Editor’s Note: This is the eighth installment of “Southern (Dis)Comfort,” a new series from War on the Rocks and the Stimson Center. The series seeks to unpack the dynamics of intensifying competition — military, economic, diplomatic — in Southern Asia, principally between China, India, Pakistan, and the United States. Catch up on the rest of the series. 

The recently resolved military standoff between Indian and Chinese troops along the border separating India, China, and Bhutan has drawn fresh attention to the predicament of smaller countries against the backdrop of rising Sino-Indian competition in Southern Asia. Border disputes notwithstanding, China’s deepening economic inroads in the region have created new strategic dynamics in a region dominated by India.

It is hard to find systematic and comprehensive analyses of the unfolding major-power competition in Southern Asia. East Asia, on the other hand, has been extensively studied as a site of Sino-U.S. competition. Some observers have argued that the two regions are now strategically connected, forming a security “supercomplex” in which great-power competition between China, India, and the United States is unfolding. Given that China is the common factor across both regions, great-power competition in East Asia could serve as a template for understanding its nature in Southern Asia. This article examines the usefulness and the limits of applying the East Asian framework to Southern Asia, particularly with regard to how smaller countries in the region are coping with intensifying competition between Beijing and New Delhi.

A common refrain about East Asian countries is that they are “hedging,” or intentionally declining to clearly align with either the United States or China — all the while benefiting from security partnerships with Washington and economic partnerships with Beijing. East Asian governments perceive a trade-off between their economic and security interests: Going too far in one domain may jeopardize their interests in the other. Indeed, this framework may not be unique to East Asia: The emerging view among analysts is that states in the 21^st century think less in terms of pure balancing and bandwagoning and are instead engaging in more complex strategic responses — such as hedging — to great power competition across regions. Do Southern Asian countries fit this pattern? Do they face similar incentives to East Asian countries when it comes to major power competition in their region, and are they reacting similarly? (We do not include Pakistan in this analysis since its unique strategic rivalry with India, longstanding close alignment with China, and extensive military capability set it apart from all other countries in Southern Asia and most countries in East Asia.)

East Asia: A Template for Understanding Southern Asia?

To answer these questions, we need to consider the similarities and differences between the strategic landscapes in East Asia and Southern Asia. Three points of similarity stand out. First, both regions have a status quo regional power that has been present since at least the end of World War II and that has invested considerable resources in trying to maintain regional hegemony — the United States in East Asia, and India in Southern Asia. Second, in both regions the same rising power — China — has since the end of the Cold War steadily expanded its economic and military capabilities, but cannot yet match the military strength of the resident regional power. This is arguably the case in East Asia by virtue of the United States’ global power projection capability, and in South Asia due to the tyranny of geography (both terrain and distance) that limits China’s current capability to sustainably project force in any non-nuclear contingency involving India. Finally, China’s channel of influence in both regions has been primarily economic. In both regions, smaller countries that depend on Chinese trade and investment may be vulnerable — or at least feel that they are — to Chinese pressure.

Three major factors that distinguish the two regions help us understand why Southern Asian countries have reacted differently to China’s rise compared to their East Asian counterparts. First, countries in Southern Asia are on average poorer, weaker in state capacity and more poorly integrated than in East Asia. In 2016, the average per capita income of East Asia was 6.6 times the average in Southern Asia. In the Fund for Peace’s 2017 Fragile States Index, five Southern Asian states (Afghanistan, Pakistan, Nepal, Bangladesh, and Sri Lanka) ranked in the top 50, compared to just two Southeast Asian states (Myanmar and Cambodia). Relatedly, East Asia has a relatively thick web of regional institutions, most prominently, the Association of Southeast Asian Nations (ASEAN), the ASEAN Regional Forum, the Asia-Pacific Economic Cooperation, and the East Asia Summit. Southern Asia, by comparison, is poorly institutionalized, with the South Asian Association for Regional Cooperation in perpetual decay due to the India-Pakistan rivalry. These differences suggest that, compared to their East Asian counterparts, Southern Asian countries are in even greater need of external economic engagement and on average are more prone to external political influence through the penetration of state institutions. These countries also lack any real capacity to employ multilateral mechanisms to manage potential great-power conflicts in the region.

Second, the source of the security threat differs in the two regions. In East Asia, states must navigate the uncertainty and anxiety resulting from China’s expanding interests and military footprint. Moreover, the security preferences of most governments in the region are consistent with the vision historically pursued by Washington, which is why they seek to sustain high levels of U.S. engagement. On the other hand, China does not yet pose a clear threat to any country in Southern Asia except India, and these countries do not necessarily share India’s vision of the ideal security order. Nepal, Sri Lanka, Bangladesh, and even Bhutan have chafed against India’s efforts at maintaining regional stability through involvement in their domestic affairs. Accordingly, Southern Asian states are not coalescing around a shared vision of security order, status quo or otherwise. This is partly a reflection of the absence of a common threat, but also of the historical infirmities of Indian policy, which has until very recently sought to keep other great powers out of the region, jealously guarding its authority over its smaller neighbors.

Third, though China has pursued economic engagement in both East Asia and South Asia, in the former this engagement has largely been through trade. By contrast, in Southern Asia, China faces stiff competition from U.S. and European importers and Indian exporters. Moreover, China’s top exports to the region — such as cotton, iron, machinery, and chemicals — tend to be low on the value chain, allowing its trading partners to find alternate sources if necessary. Rather than trade, China’s main instrument of economic statecraft in Southern Asia has been capital, specifically in the form of loans for large infrastructure projects. While the official motives behind such projects appear to be commercial, they carry potential security implications of which Beijing — and everyone else — is undoubtedly aware. For instance, while the Belt and Road Initiative in Southern Asia will provide a great deal of business to Chinese state-owned enterprises, it will also create points of leverage for China. Investments of this nature, however, also carry greater risk and vulnerability — not just for the borrower but also for the lender, since money sunk into a project is difficult to move at short notice compared to goods traded. China’s projects must therefore succeed financially in order to create the mutual benefits necessary for Southern Asian countries to gravitate towards accommodating Beijing’s interests.

Coping with Sino-Indian Competition: Strategic Options for Small States

What does all this mean for the strategies of smaller countries in Southern Asia compared to East Asia? On the security front, the logic of alignment in East Asia is to manage the risks and uncertainties of China’s rise by keeping the United States engaged. Vietnam, for example, has benefited from burgeoning trade with China but is also locked in a maritime dispute with its larger neighbor. As a result, it has elevated its diplomatic and military exchanges with the United States. Southern Asian states face the opposite problem: India, as the resident power, is zealously committed to maintaining its regional hegemony in the face of a growing Chinese presence. Southern Asian countries continue to frame their security concerns around India rather than hedging between India and China. For instance, although the Doklam standoff raised concerns among India’s neighbors about being drawn into a future Sino-Indian conflict, this did not translate into a one-sided fear of China’s growing regional presence.

New Delhi is nonetheless sensitive to Beijing’s growing diplomatic and economic ties with Southern Asian countries, as highlighted by its actions at Doklam as well as its efforts to contain Chinese influence in Bhutan, Nepal, and Sri Lanka. Thanks to its historical and cultural integration in the region, India is more adept than China at exploiting the weak and penetrable state structures of its neighbors, thereby expanding its political influence among regional elites in an attempt to counter China’s economic overtures. Indeed, great powers in the 21^st century are increasingly looking to leverage domestic politics within smaller states in order to build strategic alignment, instead of appealing to more traditional security-related concerns at the national level. This is especially true in the context of Southern Asia’s weak states. These countries are left with no doubt that India will go the extra mile to retain its traditional sphere of influence.

Going the distance, however, does not mean India will use or even threaten force in response to Southern Asian countries engaging with China. India’s domestic institutional weaknesses and economic priorities preclude this option. Unlike the United States in East Asia, India lacks the ability to play security patron, which would offer much stronger influence over the policies of Southern Asian countries. Smaller states in Southern Asia therefore seek to maintain a security equilibrium that pays sufficient respect to India’s strategic interests and sphere of influence, while profiting from economic relationships with both India and China. India’s desire for regional influence can in fact be beneficial for its neighbors, providing them with useful cover under which they keep other great powers such as China from exercising too much influence over them. Southern Asian states can thus accept both the benefits and constraints of operating within India’s sphere of influence.

On the economic front, East Asia’s material prosperity continues to depend on deepening links with China’s ever-growing domestic market. Southern Asian countries also have a major incentive to grow economic relations with China, especially on the investment side. Chinese financing of large infrastructure projects — typically faster and less conditional — is an attractive economic development strategy, notwithstanding its role in fostering alleged corruption and political patronage. However, due to the mutual vulnerability created by capital as a tool of influence, and the poor track record of a number of projects funded by China, Beijing is finding it difficult to convert its economic clout into political influence in Southern Asia. Indeed, Chinese money has created domestic political tensions as recipient countries such as Sri Lanka are pushed further into debt.

It is in the dimension of time horizons where the differences between the two regions are most visible. For East Asian countries, their largest economic partner is also their greatest source of potential insecurity; hence, they hedge with an eye to the future, seeking to maximize economic gain without losing the capacity to safeguard their security interests later. They protect these interests by building security ties with the United States. Southern Asian countries, by contrast, face no major security threat from China and are cognizant of India’s desire for regional influence. As a result, their focus is more on the present, seeking to maximize economic gain from both China and India without disrupting the region’s existing security equilibrium. They achieve the latter through a delicate balancing act between inviting Chinese investment and managing the risk of an Indian diplomatic or economic backlash. To manage India’s displeasure over their involvement with China, Southern Asian countries make periodic concessions to New Delhi while continuing to deepen economic ties with China — as Nepal, Bangladesh, and Sri Lanka have all done.

Hedging on the Horizon?

Small Southern Asian countries thus face a relatively weaker set of strategic tradeoffs compared to their East Asian counterparts. They are able to augment economic ties with India and China simultaneously, in effect playing one against the other, without facing any grave security risks or uncertainties. Two potential sources of internal risk may arise, however. First, the increased involvement of both China and India in these countries could create friction on the ground between the two powers. For now, however, New Delhi’s regional political influence remains strong while Beijing’s growing influence is economic and that too of an opportunistic rather than coordinated nature. There is little evidence that China’s investments have produced significant political or security-related gains so far.

Second, increased Sino-Indian competition in the domestic politics of Southern Asian countries may increase risks of political fragmentation and civil conflict. This may particularly arise if China consistently backs one faction in a domestic political rivalry and India consistently backs the other. Again, at present there is no evidence of such a trend. China’s support for political actors such as Mahinda Rajapaksa in Sri Lanka and Abdulla Yameen in the Maldives has been opportunistic, driven primarily by short-term advantage than any longer-term ideological or political commitment. Beijing has been more than willing to court the other side if it appears to have the political upper hand. The same is true of Indian policy, which has been politically ambivalent and open to transient partnerships of convenience.

At the regional level, the security scenario may change in the future under at least three conditions. First, escalating Sino-Indian tensions will narrow the strategic space in which Southern Asian states can operate without engaging the sensitivities of either New Delhi or Beijing. Second, either regional power might decide unilaterally that its expanding interests demand further policy accommodation from smaller states, generating a direct conflict of interests. For example, similar to its island-building activities in the South China Sea, Beijing might seek to more concretely secure its interests in the Indian Ocean by establishing a permanent maritime presence within littoral states. Alternatively, New Delhi could actively seek to build a security community to counter perceived threats from Beijing. This would be analogous to how some analysts and U.S. officials viewed the Trans-Pacific Partnership — that is, as an economic way of shoring up U.S. alliances in East Asia. Naturally, Pakistan would play spoiler to any efforts on this front. Finally, as the region’s economies mature, further opportunities to do business with China may develop. The increasing appeal of Chinese exports and Chinese consumers may create new leverage for Beijing, as appears to be the case in East Asia.

Until the above conditions materialize, however, Southern Asian countries are likely to continue pursuing their strategies of dual advantage between India and China. In the words of Sri Lanka’s Minister for Special Projects, “Taking sides is not rational in Sri Lanka’s interest… India is our brother, China is our friend.”

Rohan Mukherjee is an Assistant Professor of Political Science at Yale-NUS College. Darren Lim is a Lecturer in the School of Politics and International Relations at the Australian National University.