China’s Influence on Conflict Dynamics in South Asia

China has embarked on a grand journey west. Officials in Beijing are driven by aspirations of leadership across their home continent of Asia, feelings of being hemmed in on their eastern flank by U.S. alliances, and their perception that opportunities await across Eurasia and the Indian Ocean. Along the way, their first stop is South Asia, which this report defines as comprising eight countries—Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka—along with the Indian Ocean (particularly the eastern portions but with implications for its entirety). China’s ties to the region are long-standing and date back well before the founding of the People’s Republic in 1949.

However, around the beginning of this century, Beijing’s relations with South Asia began to expand and deepen rapidly in line with its broader efforts to “go global.” General Secretary Xi Jinping’s ascendance to China’s top leader in 2012 and the subsequent expansion of Chinese activities beyond its borders—including through Xi’s signature Belt and Road Initiative (BRI)—have accelerated the building of links to South Asia in new and ambitious ways.

In South Asia, China has encountered a dynamic region marked by as many endemic problems as enticing opportunities. It is a region struggling with violent conflict, nuclear-armed brinksmanship, extensive human development challenges, and potentially crippling exposure to the ravages of climate change. But it is also one whose economic growth prior to the COVID-19 pandemic was robust, that has a demographic dividend, and whose vibrant independent states are grappling with the challenges of democratic governance—including the world’s largest democracy in India. China’s expanding presence in the region is already reshaping South Asia, which is simultaneously emerging as an area where U.S.-China and regional competition plays out from the Himalayan heights to the depths of the Indian Ocean.

To better understand these trends, the United States Institute of Peace convened a bipartisan Senior Study Group (SSG) of experts, former policymakers, and retired diplomats to examine China’s role in South Asia from a variety of angles. The group met six times by videoconference over the course of 2020 to examine how an array of issues—from military affairs to border disputes, trade and development, and cultural issues—come together to shape and be shaped by Chinese involvement. The group members drew from their deep individual experiences working in and advising the U.S. government to generate a set of focused, actionable policy recommendations. The report includes this executive summary that details the group’s findings and recommendations and is followed by deeper explorations of U.S. interests in South Asia amid China’s growing role; Beijing’s interests in and approach toward the region; China-Pakistan relations; China-India relations; and China’s relations with the smaller South Asian states—Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, and Sri Lanka.

A rich literature on China’s relations with South Asia exists and continues to expand. This report cites from the best work in the field, which includes that of SSG members, and offers a short and accessible assessment of China’s activities across the region as well as crisp recommendations for U.S. policymakers in the executive and legislative branches of government. As the United States works to fulfill its vision of a free and open Indo-Pacific region and to respond to a more assertive China, this report can serve as a road map for the next U.S. administration while it advances the Indo portion of that vision and identifies linkages with issues in the Pacific.
Findings

The United States and China both see South Asia as important, although neither considers the region its top geopolitical priority. They consider other areas, such as East Asia, more central to advancing their interests. Still, they recognize that South Asia’s strategic geography and growing population, along with nuclear and terrorism risks, merit sizable allocations of attention and resources. South Asia is a key area in regard to Washington’s goal of building a free and open Indo-Pacific, and Beijing’s of revising the Eurasian political and security order and becoming the leading power in Asia. The emerging period of Sino-American strategic competition, which could last for decades, is likely to influence both the U.S. and Chinese assessments of and engagements in South Asia.

U.S.-China bilateral competition and confrontation make cooperation in South Asia, including during major crises, substantially more difficult. Both countries nominally have a mutual interest in countering violent extremism, ensuring strategic stability and crisis management between India and Pakistan, and promoting regional economic development. Yet bilateral tension and mutual suspicion about each other’s activities in the region restrict the prospects for sustained cooperation beyond rhetoric. On crisis management, nonproliferation, and terrorism in particular, differing viewpoints about culpability—China mostly taking Pakistan’s side and the United States often agreeing with India—will also make joint efforts difficult to agree on and implement. On Afghanistan, China and the United States have common goals of stopping the spread of international terrorism and reaching a political settlement to bring an end to decades of violent conflict, though how they try to achieve these goals differs in practice. Further, Chinese atrocities targeting Uyghurs and other ethnic minority groups in Xinjiang, carried out in the name of countering terrorism, severely restrict possibilities for productive counterterrorism cooperation until Beijing changes its approach to align with global human rights norms.

The China-Pakistan axis is strengthening, which has a detrimental effect on governance and economic reform efforts in Pakistan given the concomitant lack of transparency and accountability. Chinese-funded development projects are hardly the sole cause of problems in Pakistan, but BRI projects, in working outside established standards, can exacerbate underlying weaknesses in governance and contribute to an already unsustainable debt load. Although it wants to avoid taking on the burden of Pakistan’s problems, Beijing is also heavily invested in the China-Pakistan Economic Corridor (CPEC) as the potential crown jewel of the BRI and an overland transit route to the Indian Ocean. The CPEC faces many obstacles and its visions remain largely unfulfilled, but China’s commitment remains durable, particularly given the reputational risks of letting the BRI’s flagship corridor fail and Beijing’s increasing determination to balance India. The relationship is also buoyed by military ties and diplomatic support, which further entrench the army’s role in Pakistan’s government and strengthen illiberalism within Pakistan.

China’s approach toward India-Pakistan disputes increasingly favors Pakistan rather than adopts a more neutral stance, in part because backing Pakistan helps China constrain Indian power in Asia. Especially in the last year, China has doubled down on its support for Pakistan’s position on Kashmir. Historically, Beijing’s position has ranged from constructive neutrality to active support for Pakistan. Some worry that China might even abet Pakistan in future crises to pressure India and to advance Beijing’s territorial claims. Meanwhile, the United States has mostly backed India’s position in flare-ups along the Line of Control and New Delhi’s responses to terrorist attacks in India traced to Pakistan. Overall, Beijing has only weak incentives to support comprehensive India-Pakistan conflict resolution. Keeping the situation at a low boil serves Beijing’s aims better by forcing India to divide its resources and attention and to fear the specter of a two-front war. China’s support for Pakistan’s territorial claims also bolsters its own. For its part, Pakistan gains the support of a powerful partner in China as well as development financing that Islamabad’s shaky economic situation and political instability would otherwise make nearly impossible, barring major governance reforms.

The Sino-Indian border area will continue to be a major flash point. The summer 2020 border crisis and deaths of twenty Indian and an unknown number of Chinese troops in Ladakh put New Delhi’s challenge of balancing cooperation and competition in stark relief and will limit China’s ability to pursue opportunities in India for years. China and India are unlikely to make progress on any final resolution of their border disputes in the near or medium term. Effective protocols for border patrol operations and crisis management can help mitigate tensions but will not stop flare-ups altogether. China’s propensity for “gray zone” provocations and the prominence of territorial issues in both countries’ politics mean a process to delimit and demarcate the border would face huge obstacles.

China-India relations will become more competitive, and the pair, Asia’s two biggest powers, will struggle to cooperate throughout the Indo-Pacific region. Beijing wants to expand its influence in South Asia for its own sake and to force India to devote time and resources to its neighborhood rather than to project influence into East Asia. For its part, New Delhi worries about encirclement by Beijing. China seeks access to India’s large domestic market and potential for economic growth. To drive economic cooperation, China has relied on leader-level engagement, direct investments, and low-cost consumer and industrial goods. However, recent Indian moves to restrict access for Chinese firms, particularly in the technology industry, show deepening concerns about the economic, political, and security effects of engagement with China and a determination to avoid dependency on Beijing. Policymakers in New Delhi will continue to seek new leverage in bilateral relations and resist further erosion of India’s traditionally dominant position in South Asia, although the economic downturn caused by the COVID-19 pandemic poses a major challenge.

China’s growing focus on a blue-water navy and power projection to the “far seas” has followed its economic interests. The Indian Ocean is currently a “far sea” for China, but China aims to make it more of an intermediate one. This enhancement of global reach would be akin to the second island chain in East Asia, the end goal being to project influence all the way to Europe. Over time, China’s geopolitical objective may expand to matching or supplanting the United States and India as the most capable maritime force in the Indian Ocean region. That eventuality raises concerns about freedom of navigation in the Indian Ocean given China’s rejection of conventional interpretations of international maritime law and generally assertive behavior in the South and East China Seas. Moreover, People’s Liberation Army forces could develop the ability to block the flow of U.S. and allied forces into East Asia during a conflict.

Smaller South Asian states—which have their own interests and the agency to pursue them—both face competitive pressures to align with powerful states and have more opportunities to play major powers off one another. The fluid contest for influence among and between South Asian states makes it difficult for Washington to maintain good relations with countries across the entire region simultaneously. To some extent, countries such as Nepal, Sri Lanka, and Bangladesh see engagement with China as a hedge against Indian dominance. They will not welcome U.S. overtures viewed as a proxy for Indian interests. India is historically wary of U.S. bilateral cooperation with neighboring states, but transparency and coordination have improved in conjunction with an overall improvement in U.S.-India relations. South Asian states are also using the U.S.-China rivalry to avoid criticism of their own authoritarian or antidemocratic excesses by threatening to deepen ties with Beijing.

Smaller South Asian states place a premium on economic development, and China offers an enticing option but is not necessarily the top choice. Considerations about the risks and rewards of projects carried out under the auspices of the BRI are complex. On the one hand, accelerated project timelines and minimal oversight can provide local leaders with rapid and visible progress they can take credit for—sometimes lining their pockets in the process. On the other hand, those projects provide Beijing with major levers of influence, sometimes carry risks to sovereignty, and often add to already heavy public debt burdens. Political calculations play a major role as well. China’s appeal lies in offering development financing where the strings attached are related to Beijing’s concerns, such as political issues like Hong Kong, contracting with Chinese firms, adopting Chinese standards, and gaining strategic access. Otherwise, Chinese development offerings are agnostic or welcoming toward illiberal governments and come with few if any requirements related to transparency, anticorruption, human rights, or environmental and social sustainability. Those arrangements are designed to contrast with the liberalizing conditions that accompany Western development assistance.

To the extent that China’s infrastructure investment spurs regional integration in a transparent way and at a sustainable cost, it can be a genuine common good. At the same time, however, debt distress will be a major concern across the region, particularly given the impact of the COVID-19 pandemic. South Asian nations will be looking for options and relief from China, the United States, and multilateral financial institutions. Debt suspension measures that G20 states, including China, recently committed to provide a good start. But monitoring implementation details will be crucial, and additional actions will likely prove necessary to ensure South Asian economies can avoid the worst potential outcomes.

China seeks stability in Afghanistan to deny safe havens for anti-China violent extremist groups but refrains from intervening directly to achieve that goal. Similarly, Beijing supports the ongoing peace process but focuses on aligning its efforts with other major powers and regional players, including Russia, Pakistan, and the United States. Chinese efforts have been confined to supporting, mediating, and facilitating rather than taking on a strong leadership role in achieving, sustaining, and enforcing peace. Beijing favors a peace process and political resolution to the conflict. China is also willing to make substantial investments in Afghanistan and help generate a peace dividend, but Beijing’s willingness depends on improvements in the security situation.
Recommendations

Set priorities for American engagement in South Asia that consider the region’s relative importance for U.S. global strategy, China’s growing role there, and shifting regional trends. Washington’s investments in the region will be sizable but not limitless and therefore need to be judiciously targeted. By the same token, U.S. policymakers need to have a clear conception of where and why to balance Chinese malign influence, rather than try to compete with Beijing everywhere, at all times. American leaders should also resist framing U.S. engagement in South Asia as mainly an instrument in the larger geopolitical contest with China. Further, U.S. strategy should align with several major developments: the move from a heavy emphasis on the war in Afghanistan to devoting greater attention to the South Asia region as a whole within a broader Indo-Pacific framework; the shift from focusing on counterterrorism to major power competition with China; a deeper relationship with India and a more modest, right-sized relationship with Pakistan as Islamabad moves into China’s embrace; and growing linkages between South and East Asia.

The United States needs to change its diplomatic approach toward the region to make its policy less about responding to China and more about engaging with states in South Asia to resolve problems. It should also seek steady ties that do not hinge on South Asian states’ relations with Beijing. Washington will be better positioned to compete with Beijing when U.S. regional engagement stands on its own rather than as an instrumental response to China. To that end, leveraging the tools of power where the United States has a comparative advantage will be more effective than trying to outpace China where it has an edge.
Some issues in South Asia should be insulated from the strategic competition between the United States and China, that is, not used to gain geopolitical leverage against Beijing. These include combating COVID-19, countering violent extremist groups in Afghanistan (though again, these efforts would be hamstrung by China’s repressive Xinjiang policies), managing natural resources (especially water), preventing and adapting to climate change, countering narcotics, and caring for displaced and refugee populations.
The White House should establish an Indo-Pacific maritime policy coordination directorate at the National Security Council. It would be a functional directorate responsible for coordinating U.S. policy relating to maritime and littoral issues across bureaucratic, geographic, and functional lines.
Early in 2021, the new administration should commission a National Intelligence Estimate of China’s maritime activities in the Indian Ocean and its rimland areas, including both commercial and military moves. This would provide a baseline understanding of the state of Chinese facilities, investments, and operations there. Findings should be shared with allies and partners where appropriate.

Account for closer alignments when managing quadrilateral dynamics with China, India, and Pakistan—including greater difficulties for crisis management. Although the United States and China will each maintain working relations with India and Pakistan, more than at any point in history Washington and New Delhi have similar outlooks that diverge from the overlapping views of Beijing and Islamabad.

U.S.-Pakistan relations need to be rebalanced to focus more on enhancing economic ties and people-to-people interactions and less on security assistance and operational access issues. Even as the United States prioritizes the India partnership, it should not foreclose on a valuable relationship with Pakistan and cede all influence to China. A constructive working relationship between Washington and Islamabad is in both countries’ interests and should persist given nuclear and terrorism threats emanating from the region. The relationship, though, will necessarily evolve from its Cold War and post-9/11 roots, in which the two states attempted strategic convergence, not always successfully.
The United States should not oppose China’s taking on more of the burden in Pakistan for fostering economic growth and addressing security threats. Major Chinese investments in Pakistan are less harmful to U.S. interests than they could be in other places and are likely to result in blowback against Chinese interests eventually. At the same time, Washington should look to disenchantment created by CPEC as an opportunity to rebalance U.S.-Pakistan ties with more modest expectations on both sides.
In the event of crises between India and Pakistan, hoping for active cooperation with Beijing is less promising than seeking ways to offset any harmful actions China might take. These could include demanding suspension of Chinese arms transfers to Pakistan in the midst of crises, matching Chinese diplomatic support for Pakistan with a U.S. tilt toward India, and mobilizing U.S. allies to impose sanctions on Pakistan over financing and sponsoring terrorist acts against India. Joint de-escalation is optimal, but policymakers should assume U.S.-China deconfliction or tacit coordination, rather than cooperation, is likely the best-case scenario.
Research, policy analysis, and track 2 dialogues on nuclear and strategic stability between both adversarial nuclear dyads in South Asia—India-Pakistan and India-China—need to be encouraged. The goal should be to shape China’s thinking so that Beijing does not underestimate the potential for an India-Pakistan nuclear exchange and realizes that either party’s actions could spark an escalatory cycle.
At the same time, the risks and impact on India of a future India-Pakistan nuclear crisis and conflict escalation need to be underscored to New Delhi. In recent years, India has taken a more risk-acceptant approach to confrontations with Pakistan that exhibits some emboldenment, false optimism, and overestimation of U.S. intervention. Washington needs to have a frank dialogue in noncrisis moments about the prospects for future crises, what role the United States and China may or may not play, and the consequences that could occur in a nuclear crisis, including setbacks to the Indo-Pacific strategy. The United States should manage expectations about its role as India’s partner and a third-party crisis manager to preempt risks of entrapment or perceptions of abandonment.
A peace process should be continued in Afghanistan for which all major regional states support the basic parameters, namely, that Afghan territory should not be used to threaten its neighbors and that Afghanistan should not be a venue for proxy warfare. Further, China, India, and Pakistan should continue to be engaged to identify steps each country can take to help sustain peace and economic growth in Afghanistan after a peace settlement.

Deepen ties with India—along with facilitating New Delhi’s cooperation with U.S. allies and partners in Asia and Europe—across diplomatic, economic, technology, and military areas. The United States will need to advance the partnership at India’s pace and be patient with incremental steps. But strategic pressure from Beijing will likely make the case in New Delhi for bolder moves, such as hastening the modernization of India’s military, conducting joint military exercises, making the U.S.-Australia-Japan-India Quad militarily effective, and expanding intelligence cooperation and military interoperability to get closer to Washington and other democratic partners.

Even if a resolution is only a distant prospect, the United States should still support diplomatic efforts to peacefully resolve the China-India border dispute with consistent, good-faith implementation of border management mechanisms while talks are ongoing. Washington should make clear that it views a fair, peaceful, and sustainable resolution of the border as being in the interest of all parties and the world. However, it is essential to remain clear-eyed about China’s record of employing coercive actions in international disputes and abandoning diplomatic agreements when doing so advantages Beijing. During flare-ups, the United States should avoid reflexively pressing for concessions from both sides when one party is driving escalation.
U.S. policymakers should make clear to leaders in New Delhi the U.S. view that India’s democratic system—including respect for pluralism and human rights—is a strategic asset that facilitates India’s natural alignment with the United States and other democratic states around the world. This system also refutes arguments made by Chinese leaders, among others, that democracy is inconsistent with Asian political culture; it allows India’s vibrant and diverse society to be a strength rather than a weakness; and it enhances India’s soft power throughout the region. Similarly, American officials should underscore that recent illiberal steps in Kashmir and against India’s Muslim population erode all those benefits and that India’s strategic importance cannot alone sustain the positive relations with other democracies that New Delhi will need to ensure its security.
New U.S. military-to-military agreements and intelligence pacts should be negotiated with India to develop both a common operating picture as well as pursue routine military cooperation, such as joint naval patrols and access to infrastructure and bases. Creative procurement options, such as equipment leases, to fill critical gaps should be explored. At the same time, New Delhi should be encouraged to build up its capabilities to deter Beijing, while also recognizing that India’s actions are likely to prompt further Chinese counterbalancing and the economic downturn caused by the COVID-19 pandemic will severely constrain India’s ability to fund military improvements.
Facilitating India’s integration in a network of diplomatic, economic, and trade partnerships with democratic states should continue, most prominently through the Quad grouping with Japan and Australia, but also through links to other Indo-Pacific and European partners. Such partnerships can and should all be deepened and broadened without reference to China.
Because regional crises involving China are likely to become more frequent, a mechanism should be established to enable sharing experiences and developing best practices on crisis management among the United States, India, and other like-minded partners. Where possible, U.S.-China crisis management mechanisms that might prove useful for South Asia contingencies should be improved upon.
The United States should take an active role in boosting support for a more robust Indian presence in international organizations. One way to do so would be to continue to advocate for India’s inclusion in the Nuclear Suppliers Group and for U.N. Security Council reform that would give India a permanent seat. Washington should also consider either a new G8 that includes India or a regular G7+3 that includes India, Australia, and South Korea. India’s bid to join the Asia-Pacific Economic Cooperation forum could be supported as well, even though doing so would require some Indian trade reforms in advance.
The United States should refrain from objecting to Indian cooperation with Russia and Iran when those actions help India balance China or serve broader U.S. regional aims. For example, use of the Chabahar port in Iran to transport aid to Afghanistan should not be subject to sanctions.

Broaden the scope of U.S. engagement with South Asia to fully integrate the region into a free and open Indo-Pacific vision. Although American policy should be coordinated with Indian regional aims, Washington should not “subcontract” its regional policy to New Delhi. Instead, policies should be tailored to fit each South Asian country’s unique circumstances, strategic position, and relations with Beijing.

Nonmilitary tools should be used more effectively to influence the region, starting with packaging and communicating the popular activities the United States already does there. These include high-standard U.S. private investment as an alternative to Chinese investment, good governance advanced through programs like the Millennium Challenge Corporation and Blue Dot Network certification, and contributing to maritime security, disaster preparedness, and climate resilience. South Asia should be made a priority region for U.S. International Development Finance Corporation projects and USAID to provide financing options as well as legal, regulatory, and policy assistance to countries seeking to boost regional connectivity.
Coordination on infrastructure development financing and standards-setting should be deepened with U.S. allies and partners—especially Japan, European countries, and multilateral development banks—that have a demonstrated capacity for infrastructure finance and construction in the region. Inviting allies and partners to join the Blue Dot Network initiative could be an option to further that agenda. U.S. assistance in renegotiating project terms with China could be provided where it can be helpful, as in Myanmar, but policymakers should avoid getting pulled into unsustainable projects in the course of trying to compete with China.
Most countries in the region enjoy a trade surplus with the United States but a large deficit with China, yet Washington rarely uses market access as a foreign policy tool. The United States should develop and launch an initiative to quantify and publicize existing, deep trade and investment ties that South Asian states have with the United States and its allies and partners, and how they stack up against China. Doing so will require compelling, fact-based strategic communications that target both elites and publics.
Washington should leverage its observer and dialogue partner statuses in regional institutions such as the South Asian Association for Regional Cooperation, the Indian Ocean Rim Association, and the Indian Ocean Tuna Commission to closely track developments related to regional political and economic integration. Washington might also find a way to engage the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation, perhaps by accrediting the U.S. ambassador to Bangladesh as a representative to the organization. However, the goal of engaging in South Asian multilateral groups ought to be to signal a long-term U.S. commitment to the region, as well as to learn more about local concerns—not to be drawn deeper into squabbles between neighbors.

Recognize that technology and innovation will be central factors in whether regional states can sustain free and open economies and societies, and advance a multifaceted agenda to support like-minded states in those areas. Such an agenda could include several initiatives, including creating a Tech 10 group of countries with which the United States coordinates on technology issues that includes India as well as other Indo-Pacific partners such as Taiwan, South Korea, and Australia along with G7 countries.

Washington should support India’s aspiration to become a world leader in artificial intelligence by encouraging deeper collaboration with U.S. technology companies and universities and providing access to some restricted technologies. In addition, it should leverage smart visa policies by restoring and expanding professional (H-1B) and student visas from South Asia to attract the best talent to bolster U.S. development of cutting-edge technology, to deepen economic integration and influence, and to boost America’s favorable image in the region.
Ideally working in conjunction with the Tech 10, the United States should also focus on setting technology standards. Those standards should cover technical hardware and software issues to push back against any Chinese anticompetitive practices. Even more important, standards consultations should shape the legal and policy regimes governing new technologies to manage trade-offs on privacy, security, data ownership and access, and accountability.

Increase U.S. efforts to aid South Asian nations in the consolidation of democratic institutions. Washington should work to prove the notion that accountable, democratic governance offers the best path to sustainable growth, political and social stability, and preventing foreign interference in sovereign states. Moreover, although freedom of the press, strong civic institutions, rule of law, and elections are all critical in their own right, they will also help respond to Chinese malign influence in the region. Washington should coordinate with other democracies to maximize the impact of international support in these areas.

China’s growing involvement in South Asia could make the U.S. aims of supporting democratic governance, accountability, and transparency more difficult. This factor needs to be taken into full account.
South Asian states are largely fragile democracies. The United States can offer independent election monitoring to forestall election disputes, create independent media alternatives where a lack of media freedom diminishes the functioning of democracy, offer journalism training and scholarships, provide training for political party leaders in de facto one-party states, and help organize for the protection of minorities. In some places, however, democratically elected leaders abuse power. Washington should work to apply principled, consistent pressure on those parties to cease abuses and uphold democratic laws and norms.
Washington needs to conduct quiet coordination and dialogue with regional countries to address Chinese disinformation efforts and Chinese technology gray zone tactics. More narrowly, it should facilitate and build on exchanges to share best practices for countering foreign influence in domestic politics and elections from East Asian states such as Japan and Taiwan, who have extensive experience and demonstrated success in those areas.
Policies should reflect the foundational understanding that a robust and vibrant U.S. democratic example will itself be the most effective way to advance free, independent states in the region.