The Emerging Great Game: Chinese, Indian and American Engagement in South Asia

Executive Summary

In 2023, the Nepalese city of Pokhara found itself at the center of the emerging great power competition between China, India, and the United States. In June, the Chinese ambassador to Nepal, Chen Song, called the new Chinese-constructed airport in Pokhara a “new chapter” in Belt and Road cooperation. The only problem with this statement was that the Nepalese government did not consider the airport part of the Belt and Road Initiative (BRI).¹ Speaking before the House of Representatives, Nepal’s Foreign Minister NP Saud stated, “Not a single project in Nepal under the BRI has been executed.”² This anecdote speaks to some of the confusion and competition surrounding Beijing’s expanding presence in South Asia, which aligns with its reenergized “peripheral diplomacy” that President Xi Jinping has reportedly elevated to a status above ties with great powers like the United States.³ Thus, China has been trying to ramp up its economic, diplomatic, and security influence in a region that has not been at the forefront of its outreach over the past several decades. This engagement is also driven to an extent by China’s rivalry with India.⁴

China’s increasing foothold in the infrastructure, energy, and trade flows of the subcontinent and its involvement in domestic politics of the region is causing unease in New Delhi and, to a lesser extent, in Washington. For New Delhi, the structural shift in the power dynamics in South Asia driven by China’s increasing presence and influence in the region and more recently, violence along its disputed border with Beijing, have heightened concerns of Chinese encirclement. From Washington’s perspective, South Asia is not the primary or even secondary zone of competition in the U.S.-Sino rivalry. However, countering Beijing’s influence and assisting New Delhi in providing alternatives to China is ultimately part of Washington’s National Security Strategy of “outcompeting China,⁵” and is congruent with its Indo-Pacific Strategy.

Focusing on events since the official inauguration of the BRI in 2013, this paper examines how China, the United States, and India are competing for hard power in the political, economic, and security realms. Specifically, it focuses on events since the official inauguration of the BRI in 2013. Importantly, the author takes into account the evolution of the BRI and analyzes what has been termed as the “BRI 2.0.”⁶ This research focuses on the less scrutinized cases of Nepal and Bangladesh, with references to other South Asian states, and is driven by three questions: What are the emerging forms of great power competition in the region? Is there evidence that the great powers are responding to each other’s actions in the region, or is one power leading while the others play catch up? How are the targeted states responding to this outreach? The author relies on three main approaches to investigate these questions and analyze whether targeted states are extracting benefits from all powers playing against each other or developing effective strategies to pursue their interests. First, is utilizing open-source information in English, such as publicly available data and scholarly and think tank publications. Second, the analysis is reinforced by the author’s in-depth interviews with academics, journalists, think tank experts, as well as government and embassy officials, conducted in Nepal, Bangladesh, and Washington D.C. in May and June of 2022, and in New Delhi in May and November of 2023. The third and final approach includes a detailed examination of open-source Chinese-language sources.

This paper puts forth several key arguments regarding Chinese, Indian, and American engagement and balance of power dynamics in South Asia. First, Beijing’s activities in the region are causing a new form of great power competition between China and India, but also increasingly between the United States and China, even though Washington is primarily a peripheral power in the region. The U.S.-India relationship is also experiencing some tension as both try to navigate their own cooperation in the region. Second, regional states see the competition as an opportunity for economic development as well as a way to reduce an overreliance on India. The elites, in particular, view it as a vehicle to advance their own interests. Third, there are significant limitations for targeted states to fully realize their potential to benefit from this competition. Finally, Beijing appears to be overemphasizing the role and importance of local elites. When these elites lose power, Beijing is left scrambling to play catch up. This study begins with the case of Nepal and then goes over the case of Bangladesh. It ends with policy recommendations for the United States, India, and targeted regional states on how to better maneuver in this evolving competition. This is especially relevant as both the United States and India will undergo elections in 2024.

The Case of Nepal

In recent times, Nepal has experienced significant political upheaval due to its near-constant leadership transitions, with 13 governments in the last 16 years.⁷ While India is concerned about Chinese ambitions in Nepal and is working to counter Chinese influence, China frequently hedges its bets on certain elites whose time in power is ephemeral. More recently, Washington has significantly expanded its influence by increasing its foreign assistance in the country. For example, according to the U.S. government, during 2018-2022, Washington provided Nepal with, on average, $159,844,274 per year in foreign assistance. This amount skyrocketed to at least $618,626,906 in 2023.⁸

The dominant perspective in Nepal is that it has spent much of the past 75 years under different forms of Indian hegemony.⁹ This has taken many forms, ranging from Nehru’s insistence that India’s security interests triumph over Nepal’s¹⁰ to three de-facto Indian economic blockades of Nepal in 1962, 1988, and 2015.¹¹ The most recent blockade arose out of a dispute over a new Nepalese constitution. New Delhi responded by sealing off the border with Nepal in 2015, which caused acute shortages of goods and fuel in Nepal.¹² The economic blockade had a profound effect on Nepalis, who were still reeling from a massive earthquake in April that same year.¹³ Importantly, this blockade took place under a different geostrategic context, with China actively courting Nepal’s leadership and playing the crucial role of an alternative to India.

Analysts see the blockade as a turning point in Nepal’s relations with India, which catalyzed Nepal’s engagement with China.¹⁴ Beijing’s role as a counter to New Delhi is still in its early stages, but various actions from the Chinese government have elicited responses from both New Delhi and, more recently, Washington. On the issue of Tibet, for decades, Beijing has been concerned about unsubstantiated allegations of Nepal being used by the U.S. as a base to foment instability in Tibet.¹⁵ In fact, in the most recent meeting between Xi and Nepalese Prime Minister Pushpa Kamal Dahal in September 2023, Nepal did not agree to sign an extradition treaty with China that would force Nepal to turn over Tibetan refugees residing in Nepal.¹⁶

A RAIL LINK TO CHINA?

Beijing’s response to India’s 2015 de-facto blockade was a critical juncture in their evolving great power rivalry in Nepal. In September 2015, just as the blockade was gaining traction, China, in a symbolic gesture, signed a protocol providing Nepal access to ports along its east coast, giving Sino-Nepalese relations a huge boost.¹⁷ Former Nepalese Prime Minister KP Sharma Oli visited China in 2016 and announced that a cross-border railway project would start “as soon as possible,” and in May 2017, Nepal joined the BRI.¹⁸ Xi’s 2019 visit to Nepal also raised hopes of greater connectivity between China and Nepal. Xi stated that Nepal would be transformed from “a landlocked country to a land-linked country.”¹⁹ In March 2022, China’s foreign minister signed an agreement on a railway technical study with Nepal’s Ministry of Finance.²⁰ More recently, Beijing has provided a grant of $300 million for a feasibility study, although the projected cost of a rail line is now estimated to have increased from $3 billion to $8 billion.²¹

The proposed railway link from Tibet to Nepal has raised concerns in India about China encroaching into India’s sphere of influence. Critically, while constituencies in the Nepalese government want China to build a railway, there is near universal agreement within Nepal’s policy and scholarly communities that the railway project will never happen.²² The technical aspects are huge–the 121-kilometer link from Gyirong to Kathmandu would require 80 kilometers of bridges and 10 kilometers of tunnels in a geographic zone that is highly susceptible to seismic activity, making it an engineering nightmare that is not economically viable. The issue of who would fund the proposed railway is also controversial. According to Nepalese policy experts, Kathmandu wants the project funded through Chinese grants. One of Nepal’s most respected China analysts stated: “Nepal is looking for a free railway… and this puts China in an uncomfortable position”²³ While Nepal has signed up for the BRI and the two countries have held various meetings on the initiative, as of January 2024, out of nine BRI projects not a single one had been implemented because Nepal wants grants and not loans, and Kathmandu has different expectations from the relationship than China.²⁴ Furthermore, despite Chinese talk of allowing Nepal to access Chinese ports, seven years after this offer was made, not a single shipment to Nepal has transited Chinese ports.²⁵

Beijing also seeks to forge strong ties with elites in Nepal and has not paid adequate attention to grassroots movements and civil society, leading some Chinese analysts to argue that China needs to learn from the U.S. by paying attention to nongovernmental and community organizations.²⁶ Such investment in elites is very helpful when one’s ally is in power, but it also means that China has had to hit reset multiple times when one of its preferred leaders loses power through the democratic process. Such a situation occurred in 2021 when Oli was removed from power.²⁷ Oli was widely seen as anti-India and pro-China. His replacement, Sher Bahadur Deuba, was viewed as much more pro-U.S. and India. According to a western diplomat based in Kathmandu, under Oli, “the USA was stiff-armed and Nepal fell to China. Nepal was a pro-China puppet in its voting at the UN. After the new government was formed in July 2021, Nepal went from a puppet to an irritant in China’s belly.”²⁸ It is important to note that the December 2022 election of Dahal may change the strategic dynamic once again in Nepal. While Beijing appeared to be happy that he won the election,²⁹ the events of 2023 were not exactly a clear victory for Beijing.

The BRI is widely perceived to be Xi’s signature foreign policy initiative/legacy, thus a lack of progress on it in Nepal is a political embarrassment. The Chinese government has pressured every Nepalese delegation that visits China to show progress on the BRI, and the Chinese embassy in Katmandu has pushed Nepali leaders to do the same. However, no progress has been made on any projects.³⁰ In a public embarrassment to Beijing, China falsely claimed that the newly completed Pokhara international airport was the BRI’s flagship project in Nepal. In fact, Nepal has rejected this claim, partly due to pressure from New Delhi. Furthermore, the Indian government has also blocked international flights from India to the airport.³¹ After Dahal’s visit to China in September 2023, Nepali officials released a 40-point briefing, which did not mention the BRI. Of equal importance, two of the BRI’s nine supposed projects in Nepal, the Tamor Hydroelectricity Project and the Phukot Karnali Hydroelectric Project, were awarded to Indian companies when Dahal visited India in June 2023.³²

DELHI’S RESPONSE TO BEIJING

There is a widespread perception among Nepal’s policy community that India is a domineering neighbor. However, China’s increasing activities in Nepal may change that in the near future because of New Delhi’s fear of Kathmandu becoming too pro-Beijing. India does not have the financial ability to compete with China in Nepal, but it does have critical geographic leverage to influence Nepal in a way that China lacks. Any meaningful connectivity between China and Nepal must traverse the world’s highest mountain range, the Himalayas. In the indefinite future, China is not a realistic alternative for Nepalese imports and exports. India assists Nepal in the running of the 25-kilometer Janakpur to Jainagar rail line on the Indian border, and once news broke about the possible Chinese rail line to Tibet, New Delhi proposed a line to Kathmandu through the flat lands and not the mountains, which would be much easier to construct.³³ Ironically, by upgrading Chinese-built electrical lines that transmit excess power to India, New Delhi is also benefiting from Chinese projects in Nepal.³⁴

ENTER WASHINGTON

Nepal is far from occupying center stage in U.S. foreign policy. However, given its geographic location, over the past 70 years it has played a small, but important role in American policy toward China. While Washington utilized Nepal’s location during the Cold War, more recently Nepal has become a regional player in the emerging triangular rivalry among China, India and the U.S. The American Millennium Challenge Corporation (MCC) provided a USD 500 million grant program that is designed to build and reinforce Nepalese infrastructure by helping to maintain roads, provide electricity, and increase economic development.³⁵ It was signed in 2017 but only ratified in February 2022 due to some local opposition.³⁶

While the MCC is designed to help Nepal develop, it has been perceived by Beijing as an anti-China initiative. One Chinese commentator stated that the MCC is an attempt by Washington to “kidnap Nepal,”³⁷ while others believe it is an example of American hegemony in South Asia.³⁸

There is wide agreement in the Chinese South Asian expert community that the MCC is part of the Indo-Pacific strategy and that Nepal was coerced into joining it.³⁹ On the other hand, there is widespread belief in the Nepalese policy and the western diplomatic communities that China was behind a strong and successful propaganda campaign to discredit the MCC. One western diplomat noted: “from 2017-2018, China was winning the info-war, the U.S was not aggressive enough in this forum.”⁴⁰

However, the biggest policy takeaway from the MCC debate is that it was finally ratified because of the change in leadership in Kathmandu as the previous government under Oli was not willing to approve it. The key lesson from the MCC is that given its geographic location, Nepal has options when it comes to dealing with its neighbors and the U.S. With Washington closing the development assistance gap with China (the U.S. International Development Finance Corporation financing of private sector projects has increased in recent years by 15-fold⁴¹) there will likely be more projects available to Nepal.

IS NEPAL PLAYING THE GAME?

Overall, it is critical to note that from Kathmandu’s perspective, China represents a great opportunity. The main policy challenge for Nepal is a critical lack of state capacity and knowledge of China that would allow Nepal to better leverage its ties with its northern neighbor. Multiple Nepalese interviewees argued that Nepal lacks the ability to deal with China. According to several of Nepal’s leading China specialists, there is not a single Mandarin speaker in the entire Nepalese government, nor is there “any interest in the diplomatic corps to study China.”⁴² Another analyst pointed out that “Nepal does not even have the ability to play the China card.” Nepalese journalist Amish Raj Mulmi, one of Nepal’s top China experts, sums up Nepal’s China challenge as follows: “While Beijing has secured its interests in Nepal, Kathmandu has failed to see beyond the ‘China Card.’ It has not improved its capacity to negotiate better deals. Above all, Nepal has not been able to extricate itself from the aid-beneficiary mentality and come up with a strategy that can take advantage of China’s economic and infrastructural progress on its own terms.”⁴³

How much leverage does Nepal have over the great powers? China is deeply concerned with Tibetan refugees in Nepal, and Beijing has expressed concern about how Kathmandu has dealt with them.⁴⁴ Some Chinese commentators have argued that Nepalese politicians are “playing with fire” by “handing over their country to the U.S.,” thus apparently jeopardizing the “peace and stability of the region.”⁴⁵ Interviews revealed that the Nepalese government has not effectively used its potential leverage to play China against the other powers or, more importantly, to use Beijing’s concerns as additional leverage to push forward various Nepalese goals. The cozying up to Beijing in 2015 has not produced a firm commitment to build a rail line to Tibet. With the constant changes of government and with new leaders vacillating between New Delhi and Beijing, it is extremely difficult for Kathmandu to effectively develop and operationalize a clear and sustained policy response to any of the three great powers. Nepalese leaders are clearly aware of Indian hegemony in Nepal, but the constant game of musical chairs in leadership positions in Nepal greatly reduces room for maneuver and the ability to play powers off each other.

The prospects of Nepal taking a “non-aligned” approach to great power competition are tempting, however changes of leadership occur too frequently for any real policy to be successfully carried out and institutionalized. Kathmandu’s ability to pursue a non-aligned approach would likely be challenged both by India, which has historically exercised a form of hegemony over Nepal, and increasingly by China. Remarking on Chinese interference in Nepal’s internal affairs, Tien-Sze Fang of Taiwan’s National Tsing Hua University, writing in a Chinese-language publication, stated that“Hou Yanqi, Chinese Ambassador to Nepal, often uses her online beauty image to create a friendly atmosphere through social media. However, she also actively intervened in the political disputes within the Nepal Communist Party in an attempt to mediate conflicts and ensure that the pro-China government can remain in power.”⁴⁶ While the Chinese attempt failed, it is likely that neither of Nepal’s enormous neighbors would sit by passively as Kathmandu took a clear and sustained neutral stance.

The Case of Bangladesh

Over the past decade, Bangladesh has found itself an increasingly important actor in the evolving great power rivalry between China and India. Both Beijing and New Delhi have pledged billions of dollars in aid and loans to Dhaka, much of which is focused on developing infrastructure in Bangladesh. And the state is well-placed to take advantage of great power competition to diversify its options for economic investment and infrastructure development.

For Bangladesh, which is almost entirely surrounded by India, the ability to have an alternative to New Delhi as a source of development and military aid is not only good politics, but also essential for the country’s future.⁴⁷ As is the case in Nepal, citizens in Bangladesh harbor a deep sense of resentment toward what they perceive as Indian bullying. While India played the critical role in the formation of Bangladesh in 1971, and relations have been relatively positive over the past decade, lingering tension remains. For example, hundreds of Bangladeshis are killed each year by India border patrols, which contributes to a general sense of resentment of India in Bangladesh.

Anu Anwar, a fellow at the Fairbank Center at Harvard University, sums up the negative feelings by stating, “Bangladesh often feels threatened by India, while China takes care to respect Bangladeshi sensitivities.”⁴⁸ The bombshell comment made by Amit Shah, then the President of the Bharatiya Janata Party (BJP) (and now the Indian Minister of Home Affairs), calling Bangladeshi migrants in India “termites” was a public relations disaster.⁴⁹ The Citizenship Amendment Act of 2019, which made it possible for non-Muslim refugees from Bangladesh, Pakistan, and Afghanistan to become Indian citizens, was similarly viewed as discriminatory against Muslims.⁵⁰ In the words of a former Indian Ambassador, this comment was “deeply offensive” to Bangladesh, and while it suited Prime Minister Narendra Modi’s domestic agenda, it damaged India’s reputation in the region.⁵¹ Besides the occasional friction between New Delhi and Dhaka, Bangladesh is of much greater strategic importance to India than it is to Beijing or Washington. Events in Bangladesh, such as infrastructure projects or water security issues, have a direct impact on India, but little impact on Beijing or Washington although interest is growing in both capitals.

DHAKA’S DESIRE FOR BALANCE

A good starting point to examine great power competition in Bangladesh is 2016, when Dhaka signed onto the BRI. Of greater importance, Xi visited the country and signed 27 agreements worth $24 billion, bringing the total amount of Chinese investment in the country to $38 billion, a sum that is equivalent to roughly 10 percent of Bangladesh’s annual GDP.⁵² Furthermore, China is the only country that Bangladesh has a defense cooperation agreement with, and Beijing is also Dhaka’s largest supplier of arms.⁵³ In fact, according to the Stockholm International Peace Research Institute, from 2018-2022, the last year data is available, China provided Bangladesh with 73 percent of the value of their arms imports.⁵⁴

As will be discussed below, many of these proposed Chinese projects have not materialized, but New Delhi did respond directly to China’s $24 billion financial package to Dhaka. India provided a $5 billion line of credit to Bangladesh in 2017, the largest ever credit line offered by India to any country. The credit was designed to “wean away Dhaka from China” and is allocated towards the construction of infrastructure projects.⁵⁵ Interestingly, concerns over Dhaka’s embrace of Beijing caused New Delhi to solve its territorial dispute with Dhaka in 2015 when 162 pieces of land were exchanged on both sides of the border.⁵⁶ Overall, India has provided nearly $8 billion in lines of credit to Bangladesh. While much of this is tied to improving connectivity between India and Bangladesh, C. Raja Mohan, a senior fellow at the Asia Society Policy Institute in New Delhi, argues that the Modi government feels that India “needs to do something” about the geopolitical competition with Beijing.⁵⁷

Great power competition also manifested itself in the proposed Chinese port deal at Sonadia, where China had been lobbying Bangladesh for decades to construct a port. In 2016, India, Japan, and the United States put pressure on Dhaka to cancel the Chinese project and in its place a Japanese port project in Matarbari, which is close to Sonadia, was announced.⁵⁸ The apparent reason for cancellation was lobbying by the United States, India and Japan, who were concerned that the port would provide China with an advantage in the emerging maritime rivalry in the Indian Ocean.⁵⁹ More recently, New Delhi and Beijing have both been funding the port of Mongla in Bangladesh, the second largest in the country. After it was revealed in December 2022 that New Delhi had selected Egis as the project management consultant for the port upgrade, Beijing confirmed that it was also willing to fund the port. Rear Admiral Mohammad Musa, the Chairman of the Mongla Port, stated that the two projects were in different sections of the port and would not “collide with each other.”⁶⁰ Munshi Foyez Ahmed, a former Bangladeshi Ambassador to China, acknowledged the competition between India and China in Bangladesh, and pointed out that Bangladesh needs to manage the competition carefully.⁶¹

While some Indian infrastructure projects in Bangladesh are designed to counter Chinese initiatives, not all can be attributed to a tit-for-tat rivalry model.⁶² India has long sought access for its northeastern states to Bangladeshi ports instead of the port of Kolkata in West Bengal. Such access was halted as a result of the 1965 war with Pakistan, and the alternative route is time- and energy-intensive. For example, goods traveling from Agartala, the capital of Tripura, to Kolkata must pass through Guwahati, which takes over 30 hours for the 1,600-kilometer journey. Transit through Dhaka can reduce the time to 10 hours for the 550 kilometer trip.⁶³ To help solve this challenge, the Maitri Setu (“Friendship Bridge”) on the Feni river was inaugurated by Modi in 2021. The bridge will significantly enhance connectivity between Bangladesh and India’s northeast.⁶⁴ Joint infrastructure projects also extend to energy projects. The 1320-megawatt Maitree Super Thermal Power Station, scheduled to be Bangladesh’s largest and valued at $1.5 billion, is being set up by a joint venture between India’s NTPC Limited (formerly known as National Thermal Power Corporation) and the Bangladesh Power Development Board.⁶⁵

CHINA REPLACING INDIA?

It is tempting to view China’s replacement of India as the dominant power in South Asia as a forgone conclusion. However, so far, this is not correct. Six years after the initial announcement, the often-quoted number of $24 or $38 billion that China supposedly earmarked for Bangladesh has not materialized.⁶⁶ In addition to these challenges, there is very little, if any, transparency of the projects in Bangladesh. One of Bangladesh’s leading China scholars stated that “nobody knows how many BRI projects are actually being implemented.” Another expert stated that only one-third of projects are actually being implemented, while a western diplomat pointed out that Bangladesh came up with a large wish list of projects and then shopped it around in order to be less reliant on one state.⁶⁷ In an echo of the challenges of state capacity in Nepal, multiple interviewees pointed out that Bangladesh lacks the ability to properly implement many of the infrastructure projects that they are requesting. Another said that “Bangladeshi foreign policy is ad hoc and has no real agency. It just goes from deal to deal and it all depends on the Prime Minister whose goal is to stay in power…the Prime Minister prefers big ticket items that can be completed before elections and look good on television.”⁶⁸

Chinese analysts are aware of the geopolitical competition being played out in Bangladesh. Fudan University’s Lin Minwang argues that China needs Bangladesh strategically in order to hedge against strategic containment.⁶⁹ Other Chinese commentators have argued that India believes that China will attempt to replace India’s dominance in South Asia and that China’s deepening of ties in South Asia has minimized and even excluded India’s influence in the region.⁷⁰ One Chinese project that does merit a quick note is the Padma Bridge. In 2012, the World Bank pulled out of this important infrastructure project citing problems with corruption.⁷¹ However, from 2019 and 2021, Beijing provided Sheikh Hasina’s government $2.3 billion per year in official development assistance and other official flows. This funding was critical in finishing the Padma Bridge, as well as other projects including power plants, and the elevated highway in Dhaka. Critically for Sheikh Hasina, who was re-elected in the controversial January 2024 general election, the Padma Bridge is in her home district.⁷²

Beijing has not hesitated to pressure Dhaka when it feels its interests are under threat. Beijing warned Dhaka to avoid joining the Quad consisting of Japan, India, Australia, and the United States (even though no offer was made to Dhaka to join.) China’s ambassador to Bangladesh Li Jiming reportedly stated “obviously it will not be a good idea for Bangladesh to participate in this small club of four (Quad) because it will substantially damage our bilateral relationship.” Bangladesh’s Foreign Minister, Dr. AK Abdul called the ambassador’s comment “very unfortunate” and “aggressive.”⁷³ With this example aside, New Delhi and Washington would do well to realize that for many in Dhaka China still represents an opportunity.

WASHINGTON’S HITS AND MISSES

A final note is warranted on the high-level American visits to Bangladesh in January 2023 and the peculiar Chinese response. On January 7, Eileen Laubacher, the senior director for South Asia at the National Security Council, arrived in Bangladesh for a four-day visit, where she met with senior Bangladeshi officials including the foreign minister.⁷⁴ She was followed by Donald Lu, the U.S. Assistant Secretary of State for South and Central Asian Affairs, who visited Bangladesh from January 12-15.⁷⁵ Oddly enough, in the early morning hours of January 10, Chinese Foreign Minister Qin Gang landed at Dhaka for what the Chinese Foreign Ministry called a “technical stop” where he met with the Bangladeshi foreign minister.⁷⁶

Washington’s challenge with its dealings with Bangladesh are for the time being less about worrying about what Beijing is up to in the country and more about how American leaders should approach an increasingly autocratic leadership in Dhaka. In 2021, the Biden Administration did not invite Bangladesh to its democracy summit. While this may have played well in certain sectors in Washington, the Chinese envoy to Bangladesh, Li Jiming, came out in support of Dhaka.⁷⁷ Also in December 2021, the U.S. Treasury Department slapped sanctions on the Rapid Action Battalion (Bangladesh’s elite paramilitary force) for serious human rights violations.⁷⁸ In addition, Washington increased pressure on Dhaka in September 2023, when it began to impose sanctions against individuals believed to be involved in undermining the then upcoming 2024 election.⁷⁹ Directly addressing American criticisms over the declining level of democracy in Bangladesh, Sheikh Hasina stated that it does not matter if someone does not go on a 20-hour flight crossing the Atlantic Ocean and “that there are other countries and other continents in the world, we will make friends with those continents crossing other oceans.”⁸⁰ These comments demonstrate the challenge U.S. leaders face when balancing American values with states that are drifting away from democratic institutions and norms. Publicly scolding Dhaka over its deteriorating levels of democracy will only play into the hands of Beijing. Furthermore, while Washington harbors concerns about the increasing autocratic nature of governance in Dhaka, New Delhi sees the regime as providing regional stability and limiting Beijing’s influence in the country. There are also concerns in India that, with its recent pressure on Dhaka, Washington may take a more forward-leaning approach to policy in Bangladesh that could generate friction with New Delhi’s preferred approach.⁸¹

Ultimately, Bangladesh is attempting to “spread projects around to different countries” 82 and is more concerned with giving each great power a piece of the pie, as opposed to playing each power of the other. Foreign Minister Dr. AK Abdul Momen articulated the delicate diplomacy Bangladesh was conducting between the great powers when he stated that maintaining good ties with global powers such as the United States and China is a “challenging” task. More importantly, he stated that the “U.S., China might have their own problems…that is their headache, not ours. We want to maintain good relations with both.”⁸²

Recommendations and Conclusion

The two cases highlighted in this paper point to an evolving great power competition in South Asia. The drivers of this competition are complex and decisionmakers need to be careful in assigning too much weight to one or two politically convenient explanations. For example, China’s controversial involvement in Sri Lanka is not just about security and competition with India, it also involves substantial commercial opportunities for Chinese entities. The widely held perception that China is engaging in “debt trap diplomacy” has been discredited by some western analysts and scholars who have taken the time to carefully analyze the data and draw conclusions. For instance, the Lowy Institute points out that Beijing is not responsible for Sri Lanka’s economic crisis and finds that Eurobonds account for the largest proportion (36 percent) of Sri Lanka’s sovereign debt, while China’s share is between 10-20 percent.⁸³

Washington and New Delhi need to be aware that the BRI is a complicated, contradictory, and in many ways self-defeating Chinese initiative. It lacks cohesion and suffers from enormous bureaucratic infighting, a paucity of reliable data, and perhaps most importantly a profound lack of understanding of the countries where it is spending hundreds of billions of dollars. The idea that the BRI is a well-oiled machine based on solid evidence and a coherent grand strategy is false. Professor Zhao Suisheng, an expert on the BRI, argues that the BRI is poorly coordinated and is fragmented. He sees the BRI as being politically driven with resulting projects not always financially viable.⁸⁴ By 2018, the Chinese government started to become aware that many BRI projects were at the risk of becoming white elephants or were not economically viable for political, economic, or security reasons (or all three combined). A critical challenge for Beijing then and now is a sheer lack of area experts on countries with major BRI projects. Importantly, we are now encountering the “BRI 2.0.” China has learned many valuable lessons from its initial mistakes and is quickly changing course. For example, Beijing is completely altering its lending process and is rapidly decreasing the role of policy banks, relying more on commercial banks. Perhaps of greater importance, Beijing is now outsourcing risk management to foreign lending institutions such as the European Bank for Reconstruction and Development.⁸⁵ This new approach should significantly reduce the waste and redundancies in many of previous BRI projects.

It is critical for policymakers in the United States and India to realize that the smaller South Asian states see China as an opportunity in multiple domains. Attempts to force them to distance themselves from Beijing will likely fail and may actually be counterproductive. South Asia suffers from significant infrastructure shortfalls, and Chinese loans and grants are seen as essential to improving living conditions and livelihoods in the region. China has deep pockets and is willing to finance infrastructure projects that may not be profitable but are nevertheless critical for a state’s development and provide rent-seeking opportunities for corrupt elites. The non-democratic nature of China enables its leaders to spend money on BRI projects, but Washington needs to be aware that these projects may fail or never materialize. Instead of competing project-for-project or dollar-for-dollar with Beijing, what American leaders can do instead is to finance projects in these countries that are economically viable or help reinforce state capacity.

In particular, U.S. policymakers could consider the following courses of action:

• Expand the Regional China Officer Program to smaller states in South Asia: Washington needs to rapidly build up its Regional China Officer Program (RCO), which posts China-focused U.S. foreign services officers in key states around the globe. As of early 2024, there were no RCOs based in Nepal or Bangladesh. Specifically, the RCO can examine Chinese financial, security, political and social activities and both share them with American partners and engage local authorities. This will help to increase transparency.
• Develop state capacity in smaller South Asian states: The BRI suffers from an enormous lack of transparency on the part of both China and targeted countries. Washington should work with in-country bureaucrats and high-level officials as well as civil society groups and local media to encourage transparency on such issues. Additional funding should be made available to bring NGO leaders and local journalists to the U.S. for extended training sessions and even degree programs. The focus should be on areas, such as technical and legal assistance, where the long-term value of institutions and rule of law are emphasized. This is not in China’s playbook and it is an enormous asset that the U.S. has in its arsenal.
• Continue host country engagement across the political spectrum: The U.S. needs to play the long-game and continue to engage in host country civil society. In many states, China places too much emphasis on individual leaders who are removed from office or are defeated at the ballot box. This is a strategic liability for Beijing that Washington and New Delhi can capitalize on by allowing China to score own goals. By focusing on civil society, Washington can capitalize on its soft power appeal in Bangladesh, especially of American universities and the U.S. as an export market.

Overall, great power competition in South Asia is in its infancy. Now that China has emerged from its Covid-19 self-isolation and is reworking the BRI, its interests in the region will continue to expand, thus causing concern in New Delhi about Chinese ambitions in the region. India is also watching the United States as it engages with Nepal and Bangladesh in ways that are not always in India’s interests, causing tensions in the U.S.-India bilateral relationship. Regardless of whether we are now witnessing “Peak China,” if BRI 2.0 is able to avoid the mistakes of I 1.0, it will be a much more formidable force for both India and the U.S. to navigate.

Author Biography

Christopher K. Colley is an Assistant Professor of International Security Studies at the United States Air War College. Opinions, conclusions, and recommendations expressed or implied within are solely those of the author and do not necessarily represent the views of the Air University, the United States Air Force, the Department of Defense, or any other US government agency.