China in the Indian

Ocean Region:
Impacts, Prospects, Opportunities

Client: U.S. Government, Office of South Asia Analysis

Prepared by: Nathaniel Barber

Kieran Coe
Victoria Steffes
Jennifer Winter
Outline

Impact Analysis
Regional Security
Energy Issues
Non-Energy Economic Relations

Trends and Prospects

Expansionist China
Non-Expansionist China

Opportunity Analysis
Trends to Obstruct or Encourage
Opportunities for Future Action
Impact Analysis:
Regional Security
New Chinese partnerships with South
Asian states come at Indias expense
Construction of port facilities
Hambantota, Sri Lanka
Chittagong, Bangladesh
Sittwe, Burma
Gwadar, Pakistan
Economic and military aid
Impact Analysis:
Regional Security
Relevant
Issue Area China India Regional Players
Diplomatic
Competition Competition Win
Alliances
Hambantota,
Win Loss Win
Sri Lanka
Chittagong,
Win Loss Win
Bangladesh
Sittwe,
Loss Win Win
Burma
Gwadar,
Win Loss Win
Pakistan
Impact Analysis:
Energy Security
Definition of energy security:
Availability
Reliability
Affordability

China and India face three primary

energy security risks
High proportion of oil imports
Reliance on dominant oil exporting countries
Dependence on vulnerable sea lanes
Impact Analysis:
Energy Security
Impact Analysis:
Non-Energy Economic Relations
Increasing Chinese Trade in the Indian
Ocean region

Indias Trade Deficit with China

Foreign Direct Investment by China and

India
Impact Analysis:
Non-Energy Economic Relations
Prospects and Trends:
Assumptions

Expansionist China

Non-Expansionist China

Likelihood Scale

Very unlikely Unlikely Somewhat unlikely Plausible Somewhat likely Likely Very likely
Prospects and Trends:
Regional Security
Expansionist China Non-Expansionist China
Prediction 0-10 Years 10-20 Years 0-10 Years 10-20 Years
Outbreak of a major Very Very
Unlikely Very Unlikely
armed conflict Unlikely Unlikely
China and India open
and/or expand security
Very Somewhat
partnerships and Very Unlikely Very Likely
Unlikely likely
information-sharing
agreements
China engages India in Somewhat Very
Unlikely Very Unlikely
a proxy war via Pakistan Unlikely Unlikely
Prospects and Trends:
Energy Security
Prospects and Trends:
Non-Energy Economic Relations
Expansionist China Non-Expansionist China
Prediction 0-10 Years 10-20 Years 0-10 Years 10-20 Years
China widens its trade Somewhat Somewhat Somewhat
Plausible
surplus with India Likely Likely Likely
China seeks to expand
economic influence Very Likely Very Likely Very Likely Very Likely
with India's neighbors
China and India
Very Very
cooperate to reduce Plausible Plausible
Unlikely Unlikely
trade imbalance
China and India sign a Very Very Somewhat
Plausible
free trade agreement Unlikely Unlikely Unlikely
Opportunity Analysis:
Trends
Trends to Obstruct
Chinese FDI to regional states
Chinese-financed and built ports

Trends to Encourage
U.S.-India relationship
Indias relationship with regional states
Indian and Chinese acquisition of energy resources
Chinese-Indian trade
Membership in international energy organizations
Opportunity Analysis:
U.S. Action
Strengthen U.S. relations with India

Expand relations with Chinese-courted regional

states

Maintain naval superiority in the Indian Ocean

Ensure energy security for South Asian states

Pursue a less unequal trade balance with China

Questions?