China in the Indian

Ocean Region:
Impacts, Prospects, Opportunities

Client: U.S. Government, Office of South Asia Analysis

Prepared by: Nathaniel Barber

Kieran Coe
Victoria Steffes
Jennifer Winter
Outline

• Impact Analysis
▪ Regional Security
▪ Energy Issues
▪ Non-Energy Economic Relations

• Trends and Prospects

▪ “Expansionist” China
▪ “Non-Expansionist” China

• Opportunity Analysis
▪ Trends to Obstruct or Encourage
▪ Opportunities for Future Action
Impact Analysis:
Regional Security
• New Chinese partnerships with South Asian
states come at India’s expense
▪ Construction of port facilities
▪ Hambantota, Sri Lanka
▪ Chittagong, Bangladesh
▪ Sittwe, Burma
▪ Gwadar, Pakistan
▪ Economic and military aid
Impact Analysis:
Regional Security
Re le va nt
Issue Are a China Ind ia Re g io na l Pla y e rs
Dip lo m a t ic
C o m p e t it io n C o m p e t it io n Win
Allia n c e s
Ha m b a n t o t a ,
Win Lo ss Win
Sri La n ka
C h it t a g o n g ,
Win Lo ss Win
Ba n g la d e sh
Sit t w e ,
Lo ss Win Win
Bu rm a
G w a d a r,
Win Lo ss Win
Pa kist a n
Impact Analysis:
Energy Security
• Definition of energy security:
▪ Availability
▪ Reliability
▪ Affordability

• China and India face three primary energy security

risks
▪ High proportion of oil imports
▪ Reliance on dominant oil exporting countries
▪ Dependence on vulnerable sea lanes
Impact Analysis:
Energy Security
Impact Analysis:
Non-Energy Economic Relations
• Increasing Chinese Trade in the Indian Ocean
region

• India’s Trade Deficit with China

• Foreign Direct Investment by China and India

Impact Analysis:
Non-Energy Economic Relations
Prospects and Trends:
Assumptions

• “Expansionist” China

• “Non-Expansionist” China

• Likelihood Scale

Very unlikely Unlikely Somewhat unlikely Plausible Somewhat likely Likely Very likely
Prospects and Trends:
Regional Security
Exp a nsio nist China No n-Exp a nsio nist China
Pre d ic tio n 0-10 Ye a rs 10-20 Ye a rs 0-10 Ye a rs 10-20 Ye a rs
O u t b re a k o f a m a jo r Ve ry Ve ry
Un like ly Ve ry Un like ly
a rm e d c o n flic t Un like ly Un like ly
C h in a a n d In d ia o p e n
a n d / o r e xp a n d se c u rit y
Ve ry So m e w h a t
p a rt n e rsh ip s a n d Ve ry Un like ly Ve ry Like ly
Un like ly like ly
in fo rm a t io n -sh a rin g
a g re e m e n t s
C h in a e n g a g e s In d ia in So m e w h a t Ve ry
Un like ly Ve ry Un like ly
a p ro xy w a r v ia Pa kist a n Un like ly Un like ly
Prospects and Trends:
Energy Security
Prospects and Trends:
Non-Energy Economic Relations
Exp a nsio nist China No n-Exp a nsio nist China
Pre d ic tio n 0-10 Ye a rs 10-20 Ye a rs 0-10 Ye a rs 10-20 Ye a rs
C h in a w id e n s it s t ra d e So m e w h a t So m e w h a t So m e w h a t
Pla u sib le
su rp lu s w it h In d ia Like ly Like ly Like ly
C h in a se e ks t o e xp a n d
e c o n o m ic in flu e n c e Ve ry Like ly Ve ry Like ly Ve ry Like ly Ve ry Like ly
w it h In d ia 's n e ig h b o rs
C h in a a n d In d ia
Ve ry Ve ry
c o o p e ra t e t o re d u c e Pla u sib le Pla u sib le
Un like ly Un like ly
t ra d e im b a la n c e
C h in a a n d In d ia sig n a Ve ry Ve ry So m e w h a t
Pla u sib le
fre e t ra d e a g re e m e n t Un like ly Un like ly Un like ly
Opportunity Analysis:
Trends
• Trends to Obstruct
▪ Chinese FDI to regional states
▪ Chinese-financed and built ports
 
• Trends to Encourage
▪ U.S.-India relationship
▪ India’s relationship with regional states
▪ Indian and Chinese acquisition of energy resources
▪ Chinese-Indian trade
▪ Membership in international energy organizations
Opportunity Analysis:
U.S. Action
• Strengthen U.S. relations with India
 
• Expand relations with Chinese-courted regional states
 
• Maintain naval superiority in the Indian Ocean
 
• Ensure energy security for South Asian states
 
• Pursue a less unequal trade balance with China
 

Questions?