By Nilanthi Samaranayake 26 April 2019
Summary
• The smaller South Asian (SSA) countries maintain different levels of interaction with China, ranging from Bhutan, which has no formal diplomatic relations with China, to Bangladesh and Sri Lanka, which have the strongest military and economic ties, respectively.
• On balance, SSA countries have benefited from China’s growing economic and military engagement with them and the region. Chinese projects have helped increase connectivity within these countries as well as with external trading networks.
• Despite China’s arms sales to these countries, the dominant role exerted by India in South Asia and difficulties in the India-China relationship have ensured that military ties of SSA countries with China remain limited.
• SSA countries are increasingly aware of the potentially negative impacts and unintended consequences of Chinese financing of development projects, and they are weighing the economic benefits of such projects against the potential strategic costs of future Chinese involvement.
• US concerns about how Chinese loans to SSA countries are affecting regional security dynamics should prompt Washington to help alleviate the challenging structural conditions these countries face in the prevailing development finance order.
• SSA countries will have continuing relevance for US interests across the Indo-Pacific region, including their reliance on China for development finance, India’s standing in the region, domestic politics and internal conflict dynamics, and regional security.
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