The Chinese economy is faltering, the business sector is more indebted than ever, the fertility rate (1.702) remains below replacement level, the population is ageing, and the benefit of cheap labour is eroding. China’s debt-to-GDP ratio (US$27 trillion) is 159 percent. However, China’s objective has been to reclaim its former glory by controlling Asia in the short term and the rest of the globe in the long run. The Russian invasion of Ukraine and the western world’s response have introduced a new dimension to the Indo-Pacific power struggle. China may be emboldened by the western world’s reluctance to intervene directly in the Ukrainian situation. India would need to tread carefully and traverse the rough waters in this new geopolitical context.
The Indo-Pacific area is home to 65 percent of the world’s population, generates 63 percent of global gross domestic product (GDP), and contributes more than 60 percent of global marine trade. Numerous nations’ economic interests and future growth are inextricably linked to the freedom of navigation and free movement of trade through the Indo-Pacific.
China’s ascension to economic, technical, military, and political superpower status has resulted in a tectonic shift in the global power balance. The vibrations are now visible, and their effects are being felt throughout the world. As a result, it is maintained that managing the emergence of a tacitly belligerent China will be vital for the Indo-Pacific region’s safety, security, and stability. A more assertive China has resurrected the Quadrilateral Security Dialogue and resulted in the introduction of a trilateral security treaty (AUKUS). India, Japan, and Australia are growing power centres that are seen as regional balancing powers.
The Russian invasion of Ukraine and the western world’s response have introduced a new dimension to the Indo-Pacific power struggle. As evidenced by the persistent global division, closer connections between Beijing and Moscow could have major consequences in the future. On the other side, the US is China’s greatest commercial partner, with the two countries enjoying a sizable bilateral trade surplus (US$396.58 billion). China will face difficulties in balancing its trade surplus with the US and its relations with Russia. China may also be emboldened by the western world’s reluctance to intervene directly in the Ukrainian situation. India would need to tread carefully and traverse the rough waters in this new geopolitical context.
Economic reforms implemented in 1979 ushered in four decades of unprecedented economic growth in China. China’s GDP will exceed US$17.7 trillion in 2021, an increase of US$3 trillion over the previous year. China overtook the United States as the world’s largest economy in 2014 on purchasing power parity, and it is anticipated that it will overtake the US in nominal GDP terms by 2028. China’s continuous economic growth will bolster its global standing, and unipolarity is likely to give way to a bipolar or multipolar world.
China started a military upgradation programme following the Gulf War. The objective was to create a leaner, meaner, and more effective force that was fueled by a revived economy, bolstered by technology, and capable of self-reliance. The Chinese military has grown from a force capable of projecting and fighting wars within its borders to one capable of projecting and fighting wars beyond its borders. China’s defence expenditure, at US$252 billion (2020), is the world’s second-largest, accounting for roughly one-third of the US’s and three-and-a-half times that of India. This unprecedented growth in defence spending is consistent with China’s long-term goal of fostering its national desire to become a world leader.
China is now a preeminent military force, and the numerical and technological asymmetry between China and the Indo-Pacific countries is expanding. China is also expanding its military infrastructure in the South China Sea and Tibet, indicating a more aggressive posture. India shares many nations’ values, concerns, threat perceptions, and issues, necessitating the development of a unified strategy. There are three possible strategies: engagement, neutrality, or containment. Economic interconnectedness and mutual benefit will arise from the former. While the world wishes for a peaceful ascent of China, realists may argue for a containment strategy that could result in a confrontation.
China is embroiled in territorial conflicts with a number of governments in the region. It has argued against Japan’s ownership of the Senkaku Islands and asserted sovereignty over the South China Sea. Additionally, it has participated in the construction of artificial islands, airfields, and military bases in the Parcel and Spratly Islands, extending Beijing’s reach/responsiveness and expanding the exclusive economic zone. In the South China Sea, the Philippines, Brunei, Malaysia, Taiwan, and Vietnam all have competing claim lines. Taiwan remains an unfinished agenda item for China, and Sino-Indian relations have reached a breaking point following the Galwan incident. Each of these flashpoints is capable of escalating and destabilizing the region.
China confronts numerous obstacles as it embarks on a post-COVID-19 economic resurgence. The economy is faltering, the business sector is more indebted than ever, the fertility rate (1.702) remains below replacement level, the population is ageing, and the benefit of cheap labour is eroding. China’s debt-to-GDP ratio (US$27 trillion) is 159 percent, which is 60% more than the global average. Internal security concerns such as Hong Kong’s integration, turmoil in Xinxiang, and protests in Tibet continue to fester and must be handled without detrimental consequences. For the Chinese Government, economic stability and equitable wealth distribution are critical. With this backdrop in mind, it will be fascinating to observe China’s policy shifts in order to avoid the “middle-income trap.”
China is the world’s manufacturing powerhouse and the world’s top importer of oil and natural gas. Energy security is viewed as critical to the country’s continued progress. The vast majority of crude oil is imported from the Persian Gulf via the Malacca Strait. This strategic vulnerability remains a source of concern for China and will continue to be so. The military has a long history of following commerce, and as a result, the deployment of military forces to protect China’s economic interests is likely in the future.
The Belt and Road Initiative is President Xi Jinping’s signature initiative, with the goal of expanding China’s market through infrastructural development, regional connectivity, and economic interdependence. The economic feasibility of a number of these projects — which incorporated Chinese labour, material, and financing — has trapped recipient countries in a ‘debt trap’. Due to nations’ incapacity to repay their debts, they have been forced to make compromises that are detrimental to their national interests. Sri Lanka’s rash borrowing from China to finance infrastructure projects has contributed to the country’s current financial turmoil. China has already taken over the port of Hambantota on a 99-year lease, and Sri Lanka is currently discussing a debt restructure.
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The Indo-Pacific area plays a vital role in global economic and security dynamics. On the one hand, there is the United States, which has been a dominant force for decades. On the other hand, there is China, a rising power that is looked at suspiciously due to its potential danger to the status quo. The Sino-US strategic competition also casts a pall over other Indo-Pacific countries. The world can only hope for joint development and coexistence. However, it appears as though an assertive and expansionist China has chosen the route of confrontation. China’s objective has been to reclaim its former glory by controlling Asia in the short term and the rest of the globe in the long run. As a result, China’s rise will continue to be a source of contention for states in the Indo-Pacific and beyond. Numerous countries and regional organizations are observing the unfolding picture from the sidelines. They will need to calibrate their replies in order to safeguard their national interests while also keeping an eye on China’s rise and intentions.
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About the author
Neeraj Singh Manhas is a Director, Indo-Pacific, at Raisina House, New Delhi. He has authored three books under his name and has various research interests covering India-China in the Indian Ocean, India's maritime securities, and Indo-Pacific studies.