Thursday, February 18, 2010

The Chinese string of pearls

The creeping infiltration of Chinese commercial (and by implication political) interests into India's neighbours has been cause for growing concern among the Indian foreign policy establishment. This worry is anecdotally captured in terms of the "string of pearls" - consisting of ports and other strategic installations and being built with massive Chinese assistance - to surround India and eventually undermine India’s pre-eminence in its Near Abroad.

As this example of the massive integrated infrastructure development project in Southern Sri Lanka at the 2004 Tsunami devastated Hambantota (China’s Export-Import Bank is financing 85% of the cost of the $1 billion project) illustrates, unless India can match China's deep pockets, the "string of pearls" will only grow. The Times article quotes Sri Lankan President Mahinda Rajapaksa as saying that he had offered the Hambantota port project first to India, which turned it down.

These loans are an excellent example of strategic diplomacy with profound economic implications. All the infrastructure projects financed with Chinese grants and loans are invariably executed by Chinese contractors. Apart from the enormous goodwill generated among its recipients, these projects provide a platform for opening and expanding markets for Chinese goods and service exports.

The take away from all this is that in its strategic competition with China, Indian diplomacy should put its money where its mouth is!

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