Anti-Satellite missiles and conventional DF-21C's are developed, deployed, and used. In the nuclear arena, China is reported to have deployed a credible second-strike capability for assured retaliation against all its nuclear adversaries and the current emphasis continues to be to improve the reliability, survivability, and penetrability of its nuclear arsenal through mobility, concealment, and a moderate increase in warheads. Toward this end, China has started deploying road mobile and solid fuelled DF-31 and DF-31A Inter Continental Ballistic Missiles (ICBMs), and is reportedly building five Jin-class SSBNs, which would be armed with approximately 10 JL-2 Submarine Launched Ballistic Missiles (SLBMs). [16] Future trends suggest that the 2nd Artillery is keen to develop multiple independently targeted re-entry vehicles (MIRVs) and ASATs to defeat missile defence programs initiated by the US. [17]
41. Operational Focus. At the operational level, the SAC is preparing to conventionally fight Local Wars. It has built a 5,000 kilometre long tunnel network to provide protection for its mobile missile systems, thus reducing the risk of pre-emption and complicating adversary targeting. Moreover, the forces with the greatest precision, the SRBM and LACM forces have large numbers of reserve missiles per missile launcher, thus ensuring the possibility of sustained combat operations and repeated salvo fire. This combination of enhanced mobility, survivability, and large supplies of ammunition ensure that adversary forces in the region must operate in an environment in which there will be no sanctuaries within hundreds of kilometres with China if a conflict should start. To engage targets in India China has deployed the DF-4 and DF-21 in Tibet and DF-31 and DF-31A in Delingha in Quinghai province. [18] Moreover, out of 1500 or more mobile CSS-6 and CSS-7 Short Range Ballistic Missiles deployed against Taiwan at least half can be relocated in Tibet (already validated by an exercise). [19]
Manifestations
42. Widening Gap in Military Capabilities. India's defence budget for FY 2012-13 is Rs 1,05,000 crore as compared to Chinese . Due to China's vigorous military modernisation drive, the military gap between India and China is growing every year. Assuming China and India continue to spend 2% and 2.5% of their projected GDPs on defence, and that these funds will be translated into vital military assets, the difference in their respective capabilities will start widening in the time frame of 2020 (See Figure 11). This growing asymmetry in military capability may give rise to Chinese assertiveness and encourage it to seek the resolution of border dispute on its own terms by taking recourse to conflict.
43. Qualitative Edge of PLA. China's anti-satellite (ASAT) missile test in 2007, its anti-ship ballistic missile (ASBM) test in 2010, and the maiden flight of a J-20 fifth generation stealth fighter aircraft in 2011 represent increasing Chinese capabilities. [20] China's aspiration to match, or at least deter, US forces during a future Taiwan crisis, sets such a high technological benchmark for the PLA that this might automatically grant it an edge against India. Thus, while striving for a semblance of parity in numbers, India would need to review the qualitative effectiveness of its deterrence capabilities frequently the absence of which may fuel Chinese adventurism and precipitate in a conflict.
44. Reduced Reaction Time. Within the ground forces, the emphasis has been on rapid response units capable of deploying anywhere in China within 24 hours. Four Group Armies (GA) have reportedly been trained for such contingencies, with the 13th GA (Chengdu MR) specifically trained for high altitude warfare. [21] The frantic pace of infrastructure development in Tibet is also a cause of concern for India since it has shrunk the preparatory period for responding to a High Level Threat (HLT) from six months to a matter of a few weeks. [22]
45. Nuclear Dilemma. Strategic modernization of China's nuclear forces at a time when most of China's centres of gravity remain beyond the range of Indian missiles will place additional strain on India's nuclear doctrine and development and pin the stability of nuclear deterrence on China's intentions. Some experts conjecture that China may graduate from minimum to limited deterrence spurred by continued economic and scientific advancement and changes in threat perceptions. Similarly, China's no-first-use pledge is also questioned leading to fear that China may claim threats to its sovereignty to justify pre-emption as a strategically defensive act. [23] In view of the foregoing, credible second strike capability against China seems the best option to assure stable Sino-India relations. Another potentially complicating factor is that China does not recognize India as a Nuclear Weapon State (NWS), hence leaving no scope, at present, for nuclear CBMs. [24]
46. Increased Regional Reach of PLA. In the course of its modernization PLA has exhibited little evidence of attempting to acquire disproportionate power projection capabilities that would imply an aggressive intent. However, the PLA's regional reach will steadily improve and alter the balance of power in Asia. [25] Thus India will be hard pressed to ensure it has a sufficient credible conventional and nuclear deterrence capability to prevent any miscalculations of cheap victory or opportunism. This counter-balancing might partially feed the security dilemma and sow the seeds of conflict.
47. Interpreting Chinese Intent. The Chinese defence White Papers have envisaged local border wars and preparing for local wars has been defined as a defence priority in these papers. If we try to identify with whom they are envisaging local war, India is the most likely target because of the unresolved border dispute between the two countries and the problem in Tibet. The way China has transformed its military capabilities; has focused on long-range deployment military exercises; has built military infrastructure to mobilize at least half-a-million army in a short period in Tibet; has developed high-tech acclimatisation facilities (which provide mountain acclimatisation conditions in the plains itself) and has deployed more advanced missiles capable of targeting most of Indian territory raise apprehensions about the ultimate aim of all these preparations. The developments definitely aim at building capabilities for an eventual conflict with India. As long as the capabilities exist the possibility of conflict looms large as in does not take very long for the intentions to change.
48. Future Prospects. China's relative military superiority and its drive to modernize imply that the current state of deterrence between China and India will be a case of constantly shifting goal posts. Military modernization by China, even if not aimed at India, has the potential to disturb the current stability; the challenge for India is to ensure deterrence without intensifying the security dilemma. However, a prudent Indian strategy for the future must also incorporate potent conventional and nuclear deterrence. China's overall aim is to close the wide military gap between the PLA and the world's leading military powers, particularly in hardware designed to provide strategic outreach capabilities. This aim will continue to be pursued relentlessly and resolutely. The achievement of this aim will automatically lead to a still greater gap between the military power of India and China. Consequently, India must enhance its investment in modernising its armed forces both in terms of the adequacy of force levels for carrying the conflict into China and the military hardware required to deter and if necessary, fight a resurgent PLA.
CHAPTER IV : RISING CHINESE GEOPOLITICAL INFLUENCE IN SOUTH ASIA
Contours of China's South Asia Policy
49. Following its takeover of Tibet, China became an integral part of the Southern Asian geopolitical and strategic environment. It shares borders with Pakistan (given its occupation of a portion of Jammu and Kashmir), India, Nepal, Bhutan and Myanmar. [26]
50. The rise of China, whether in terms of economic growth or military build-up, is bound to have a regional implication. Different countries, however, have their own interpretation and response. As neighbouring states, each is affected, some positively and some negatively, by China's military power, posture, strategic thinking, and evolving role. China thus shapes in a major way the regional balance of power and security environment. Although India and South Asia are not central to China's foreign relations and policy priorities at present, this is a growing area of Beijing's interest. For New Delhi, however, whether positive or negative, "China's military doctrines, forced deployment postures and economic interests are a matter of interest to India." [27]
51. China's Stance. Interestingly, the Chinese Ministry of Foreign Affairs does not use the term South Asia in its major foreign policy pronouncements and limits it to discussions on Pakistan. It treats all countries around in its periphery (including India) as 'Asian Neighbours' and claims that it conducts its foreign policy towards them in 'the Asian spirit of coexistence in harmony, good neighbourly friendship, consultations and dialogue, respect for civilization diversity, solidarity and (mutually beneficial) cooperation'. [28] It lays emphasis on consolidating its relationship with its Asian neighbours through frequent high-level contacts, and believes in pushing forward regional cooperation and expanding 'exchanges and cooperation in the fields of trade, investment, infrastructure, finance, science and technology, culture and education to unprecedented width and depth'. [29] This, in a way, denotes China's aspirations as an emerging world power with bigger ambitions to make its mark on the world stage as the most pre-eminent power in Asia. Against this backdrop, it is necessary to take a close look at China's relationship with each of the South Asian countries and understand its implications for India.
China and Pakistan
52. Historical Friendship. Of all of China's relations in Asian neighbours, those with Pakistan outweigh and overlay any other bilateral relationship. The Beijing Islamabad "special relationship" is part of China's grand strategy that moulds South Asian security environment. Despite some improvements in Sino Indian relations Pakistan remains the linchpin of China's South Asia policy. [30] The relationship between the two prospered, especially since the 1960s, against the backdrop of the India-China war of 1962. Pakistan has since looked up to China as a major strategic partner. Pakistan played a major role in the US-China reconciliation in early 1970s. China and Pakistan are united in their antipathy towards India and each uses the other as a strategic ally in southern Asian region against India. Beijing's 'entente cordiale' with Islamabad continues to flourish underpinned by military, economic and infrastructure development and diplomatic cooperation. No one put it better than Chinese President himself during November 2006 Pakistan visit; "We can give up gold but we can't give up our relationship with Pakistan. China Pakistan relationship is higher than the Himalayas, deeper than the India Ocean and sweeter than honey". [31] China has engaged itself in critical infrastructure building and business investments in Pakistan. This is amply demonstrated by the construction, and later expansion, of the Karakorum Highway, a deep-sea port at Gwadar, Chashma Nuclear Power Plant, Taxila Heavy Mechanical Complex, Jinnah Sports Stadium, and the Pakistan-China Friendship Centre. Reports in the media indicate that Chinese are increasing their footprints in the Pakistan-occupied Kashmir (PoK) under the pretext of developing infrastructure in the region. [32] Moreover, this 'all weather' relationship is likely to further get strengthened in view of recent strains between Washington and Islamabad and the United States announcing plans for a withdrawal of troops from Afghanistan [33] .
53. Trade. China-Pakistan trade hovers around US$ 10 billion and they are taking active measures to raise it to about $15 billion by 2012. According to Pakistan Foreign Ministry, 'over 100 Chinese projects in various fields are underway in Pakistan and thousands of Chinese are working on these projects'. [34]
54. Defence Cooperation. The two armies have very good relationship. China continues to provide military assistance, both conventional weapon platforms and components for strategic weapons, to Pakistan army. China's transfer of missile and nuclear technology to Pakistan is an uncontested fact. The Indo-US nuclear deal in 2007 has been wrongly interpreted by both as being directed against them and this has brought them even closer together. This is demonstrated by the brazen attempt by the Chinese to grandfather some nuclear deals with Pakistan, as a strategic counter to Indo-US deal.Contrary to some of the Chinese claims, no notable let-up has been observed in China's military cooperation with Pakistan. It continues and finds newer areas like supply of unmanned aircraft to Pakistan. Besides, it has been recorded that whenever India and Pakistan have come close to confrontation in the last 20 years, the Pakistani political and military leadership have paid visits to China and extracted positive political statements from the Chinese leadership about China-Pakistan friendship, seeking to put indirect pressure on India. Besides, it has also been noted that China has, in some cases supplied military assistance to Pakistan in the immediate backdrop of the latter's crises with India. Geostrategic and security considerations continue to be the most important drivers of close Sino-Pakistan relations. This relationship presents India a potential two front war threat. [35]
China-Bangladesh
55. Chinese Interest in Bangladesh. China was one of the few countries which did not support the independence of Bangladesh in 1971. However, it did not waste much time and established diplomatic relations with Bangladesh in 1975. The relationship between the two countries is growing, with China substantially increasing its economic and trade relations with Bangladesh. For China, Bangladesh is a doorway into India's turbulent north eastern region, including Arunachal Pradesh, to which China lays territorial claims. China prizes Bangladesh for its immense natural gas reserves which rival those of Indonesia. Bangladesh's geographic proximity with Myanmar makes these reserves accessible to China. 'Further as China looks at the possibilities of naval presence in Indian Ocean, the port of Chittagong - where it is developing a container port facility - and the long Bangladesh coastline along Bay of Bengal offer enticing possibilities'. [36]
56. Blooming Bilateral Relations. China is Bangladesh's largest trading partner and imports from China have increased over a period of time. [37] China has invested in the Bangladeshi market in textiles, energy, and infrastructure sector. The Chinese President had visited Bangladesh in 2010. Agreement on 'Closer Comprehensive Partnership of Cooperation between China and Bangladesh' was signed during Sheikh Hasina's visit to Beijing in March 2010. According to the outgoing Ambassador of China to Bangladesh, 'The bilateral trade volume in the first 11 months of 2011 reached $7.5 billion, with an increase of 21.3 percent compared with same period in 2010. Bangladeshi exports to China reached $400 million, an increase of 79.5 percent'. [38] Media reports quoting Chinese foreign ministry reports suggested that China responded positively to the request from Bangladesh side to help it in launching a communication satellite. China and South Korea are the largest foreign investors in Bangladesh followed by India. China is providing Bangladesh with hydrological data at three points in the upper reach of river Brahmaputra on a daily basis between January to October free of cost. China has also agreed to develop a deep-sea port at Sonadia near Cox's bazaar.
57. Defence Cooperation. The two countries have extensive defence cooperation, involving regular military-to military exchanges and contacts at high levels. China is largest supplier of small firearms to Bangladesh and also transfers missile to the country. China trains Bangladeshi forces under Defence Cooperation Agreement signed between China and Bangladesh in 2002 and shapes Dhaka's security apparatus. Recently, China has assured to help Dhaka in developing peaceful use of nuclear technology for the implementation of Rooppur Nuclear Power Plant. China has also built six 'friendship bridges' across various rivers in the country. China had agreed to supply frigates to Bangladesh Navy in 2010. Bangladesh is purchasing forty-four military armoured vehicles costing US $ 200 million from China. [39] China and Bangladesh are likely to strengthen their relationship further in the future, especially on economic and security-related issues.
China-Nepal
58. Growing Chinese Interest and Influence in Nepal. As a state sharing its border with China's restive province of Tibet, Nepal occupies a special position in Chinese foreign policy. China has three major strategic interests in Nepal: first, containing Tibetan refugees(total number amounts to about 20,000) south of the Himalayas and stopping their anti-China activities; second, neutralizing India's influence in Nepal and setting up a pro-China regime in Kathmandu, for which China has scaled-up its policy of engagement in recent years and adopted even soft diplomatic measures, that is, people-to-people contacts, cultural relations, scholarships to students, economic aid, and spreading of Chinese Buddhism in Nepal; and third, investing in strategically important infrastructure like airports and important highways. The investments in Lumbini and Pokhara airports are a point of reference. [40] China has increased its annual assistance to Nepal from RMB 150 million to RMB 200 million. It also announced an RMB 750 million (US $ 120million or Nepalese Rs [NRs] 9.7 billion) grant to Nepal to be spent on mutually identified projects under a new bilateral Agreement on economic and Technical Cooperation (Link1). China also announced a one-time grant of $ 20 million to be spent on the rehabilitation of former Maoist combatants. [41] China agreed to provide engineering equipment assistance worth RMB 30 million and assistance worth RMB 100 million to the Nepal Army Hospital at Chhauni during recent visit of PLA Chief, General Chen Bingde to Nepal on 23 March 2011.
59. Policy Shift. Above developments indicate major shift in China's foreign policy towards Nepal since 2008 after the fall of the monarchy. China has increased its political, economic, military, and academic delegations to Nepal, posted one of its better diplomats as Ambassador to Kathmandu, increased people-to-people contacts, opened more customs posts at the borders, increased annual grant assistance, and most importantly, strengthened its engagements at the institutional level leading to greater interaction with Nepalese army, bureaucracy, police, and armed police (mostly deployed along the borders). China, it seems, is positioning itself as an alternative to India in Nepal thereby reducing the salience of Indo-Nepal ties. [42]
China-Bhutan
60. While Bhutan and China do not share official diplomatic relations, the two countries are engaged in boundary negotiations since the 1980s. There are pressures from the National Assembly members on the incumbent government to solve the boundary dispute. Economically, China is slowly making inroads into Bhutan. It has made efforts to offer itself as an attractive economic partner to Bhutan, particularly for the development of north and north western areas. China has expressed its intent to invest in projects relating to health and education services and it has also been exporting farming and telecommunication equipment to Bhutan. Formalizing diplomatic relations with China will occupy an important place in Bhutan's foreign policy in the coming years. As public pressure builds up to resolve the disputed boundary issue, and as China's penetration into Bhutanese economy grows there may be a major shift in Bhutanese foreign policy, away from its current focus on India.
China-Sri Lanka
61. Increasing Sino Lankan Bonhomie. China's ties with Sri Lanka have intensified, particularly since 2009. China has now become Sri Lanka's largest donor and third-largest import origin country. According to Sri Lankan President Mahinda Rajapaksa, 'the relations between China and Sri Lanka are at the highest levels of friendship and understanding'. [43] As indicated by very high level visits form Sri Lanka to China the current government is seen to be boosting its relations with China against the backdrop of ongoing international attempts to isolate Sri Lanka over human rights accountability issues. Playing its part China has used its veto power in the United Nations Security Council to block the discussion on steps undertaken by the Sri Lankan Government in its fight against the LTTE.
62. Trade and Economic Relations. Growing trade and economic relations is another important indicator of the China-Sri Lanka multi dimensional engagement. In 2010, Sri Lanka's export to China was valued at Sri Lankan Rupees (SLR) 8,579 million, which accounted for 0.9 per cent of its total export. On the other hand, Sri Lanka's import from China in 2010 was SLR 140,210 million, 9.2 per cent of its total import value. China became the top-most aid provider to Sri Lanka with a total aid commitment of US $ 759.8 million during January-April 2011. [44] China's investments in Sri Lanka have been directed mainly towards development of infrastructure and specific regions such as Hambantota where it is building a $ 1 billion port that military analysts suspect it plans to use as refuelling and docking station for its navy. [45] Central Bank of Sri Lanka included the official currency of China, Renminbi or Yuan, in the list of designated currencies permitted for international transactions through banks in Sri Lanka in 2011.
63. Defence Cooperation. In 2008, Sri Lanka also signed an arms deal with China worth US$ 37.6 million. Recent years have witnessed various high-level visits by a PLA delegation which further enhanced military ties in the field of professional training, exercises, and military assistance to Sri Lanka. [46] The PLA continues to offer training to Sri Lankan military personnel on various training modules. [47] China also gave six F-7 Jet fighters to Sri Lanka free of cost in 2008. China's military aid has substantially contributed to enhancing China's political, diplomatic and strategic influence over Sri Lanka vis-a-vis India, which is a disturbing sign for peace and stability in South Asia. in future China-Sri Lanka strategic tie ups are likely to increase further. [48]
China - Myanmar
64. China's Strategic Interests in Myanmar. Myanmar lies at the strategic crossroads between South West China, North East India, the Indian Ocean, and South East Asia. Myanmar and China emerged as 'partners in adversity' after they faced criticism and sanctions in the wake of their respective crackdowns against democratic protests in 1988/89. [49] While India opted to politically isolate Myanmar, the PRC took the opportunity to establish a foothold in Myanmar. Myanmar offers a threefold advantage to China: one, port access to China's landlocked and impoverished Yunan Province; two, a transit corridor through Myanmar to mitigate China's Malacca dilemma; and three, military bases in Myanmar that can enhance China's strategic reach in the IOR. [50] Myanmar is also reported to have large gas reserves, a factor that is of immense interest to China.
65. Chinese Investments in Myanmar. Since 1988, the PRC has made extensive investments in Myanmar. By 2005, this included $100 million in aid, $1 billion in seller's credit, and $2 billion invested in various projects, thus laying a foundation for strong bilateral relations. [51] The main infrastructure project undertaken by China has been improvement of the Irrawaddy corridor linking Kunming to Kyaukpyu, construction of a deep-water port and construction of an oil pipeline linking Sittwe to Kunming, in addition to the gas pipeline already underway. [52] In 1988, Myanmar undertook an ambitious military modernization program with Chinese assistance; by 1992, military exports from China amounted to $1.4 billion including a squadron of F-7 fighter aircraft, and six Hainan class patrol boats. [53]
66. Misplaced Perceptions. In 1992, the Kyodo News Agency in Japan reported that a listening post was established in the Coco islands, barely 11 miles from India's Andaman and Nicobar Islands, along with a naval base at Haingyyi Island. [54] In 1997, treaty between Myanmar and China, granted the latter a 30-year permit to fish in Myanmar's waters; further strengthening the apprehensions regarding China's efforts to gain access to Myanmar's military facilities. However, even after years of speculation, analysts have found no concrete evidence of a permanent Chinese military presence in Myanmar. [55] In 2005, India acknowledged that there was no Chinese base at Coco Islands, or anywhere else in Myanmar and in 2008 Myanmar passed a referendum prohibiting foreign troops from being based on its soil. [56]
China-Maldives
67. The growing economic and military power of China along with its dependence on energy sources coming from Gulf and Africa has made Chinese interested in the Maldives. The diplomatic relationship between China and Maldives was established on 14 October 1972. Since then, the country has been trying to build on it with various economic programmes and high-level visits. China's has expressed its desire to maintain friendly exchanges and cooperation at all levels in an effort to expand mutual trust and economic and trade cooperation in fields such as fisheries, tourism, and infrastructure building. China also encouraged Chinese companies to further participate in the Maldives' national construction and more Chinese tourists to visit the country.
68. China-Maldives bilateral relations received a major boost after China opened its embassy in Male on 8 November 2011. China is also trying to increase its leverage with Male by sending larger number of tourists as tourism remains a major contributor to the Maldivian economy.
69. China is the past has shown interest in creating a naval base for itself in Maldives. It is reported that China may have clinched a deal with Maldives to build a naval facility capable of hosting submarines on the islands of Marao; allowing it to lease the island and develop it for 25 years. [57] It is also interested in developing Ihavandhoo and Maarandhoo Islands, with transhipment ports among other things, as well as grabbing a piece of action in the development of the country's second international airport at Hanimaadhoo. [58] China wants a presence in these islands which will fulfill their desire to get a foothold in the Indian Ocean. China's main aim is to ensure the security of its sea lanes for facilitating its critically needed energy imports. With the changed political environment in Maldives after Mohd Nasheed's resignation, and increasing assertion of the Islamists, there is a fear that India may lose its long-standing advantage in Maldives to China.
Implications For India
70. Replacing India as Reliable Partner. From the given analysis, it is clear that China is upgrading its relationship with all South Asian countries in a determined manner. It is expanding the areas of engagement, creating opportunities for Chinese investment where it is profitable, offering aid and assistance, and mostly engaging itself profitably in infrastructure- building projects in most of the countries. It has to be acknowledged also that the Chinese ability to deliver on these fronts has generated popular goodwill in most of the countries. With its increasing economic might and its global presence, it is also being viewed as a reliable partner in the region. While this may not offset the natural affinities that India has with each of the South Asian countries, it is likely to increasingly reduce their dependence on India on many counts. This may inevitably lead to an overall weakening of Indian influence and pose a critical challenge to Indian diplomacy, foreign policy and security. China's interests in the neighbourhood may be benign at the moment, but with increasing penetration into the region through multi-dimensional engagements, it is likely to lead to further assertive posture vis-à-vis India in future.
71. China - Myanmar. Burmese dependence on China could have a negative impact on the traditional neutrality and independence of Myanmar, strengthen the military regime and create a destabilizing strategic relationship. The Tibetisation of Burma also provides China with an invasion route to India and generates apprehensions regarding a "two and half front war". [59]
72. China's shadow in the South Asia is lengthening steadily, presenting the security dilemma regarding its rise in front of India policy makers. Unless India takes appropriate diplomatic and strategic measures to arrest its declining influence in South Asia it may face grave security challenges in future.
