China’s Expanding Footprint in South Asia and India’s Response

China is not a South Asian state, yet by 2026 it is the largest bilateral creditor and the principal arms supplier in most of India’s neighbours. What has changed is less the scale of that presence than what it does politically: it hands small states an alternative to India, and an alternative is a bargaining asset whether or not it is ever used. India’s difficulty is therefore not Chinese power in the abstract but the effect of a credible outside option on eight relationships it once managed by default.

What is being claimed, and what this note argues

The phrase “Chinese encirclement” flattens several very different Chinese purposes into one, then attributes to them a coherence Beijing has not demonstrated. Five propositions organise everything that follows.

• China’s motives in South Asia are plural and partly in tension — energy security, land access to the Indian Ocean, frontier control in Xinjiang and Tibet, commercial return, and strategic pressure on India. They call for different instruments in different countries and they do not always point the same way.
• The instruments vary enormously in real leverage. Arms dependence binds Pakistan almost irreversibly; concessional lending in Nepal has produced almost nothing on the ground in nine years.
• The most consequential effect is indirect. Chinese presence changes the bargaining position of small neighbours far more than it changes the military balance, and it is that bargaining shift which India experiences as loss of influence.
• The two dominant framing devices are contested constructs. “String of pearls” is Western and analytical; “debt-trap diplomacy” is empirically damaged. Both retain political force after their mechanisms have been discredited.
• India’s counter is real but uneven — strong on crisis response, credit and digital public goods, chronically weak on delivering what it announces.

How China entered South Asia: four phases

Phase one — the security entry, 1950 to 1978

• The relationship began not with commerce but with Tibet and the boundary, and everything since has been built on that foundation.
  • The occupation of Tibet in 1950–51 removed the buffer that had insulated the Himalayan states, and turned Nepal, Bhutan and Sikkim from remote periphery into a shared frontier.
  • Nepal settled its boundary with China in 1958, three years before India’s own boundary dispute became a war, and the sequencing mattered: Kathmandu learned early that Beijing could be dealt with.
  • The 1962 war established the enduring political fact — that India could be defeated — and every subsequent Nepali or Bhutanese calculation about Indian protection has been made in its shadow.
• The China–Pakistan axis dates from 1963, when Pakistan ceded the Shaksgam tract of territory India claims to China under a boundary agreement India has never accepted.
  • What followed was decades of nuclear, missile and conventional assistance to Pakistan, sustained across every change of government in both countries.
  • This is the only genuine alliance China has in South Asia, and it long predates any economic initiative.
• Elsewhere the entry was opportunistic. China supported the forces that displaced the Awami League after the assassination of Sheikh Mujibur Rahman in 1975, and Dhaka’s subsequent turn toward Pakistan, Saudi Arabia and Beijing set a pattern that has recurred at every change of government since.

Phase two — commercial arrival, 1978 to 2005

• Chinese engagement in this period was contractor-led and unglamorous, and it is routinely omitted from Indian accounts that begin the story in 2013.
  • Chinese firms entered the Maldivian construction market from 1985; the Gayoom presidency courted Beijing across two visits, in 1984 and again in 2006.
  • Nepal bought Chinese weapons in the late 1980s in circumvention of its treaty understandings with India, producing the trade and transit crisis of 1989 and establishing the “China card” as a usable instrument of Nepali politics.
  • Bangladesh signed its first defence cooperation agreement with China in 2002, under a BNP government, a full decade before infrastructure lending became the headline story.
• The phase matters analytically because it shows that Chinese influence was accumulating before the Belt and Road existed, and therefore that removing the BRI would not remove the influence.

Phase three — the infrastructure decade, 2005 to 2020

• The Belt and Road Initiative, launched in 2013, gave a single label and a financing model to activity that was already under way.
  • Pakistan joined through CPEC in 2015; Bangladesh, Sri Lanka, the Maldives and Nepal followed across 2016 and 2017. Bhutan alone did not.
  • Hambantota was leased for 99 years in 2017; Xi Jinping’s visits to Colombo (2014), Malé (2014) and Dhaka (2016) each converted a commercial relationship into a declared strategic partnership.
  • The Maldives–China Free Trade Agreement, signed under Yameen in 2017 and then repudiated by the Solih government, showed how quickly the model could be reversed when the elite changed.
• The decade also produced the first Chinese naval presence in the Indian Ocean that India could not ignore — anti-piracy task forces from 2008, submarine port calls at Colombo in 2014, and the opening of the Djibouti base in 2017.

Phase four — institutional consolidation, 2020 to 2026

• Since the pandemic the emphasis has shifted from projects to convening power, which is a slower and more durable form of influence.
  • The COVID period produced China-led ministerial formats, standing regional bodies and vaccine supply at exactly the moment India’s own exports were suspended.
  • The Kunming trilateral of June 2025 with Pakistan and Bangladesh, and reporting through late 2025 of a possible new regional grouping that would bypass SAARC, mark the point at which China moved from participant to convenor.
• The four-phase sequence yields the single most useful conclusion for policy: influence built over seventy years cannot be dislodged by a five-year programme, and Indian responses framed as displacement rather than competition have consistently failed.

Five motives, not one encirclement

Energy security and the Malacca dilemma

• Hu Jintao named the “Malacca dilemma” in 2003, and it remains the most credible single driver of Chinese behaviour in the Indian Ocean.
  • Roughly four-fifths of China’s imported crude transits the Strait of Malacca, a chokepoint an adversary navy could interdict without invading anything.
  • The vulnerability is structural and permanent. No amount of naval construction removes the geography, so the answer has to be route diversification and presence along the route.
  • This motive explains Gwadar, Kyaukpyu, Hambantota and Djibouti better than any theory of territorial ambition, and it explains why Chinese interest concentrates on littoral logistics rather than land.
• Indian analysis frequently treats the dilemma as a pretext rather than a real constraint, which is a mistake: it is a genuine strategic weakness, and states act on genuine weaknesses.

Overland access to the Indian Ocean

• Two corridors are meant to reach salt water without passing Malacca, and both were designed as insurance rather than as commerce.
  • The China–Pakistan Economic Corridor links Kashgar in Xinjiang to Gwadar, roughly 3,000 km of road, rail, power and pipeline, passing through Gilgit-Baltistan — territory India claims, which is the basis of India’s formal objection to CPEC.
  • The China–Myanmar corridor already works: crude oil and natural gas pipelines from Kyaukpyu in Rakhine to Kunming have operated since 2013, and the Kyaukpyu deep-sea port and special economic zone under CITIC is the maritime terminus.
  • Neither corridor is commercially efficient, and their poor economics has not killed them — which is itself the strongest evidence that their purpose is strategic.
• The corridors have a second effect India rarely states plainly: they give China standing reasons to care about internal stability in Pakistan and Myanmar.
  • Beijing brokers ceasefires between the Myanmar junta and the ethnic armed organisations because its pipelines run through contested ground.
  • It presses Islamabad on security for Chinese nationals for the same reason, and has pushed for joint security arrangements Pakistan is reluctant to concede.

Securing the Xinjiang and Tibet peripheries

• South Asia is China’s soft western flank, and much of its regional diplomacy is defensive frontier management rather than expansion.
  • Afghanistan matters chiefly as a possible sanctuary for Uyghur militants, and China’s core demand of every Kabul government, Republic or Emirate, has been that it not become one. Beijing also opposed the prolonged American presence for keeping militancy alive on its doorstep.
  • Nepal matters chiefly for Tibet. Chinese engagement in Kathmandu has consistently prioritised surveillance of the Tibetan refugee population and the securing of the Tibetan Autonomous Region’s southern approaches ahead of infrastructure delivery — a priority Nepali officials themselves report.
  • The Trans-Himalayan Multi-Dimensional Connectivity Network is, from Beijing’s side, as much about extending state reach to the Himalayan crest as about trade, which is why the Kerung–Kathmandu railway survives as a proposal despite failing every commercial test.
• Mao’s “five fingers” formulation — Tibet as the palm, with Ladakh, Nepal, Sikkim, Bhutan and Arunachal Pradesh as the fingers — is quoted constantly in India and never in Chinese policy documents.
  • It nonetheless captures a real continuity: Chinese frontier policy treats the Himalayan states as extensions of the Tibetan security problem rather than as independent foreign-policy objects.

Markets, contracts and surplus capacity

• The commercial motive is systematically underrated in Indian writing and is often the actual explanation for a given project.
  • Belt and Road lending exports Chinese overcapacity in steel, cement and construction, and terms typically require Chinese contractors — which is why the loan and the builder arrive together, and why “investment” figures overstate what reaches the host economy.
  • South Asia is also a market. China runs a large trade surplus with every state in the region, and the China–Maldives Free Trade Agreement, in force from 1 January 2025, has widened rather than narrowed Malé’s deficit while eroding its customs revenue.
  • Resource access is a growing strand — the Mes Aynak copper concession in Afghanistan is the clearest case, negotiated across two entirely different Afghan governments.
• Where the commercial motive dominates, the strategic return is thin. This is visible in the number of Chinese projects that stall the moment they stop being profitable, and it is the strongest single reason not to read every Chinese contract as a strategic move.

Keeping India regionally constrained

• The one motive that is genuinely about India is also the cheapest of the five to pursue.
  • A South Asia in which India is absorbed by its neighbours is a South Asia in which India projects less power into the Indo-Pacific, where China’s principal contest lies.
  • Support for Pakistan is the purest expression: decades of assistance for a fraction of what direct competition with India would cost, sustaining a rival that occupies Indian attention permanently.
  • The instrument is often diplomatic rather than material — holds at the UN Security Council on terrorist designations, of which the long block on listing Masood Azhar until 2019 is the standing example, plus public endorsement of neighbours’ positions in disputes with India.
• China has also repeatedly signalled interest in SAARC observer status and eventual membership, supported publicly by Nepal and Pakistan. India’s refusal is the clearest instance of Indian influence still being decisive, and it is a large part of why China has built formats of its own instead.

Motive	Principal instrument	Main theatre	What success looks like for Beijing
Sea-lane security	Port access, naval logistics, survey vessels	Indian Ocean littoral	Assured refuelling, repair and intelligence along the route
Overland ocean access	CPEC, China–Myanmar corridor and pipelines	Pakistan, Myanmar	Energy and cargo flows that bypass Malacca
Frontier security	Security cooperation, refugee control, Tibet-facing links	Nepal, Afghanistan, Bhutan	No sanctuary for Uyghur or Tibetan dissent
Commercial return	BRI lending, contracting, FTAs, resource concessions	Region-wide	Contracts, market share, resource access
Constraining India	Arms transfers, UNSC holds, alternative groupings	Pakistan, and region-wide	India occupied at home, less capable abroad

The instruments, assessed one by one

Belt and Road and the corridor model

• Every South Asian state except India and Bhutan has joined the Belt and Road Initiative, and that near-uniformity is the single most quoted fact about Chinese influence in the region.
  • Membership is much cheaper than delivery. Nepal signed its BRI memorandum in May 2017 and nine years later has no completed BRI project beyond the contested Pokhara international airport; an original list of 35 projects was cut to nine at China’s own request.
  • The BRI Cooperation Framework signed at Beijing in December 2024 identified ten projects for renegotiation, and by mid-2026 no Nepali agency could state the status of any of them.
  • CPEC is the exception that proves the pattern: the only corridor with substantial disbursement, and also the only one where the recipient’s debt position has become a first-order political problem.
• The corridor model has a recurring flaw India should name rather than fear. It creates sovereign liabilities against assets with weak revenue, so the recipient carries both the financial risk and the political blame.
  • Pakistan has sought rollovers of more than US$12 billion a year and restructuring of over US$15 billion in power-sector liabilities, and Chinese power producers have refused to write down unpaid dues.
  • China withdrew from financing the ML-1 railway, Pakistan’s flagship remaining project, after nearly a decade of negotiation, leaving Islamabad seeking multilateral money for a truncated section instead.
  • What Pakistan calls “CPEC 2.0” is a set of memoranda worth around US$8.5 billion in agriculture, electric vehicles, solar, health and steel — a substantial downgrade from corridor-scale infrastructure, and announced by Islamabad without Chinese endorsement.
• The lesson generalises. Chinese lending is fragmented across competing institutions — policy banks, commercial banks, provincial governments, state-owned enterprises — and behaves less like a strategy than like a market with a state’s flag on it.

Port and infrastructure lending

• Port access, not port ownership, is the object, and the distinction determines what India should actually worry about.
  • Hambantota was leased for 99 years in 2017 to China Merchants Port; Colombo Port City is a reclaimed financial zone with its own regulatory regime; Kyaukpyu is a deep-sea port with a Chinese majority stake; Gwadar is operated by a Chinese state firm.
  • Gwadar remains commercially marginal, its throughput a fraction of Karachi’s and its city under prolonged security lockdown — the clearest evidence that a “pearl” can be acquired and still deliver almost nothing.
  • Djibouti remains China’s only declared overseas military base, which is the strongest available evidence that the model is dual-use commercial access rather than a base network.
• Survey and research vessels are the genuinely novel instrument, because they generate data of direct military value under a civilian label.
  • Chinese research vessel calls at Sri Lankan and Maldivian ports drew Indian protest; Colombo imposed a one-year moratorium from January 2024 and then moved to a standard-operating-procedure regime rather than a permanent ban.
  • Hydrographic and oceanographic survey of the northern Indian Ocean supports submarine operations, and it is the one activity where the civilian designation is thinnest.
• India’s response has been to seek visibility rather than exclusion — white shipping agreements, coastal radar chains, and information-sharing through the fusion centre at Gurugram — which is the realistic objective given that no neighbour will accept a veto over who calls at its ports.

Defence sales and military-technical dependence

• Arms transfers are China’s deepest and least reversible instrument, because a supplier relationship locks in spares, training, munitions and doctrine for decades.
  • Pakistan drew about 80% of its arms imports from China in 2021–25, up from 73% in the preceding five years, and 61% of all Chinese arms exports went to Pakistan alone — a concentration with no parallel anywhere in the world.
  • Bangladesh’s armed forces are overwhelmingly Chinese-equipped. Two Type 035G Ming-class submarines were delivered in 2016 and commissioned the following year, and the Chinese-built submarine base at Pekua opened in March 2023.
  • Myanmar’s military has been sustained by Chinese and Russian supply throughout the civil war, and Sri Lanka and Nepal have both taken Chinese aircraft, patrol vessels and light equipment on concessional terms — Pakistan has separately offered Colombo the JF-17, itself a Sino-Pakistani product.
• The Indian counter-position is improving but starts from far behind.
  • The first-ever India–Sri Lanka defence cooperation MoU was signed only in April 2025, which is itself the measure of how long India left the field open.
  • India’s engagement with Bangladesh has been limited largely to exercises — Sampriti on land and Milan at sea — and a defence line of credit that converted slowly into deliveries.
  • India remains the world’s second-largest arms importer, drawing about 40% from Russia, 29% from France and 15% from Israel, which constrains what it can offer neighbours from its own production.
• The strategic consequence is that Chinese equipment shapes the operational picture on two of India’s borders, and increasingly the maritime picture in the Bay of Bengal.
  • G. Parthasarathy has argued that the naval dimension is where India should concentrate its concern, because China and Pakistan operate as a combined supplier bloc in the Indian Ocean littoral rather than as separate vendors.
  • The point is analytically sharper than the encirclement frame: what India faces is not a ring of bases but a single arms-and-training ecosystem extending from Karachi to Chittagong.

Elite links, party diplomacy and the politics of access

• China works the political class rather than the public, and this is the instrument Indian analysis has most often named and least often documented.

“China has perfected the art of buying elites in smaller countries.”

S.D. Muni

• The mechanisms are unglamorous and effective.
  • Party-to-party links through the International Department of the Communist Party of China run parallel to state diplomacy and survive changes of government.
    • The inter-party accord signed between the BNP and the CPC in June 2026 is the newest instance; China has maintained comparable links with the Awami League, with Nepal’s communist parties and with Sri Lankan parties across the spectrum.
  • Training programmes, funded delegations, scholarships and media partnerships cultivate officials, editors and younger politicians over long horizons and at trivial cost.
  • Project finance flows toward visible, nameable assets — a stadium, a bridge, an airport, a convention centre — which are politically useful to incumbents in a way that budget support or a training programme is not.
• The limits of elite capture appear whenever the elite is replaced.
  • The Maldivian reversal of 2018, Sri Lanka’s turn after the 2022 collapse, and the Nepali corruption prosecutions of Chinese contractors after 2026 all show that a relationship built on a leadership is exposed when that leadership falls.
  • India suffered the identical failure in Dhaka in August 2024, which is why the criticism has to be made as a general point about personalised diplomacy rather than as an accusation unique to China.

Vaccine, disaster and public-goods diplomacy

• The pandemic was the moment Chinese regional diplomacy acquired an institutional shape rather than merely a project list.
  • China supplied Sinopharm and Sinovac doses across the region, often filling gaps left when India suspended vaccine exports during its own Delta wave in 2021 — a suspension whose reputational cost long outlasted its duration.
  • A foreign ministers’ meeting on 27 April 2021 brought China together with Afghanistan, Bangladesh, Nepal, Pakistan and Sri Lanka — a South Asian grouping deliberately configured without India, Bhutan or the Maldives.
  • It produced two standing bodies: the China–South Asian Countries Emergency Supplies Reserve and the Poverty Alleviation and Cooperative Development Centre, launched at Chongqing in July 2021.
• These are small institutions with a large signal. They establish that a regional format can exist in which China convenes and India is absent, which is a precedent rather than a programme.
• China’s disaster response, by contrast, remains slower and more logistically constrained than India’s, and this is the one public-goods domain where Indian advantage is structural rather than merely claimed.

The institutional layer: forums, trilaterals and the SCO

• China has been assembling a parallel regional architecture piece by piece, without ever announcing one.
  • The China–South Asia Cooperation Forum and the China–South Asia Exposition, both hosted at Kunming, provide an annual convening rhythm; the seventh Forum met in 2026.
  • The China–Indian Ocean Region Forum on Development Cooperation, first convened at Kunming in 2022, extends the frame from South Asia to the whole littoral and drew participation from states across the region while India stayed away officially.
  • The Shanghai Cooperation Organisation now contains India and Pakistan as members with Nepal, Sri Lanka and the Maldives as dialogue partners — a body in which South Asian states meet under a Chinese-shaped agenda and India is a participant rather than a convenor.
• The trilaterals are the sharper development because they are explicitly sub-regional.
  • A China–Pakistan–Bangladesh trilateral met at Kunming in June 2025, and reporting through late 2025 indicated advanced discussion of a new grouping that would sidestep SAARC entirely.
  • A China–Pakistan–Afghanistan trilateral agreed in May 2025 to extend CPEC into Afghanistan, reaffirmed at a first formal ministerial in Kabul that August — though Pakistan–Afghanistan armed clashes since have made the corridor politically implausible for now.
  • The so-called “Himalayan Quad” — a proposed China, Nepal, Pakistan and Afghanistan grouping — has never been formalised, and Nepal has publicly disowned any such plan. It is best treated as an analytical marker of what a minus-India regionalism would look like, not as an existing bloc.
• The realistic assessment is that none of these formats yet does anything, and that this is not the point. Their function is to establish that South Asian regionalism without India is thinkable, which over a decade is worth more than any single port.
• What both sides are practising is minilateralism — small, purpose-built groupings that trade universality for effectiveness.
  • Its advantage is speed and cohesion; its cost is legitimacy and the exclusion of those most affected, which is why every such grouping generates a rival.
  • India cannot object to minilateralism in principle, because the Colombo Security Conclave and BIMSTEC are its own instances of it — the argument has to be about which groupings deliver, not about whether narrow formats are legitimate.

Instrument	Depth of leverage	Reversibility	India’s principal exposure
Arms transfers	Very high — spares, training, doctrine	Very low	Two-front planning; Pakistani and Bangladeshi capability
Corridor lending	High in Pakistan, low elsewhere	Low where disbursed	Sovereignty claim through Gilgit-Baltistan
Port and SEZ access	Moderate — access, not control	Moderate	Naval logistics and survey data
Elite and party links	High but personalised	High — falls with the elite	Policy swings at every election
Health and disaster supply	Low material, high reputational	High	Loss of the first-responder identity
Forums and trilaterals	Low today, agenda-setting over time	High	A regionalism that excludes India

Reading the instruments through weaponised interdependence

• Farrell and Newman’s concept of weaponised interdependence explains what ports, cables, payment rails and debt actually deliver, better than any encirclement metaphor.
  • Networks of exchange have hub-and-spoke structures, and a state with jurisdiction over the hub acquires two distinct capabilities.
  • The chokepoint effect is the power to deny access — which is precisely what China fears at Malacca and what India could exercise there.
  • The panopticon effect is the power to see what flows through — which is what survey vessels, port management systems and telecommunications infrastructure deliver quietly and continuously.
• Read this way, the contest in South Asia is about who owns the hubs, not about who owns territory.
  • Chinese port concessions, undersea cable landings and equipment supply build one set of hubs; India’s payments rails, power grid interconnections and open border with Nepal build another.
  • The framework also names India’s own vulnerability: interdependence cuts both ways, and India’s technology, energy and financial dependencies limit how much pressure it can absorb from any single source.
• It follows that India’s digital and grid integration is strategic infrastructure, not merely development assistance — a point Indian policy makes far too modestly.

The country ledger in 2026

Country	China’s principal lever	State of play, 2026
Pakistan	CPEC plus near-total arms dependence; over 72% of external bilateral debt owed to China	The alliance holds but has soured: ML-1 definancing, downgraded “CPEC 2.0” memoranda, unpaid power-sector dues, and repeated attacks on Chinese nationals driving demands for joint security
Bangladesh	Arms supply, BRI membership, port modernisation, party-to-party links	The year’s most consequential shift. PM Tarique Rahman visited Beijing 22–26 June 2026 — 15 MoUs, a BNP–CPC inter-party accord, roughly US$300 million in grants, Chinese backing for a Teesta management project, Mongla port expansion and an exploratory 2+2 dialogue
Nepal	BRI framework, largest source of FDI, Trans-Himalayan connectivity, Tibet-related security demands	Delivery remains near zero. The RSP government under Balendra Shah applies project-by-project scrutiny, insists on grants rather than loans, and is prosecuting corruption cases involving Chinese contractors at Pokhara airport
Sri Lanka	Hambantota lease, Colombo Port City, the US$3.7 billion Sinopec refinery, largest bilateral creditor	Hedged with visible care. The NPP government signed India’s first defence MoU in April 2025 while accepting Chinese investment; the research-vessel ban gave way to a standard operating procedure; China pledged deeper defence ties in July 2026
Maldives	FTA in force from 1 January 2025, the March 2024 free military assistance agreement, dominance of bilateral grants	India’s relationship repaired without China being displaced. China granted a five-year debt deferral in October 2025 and supplies the larger share of grants; India carries the currency swaps, credit line and FTA talks
Myanmar	Kyaukpyu port and the Kunming pipelines; influence over both junta and ethnic armed organisations	China is the indispensable external actor. It brokered ceasefires, backed the staged elections from December 2025, and secured approval to proceed at Kyaukpyu, while India’s Kaladan project stays stalled
Bhutan	Boundary negotiation as the route to diplomatic relations; 269 sq km in the west and 495 sq km in the north in dispute	Normalisation is advancing, not frozen. Twenty-five rounds of boundary talks and a Three-Step Roadmap agreed in 2021; the 15th Expert Group Meeting met in Beijing, 30 March–1 April 2026, with a Joint Technical Team on delimitation
Afghanistan	First mover on recognition-adjacent diplomacy; Mes Aynak copper; proposed CPEC extension	Ambition outruns delivery. Beijing accredited an ambassador early and courts mineral concessions, but Pakistan–Afghanistan hostilities have stalled the corridor and pushed Kabul toward New Delhi instead

• The two ends of the ledger carry the argument. Pakistan shows what maximum Chinese leverage looks like — and that it buys a client whose instability China must now manage. Bhutan shows that a state with a functioning security relationship with India and no debt exposure can normalise with Beijing on its own timetable.
• The middle six are the real contest. In all six the pattern is identical: Chinese money, Indian proximity, and a local government pricing one against the other.
• Not one of these states has aligned with China against India, and none has offered basing rights, joined a Chinese security guarantee, or accepted Chinese forces on its soil. That is the fact most often lost in the encirclement literature.

What has changed in South Asia is not the balance of power but the number of options available to small states — and options, not power, are what redistribute bargaining leverage.

“String of pearls”: a Western analytical construct

• The phrase is not Chinese. It was coined by the American consultancy Booz Allen Hamilton and entered circulation through a 2005 report for the United States Department of Defense titled Energy Futures in Asia.
  • Its original subject was energy security, not encirclement. The report asked how China would secure oil flows, and the “pearls” were the facilities along that route.
  • No Chinese policy document uses the term, and Chinese commentary treats it as hostile characterisation. Presenting it as a stated doctrine attributes to Beijing a plan it has never published.
• What the construct gets right is not trivial.
  • It identified, two decades early, the specific locations that would matter: Gwadar, Hambantota, Chittagong, Kyaukpyu and the Horn of Africa.
  • It anticipated dual-use logistics — commercial ports whose infrastructure carries military utility — as the model China would choose in preference to formal bases.
  • It correctly located the driver in energy dependence, which is why it has aged better than most strategic coinages.
• What it gets wrong matters more, because the errors shape Indian policy.
  • It implies a single directing intention across projects that were separately negotiated, differently financed and frequently unprofitable.
  • It conflates access with control. A commercial lease does not deliver wartime basing rights, and Colombo has publicly undertaken that Chinese naval vessels will not use Hambantota — a commitment whose credibility in crisis is untested, but which the “pearls” frame cannot even describe.
  • It licenses fatalism. If encirclement is a plan being executed, every Chinese project is an Indian loss and India’s own agency disappears from the analysis.
  • It ignores the host state entirely, treating Colombo, Islamabad and Nay Pyi Taw as terrain rather than as governments with their own reasons.
• The Indian counter-coinage, the “necklace of diamonds” — Chabahar, Duqm, Sabang, Assumption Island, Agalega, and access arrangements with France and the United States — has the same defect in reverse: it describes an aspiration as though it were an achieved network.

The debt-trap thesis and its critics

The thesis as usually stated

• Brahma Chellaney coined “debt-trap diplomacy” in 2017, and international reporting through 2018 made Hambantota the standing exhibit.
  • The claimed mechanism runs: China lends for an unviable project, the borrower defaults, and China converts the distress into strategic control of the asset.
  • The thesis gained traction fast because it supplied a moral vocabulary — predation — to what had been a technical argument about lending standards, and because it flattered the intuition that small states are passive.

What the evidence shows at Hambantota

• The Sri Lankan case does not support the mechanism it is used to illustrate, and the details matter one by one.
  • The debt was overwhelmingly not Chinese. International sovereign bonds held largely by Western private investors were by far the largest single component of Sri Lanka’s external debt; Chinese lending sat in the range of 10–13%.
  • The project’s own repayments were small. As Umesh Moramudali showed, Hambantota’s loan instalments amounted to less than 5% of Sri Lanka’s total foreign debt servicing at the time of the lease.
  • There was no default and no seizure. The Sri Lankan government initiated the lease proposal; the loans were never defaulted on and their terms were not altered. The transaction therefore cannot be described as a debt-equity swap, because no debt was cancelled in exchange for the asset.
  • The money did not go to Hambantota. The US$1.12 billion was used to shore up foreign exchange reserves and meet short-term obligations arising from a general balance-of-payments crisis with many non-Chinese causes.
• The scholarly critique is broad and comes from several independent directions.
  • Deborah Brautigam and Meg Rithmire called the narrative “a lie, and a powerful one”, noting that Chinese lenders have repeatedly restructured and have not seized assets in lieu of repayment anywhere.
  • Lee Jones and Shahar Hameiri, in research published by Chatham House, argued that the thesis inverts causation: recipient governments drive these projects for domestic political and developmental reasons, and Chinese lending is too fragmented across competing institutions to execute a central plan.
  • The China Africa Research Initiative at Johns Hopkins found that Chinese loans were not the principal driver of debt distress in the countries most frequently cited as victims.
• Sri Lanka’s restructuring then settled the question in a way theory could not.
  • China’s share of Sri Lankan bilateral debt fell from about 57% in 2022 to roughly 45% by 2025, and its outstanding claims fell from about US$8 billion to US$4.9 billion.
  • Chinese lenders absorbed losses of the order of US$7 billion — behaviour flatly incompatible with a strategy of engineering default in order to acquire assets.

What survives the critique

• The critique defeats the mechanism, not the politics, and holding both halves is what an adequate answer requires.
  • Opacity is real. Contracts are frequently confidential, and confidentiality and cross-default clauses limit a borrower’s room to restructure with anyone else.
  • Creditor concentration is real. Being the largest bilateral creditor confers a practical veto in any restructuring, as Colombo discovered when it needed Chinese sign-off before its IMF programme could proceed.
  • Political capture requires no trap. A signature project becomes a domestic political asset for the incumbent, and a Chinese stake in that incumbent’s survival follows without anyone intending it.
  • Asset control need not be sought to be obtained. A ninety-nine-year lease over a deep-water port, negotiated freely and paid for in cash, still produces the map that a seizure would have produced.
  • Debt exposure narrows future hedging. The Maldives, carrying public debt above 131% of GDP and dependent on a five-year Chinese deferral, has less room to bargain in 2026 than it had in 2023 — which is the trap thesis’s real content, arrived at by a different route.
• The correct Indian position is therefore narrower and stronger than the one usually taken: attack lending standards, transparency, procurement rules and project viability, not a predatory intent the evidence does not carry. The narrower claim is also the one multilateral institutions and the recipients’ own auditors will support.

The debt-trap thesis is mostly wrong about how China acquires influence and mostly right that it acquires it — which is why refuting the mechanism has changed so little politically.

What the smaller states actually do

Hedging as observed behaviour

• Hedging, not bandwagoning, is what the record shows, and the distinction is the analytical core of the whole question.
  • Rohan Mukherjee and Darren Lim define hedging as a secondary state deliberately pursuing contradictory or ambiguous alignments with competing great powers, so as to keep both engaged and neither able to impose terms.
  • They argue that South Asia sustains hedging better than East Asia because it contains fewer genuinely zero-sum issues — a state can take Chinese investment and Indian security cooperation without either becoming impossible.
  • The doctrine’s own formulation came from a practitioner rather than a scholar. Mangala Samaraweera described Sri Lankan foreign policy as an attempt at

“trying to be friends with everyone and alienating no one.”

Mangala Samaraweera

• Mohammed Nuruzzaman states the harder version: as China becomes more economically enmeshed with India’s smaller neighbours, India’s relative influence declines even where no state has switched sides, because integration itself redistributes leverage.
• The proposition to reject is the one that Indian commentary reaches for most easily — that neighbours are being bought. Nepal, Sri Lanka, Bangladesh and the Maldives have each reversed direction at least once in a decade, which is not the behaviour of clients.

The evidence, case by case

• The Maldives ran the full arc inside thirty months. Muizzu campaigned on “India Out”, secured the departure of Indian military personnel by May 2024 and signed a free military assistance agreement with China in March 2024.
  • He then took Indian currency swaps worth about US$760 million, an Indian line of credit of ₹4,850 crore, and opened FTA negotiations with New Delhi.
• Sri Lanka took both offers simultaneously. The NPP government signed the first India–Sri Lanka defence MoU in April 2025 and accepted the Sinopec refinery at Hambantota in the same period, while replacing a blanket vessel ban with a procedural regime that keeps discretion in Colombo’s hands.
• Nepal has kept the framework and withheld the projects. The new government retains the BRI cooperation framework while insisting that projects come as grants rather than loans, and has quietly dropped the Damak industrial park near the Indian border from its programme.
• Bangladesh calls its posture “Bangladesh First”, not alignment, even while upgrading ties with Beijing to a declared community of shared future — and the same government has kept its trade, power and transit interdependence with India intact.
• Bhutan has hedged by refusing to hedge, declining BRI membership and Chinese lending altogether while negotiating a boundary settlement on its own schedule, which is the strongest available demonstration that Chinese money is not irresistible.

The costs the hedgers understate

• Debt concentration reduces future room to manoeuvre, and the states most enthusiastic about hedging are the ones nearest that limit.
• Capacity limits mean small states often cannot properly evaluate the contracts they sign — which is precisely where Indian and multilateral technical assistance has real purchase, and where India’s comparative advantage is unexploited.
• Domestic factionalism converts hedging into oscillation, so every election reopens questions both larger neighbours thought settled, and neither can build durable expectations.
• Great-power competition can be withdrawn. A neighbourhood whose bargaining power depends on two suitors is exposed if the suitors reconcile — which is exactly what the India–China thaw since 2024 has begun to threaten.

The outside option, not Chinese power, is what has changed. India is not being displaced by China; it is being negotiated with by neighbours who now have somewhere else to go.

India’s response, and what each instrument is worth

The doctrinal frame

• Neighbourhood First, articulated from 2014, made the neighbourhood the declared first circle of Indian diplomacy, with non-reciprocity, delivery and connectivity as its stated principles.
  • Its measurable content is the external affairs aid budget, which remains overwhelmingly regional. Of roughly ₹5,685 crore allocated to aid in the 2026–27 Union Budget, Bhutan alone takes about ₹2,288 crore, with Nepal ₹800 crore, the Maldives ₹550 crore, Sri Lanka ₹400 crore and Myanmar ₹300 crore.
  • The Bangladesh allocation of ₹60 crore is the most eloquent single number in that budget: it registers a relationship that has not been rebuilt since 2024.
• SAGAR, announced in 2015, converted the neighbourhood policy into a maritime doctrine — Security and Growth for All in the Region — with India as net security provider and first responder across the Indian Ocean.
• MAHASAGAR, announced during the Prime Minister’s Mauritius visit in March 2025, restates that vision as Mutual and Holistic Advancement for Security and Growth Across Regions, extending the frame from the Indian Ocean to the Global South as a whole.
  • The shift is deliberately non-territorial. It answers Chinese presence with a claim to provide public goods across an ocean, rather than with a competing map of facilities India cannot afford to build.
  • Its risk is overreach: a wider frame on the same budget dilutes rather than deepens, and the neighbourhood is where the budget actually goes.

Money: credit, swaps and rescue

• India’s comparative advantage is not the size of its lending but its speed when a neighbour is failing.
  • Sri Lanka in 2022 is the reference case: about US$4 billion in credit lines, a currency swap, deferred payments and fuel, food and fertiliser supply, delivered before the IMF programme and at a moment when no other creditor moved. India was that year Sri Lanka’s largest single lender.
  • Currency swap facilities of US$400 million and ₹30 billion for the Maldives in October 2024, and a line of credit of ₹4,850 crore during the July 2025 visit, repaired a relationship that had begun in open hostility.
  • Bhutan’s 13th Five Year Plan support of ₹10,000 crore, announced in 2024, is more than double the previous plan and the largest such commitment India has ever made to any country.
• The limits are structural and should be conceded rather than argued away. India cannot match Chinese project finance in volume and should not try; its lending is most effective where it is counter-cyclical, arriving precisely when Chinese lending has stopped.
• India’s own emerging strength is as a market and a source of remittance income — the eight million Nepali citizens living and working in India under the open border are a form of interdependence China cannot replicate at any price.

Security: the Colombo Security Conclave and defence cooperation

• The Colombo Security Conclave is India’s most successful regional institution-building of the decade, and it works precisely because it is narrow.
  • Revived in 2020 from a trilateral begun in 2011, it now has six members — India, Sri Lanka, the Maldives, Mauritius, Bangladesh and Seychelles — with a permanent secretariat at Colombo.
  • Its five pillars are maritime safety and security; counter-terrorism and countering radicalisation; trafficking and transnational organised crime; cyber security and critical infrastructure protection; and humanitarian assistance and disaster relief.
  • The seventh National Security Adviser–level meeting, at New Delhi in November 2025, admitted Seychelles as a full member.
  • Its design lesson is the transferable one: it excludes Pakistan without saying so, requires no region-wide unanimity, and therefore functions where broader bodies do not.
• Bilateral defence cooperation has begun to follow the same logic — the India–Sri Lanka MoU of April 2025, continued training of the Maldivian National Defence Force, expanding coastal radar chains and white-shipping arrangements, and joint exercises across the littoral.
• The recurring Indian error is to seek exclusivity, which no small state can concede publicly. The workable objective is transparency about who is present and what they are doing, not a veto over their presence.

Public goods: health, disaster relief and digital infrastructure

• India’s first-responder record is its strongest non-material asset and the one Chinese capability cannot match on timelines.
  • Vaccine Maitri delivered doses across the neighbourhood before India’s own domestic wave forced a suspension — and the suspension is the standing lesson about the cost of announcing capacity one cannot sustain.
  • Operation Brahma, launched within hours of the Myanmar earthquake of March 2025, and the record from Nepal in 2015 back to the Maldives water crisis of 2014, establish a pattern of arriving first.
  • The precedent runs back to Operation Cactus in 1988, when Indian forces reversed a coup attempt in Malé within hours of a request — the episode that made India the Maldives’ default security guarantor for three decades and that no Chinese capability could have substituted for.
• Digital public infrastructure is India’s genuinely distinctive offer, and it is the instrument least available to Beijing.
  • RuPay and UPI are live in Bhutan — RuPay from 2019, UPI from 2021 — and in Nepal, where RuPay arrived in 2022, UPI in 2024, and person-to-person transfers and remittances were added in June 2026.
  • Sri Lanka took both in February 2024; the Maldives took RuPay in October 2024 with UPI in development under a network agreement signed in July 2025.
  • India has signed digital public infrastructure agreements with more than twenty countries, exporting a stack rather than an asset — which creates dependence on Indian systems without creating debt.
  • The strategic point is that payments integration binds populations rather than governments, and therefore survives a change of government in a way a port concession does not.

Connectivity, and its record

• Connectivity is where India’s stated strategy and its delivery diverge most sharply, and the gap is entirely of India’s own making.
  • BBIN, the sub-regional motor vehicles agreement of 2015, remains unratified by Bhutan, and the initiative has run as a trilateral ever since.
  • Chabahar gives India access to Afghanistan and Central Asia bypassing Pakistan, and India took over operations of the Shahid Beheshti terminal — but sanctions exposure has kept investment cautious and volumes low.
  • The Kaladan Multi-Modal Transit Transport Project is stalled at exactly the point that mattered. India took operational control of Sittwe port in May 2023, but Paletwa fell to the Arakan Army in January 2024 and the road link through Chin State is not in friendly hands.
  • The India–Myanmar–Thailand Trilateral Highway remains incomplete, with the Myanmar sections the binding constraint.
• The contrast with China is instructive rather than shameful. China’s corridors are also mostly unbuilt. The difference is that India’s failures occur in projects India controls, which makes them harder to explain and more damaging to credibility.

Dimension	China’s approach	India’s approach
Finance	Large, fast, collateralised, contractor-tied	Smaller, concessional, grant-heavy, counter-cyclical
Delivery	Strong where profitable; stalls when returns vanish	Chronically slow, but continues past the point of return
Security	Arms sales creating long dependence	Training, exercises, radar, HADR; recent defence agreements
Institutions	Minus-India forums and trilaterals	Colombo Security Conclave, BIMSTEC, sub-regional formats
Soft power	Scholarships, party links, elite cultivation	Education, diaspora, culture, health, the digital stack
Principal vulnerability	Backlash when debt or contractors become a scandal	Backlash when India is seen to back a domestic faction

Where India’s response falls short

The delivery deficit

• Delivery is the single most cited Indian weakness in the entire literature, and it is cited by India’s friends more often than by its critics.
  • S.D. Muni’s diagnosis of Nepal policy generalises across the region: Indian policy has been driven by

“a strong sense of inherent insecurity, bordering on paranoia.”

S.D. Muni

• His prescriptive corollary is the operative sentence — India should avoid undue delay in implementing its projects, because delay is what leaves space for China.
• Pancheshwar, under the Mahakali Treaty of 1996, has not been implemented in nearly three decades; Punatsangchhu-I in Bhutan remains geologically troubled while the 10,000 MW hydropower target has quietly lapsed; Kaladan is stalled. Each is an Indian project, not a Chinese one.
• The institutional causes are known and unglamorous: land acquisition abroad, inter-ministerial coordination, contractor capacity and financing procedures that were designed for domestic projects and transplanted without adaptation.
  • Constantino Xavier’s work on Indian connectivity abroad identifies land acquisition in the partner country as the single most common cause of delay — a problem India has repeatedly failed to plan for even where it has budgeted the money.
  • The consequence is that announcement and completion have become separate events in the neighbourhood’s political imagination, which devalues every subsequent Indian announcement.

Leverage built on parties rather than interests

• India has repeatedly concentrated a relationship in one domestic political formation and then lost the relationship with it.
  • The Bangladesh reset of August 2024 exposed a relationship built almost entirely through the Awami League, and the stalled bilateral engagement of 2026 — with the Hasina extradition question unresolved after her conviction in absentia — shows how long that cost persists.
  • The Maldives in 2023 and Nepal in 2015 produced the same outcome from the same cause: Indian association with one faction converted into a domestic election issue against India.
  • Sumit Ganguly’s warning about Bangladesh generalises: the closeness India enjoyed with one government put the whole relationship at risk when that government fell, and the turn toward China was the predictable consequence rather than a surprise.
  • V.P. Haran’s remedy is procedural rather than rhetorical — institutionalised annual engagement at summit level, which generates momentum on stalled projects and clears misunderstandings before they harden.

Trade, market access and the economics of the relationship

• India is the natural market for the region, but neighbours experience Indian trade policy as an obstacle rather than an opportunity.
  • Non-tariff barriers, testing and certification requirements, and slow land-port infrastructure blunt the preferences that regional agreements formally grant.
  • Intra-regional trade remains under six per cent of the region’s total trade, and the informal trade that flows around the barriers is a standing measure of how much formal trade is being suppressed.
  • Trade with Pakistan has been effectively nil since May 2025, which removes the single largest theoretical gain from regional integration and hands China an argument about India’s reliability.

Framing and self-presentation

• Security-first framing generates its own backlash. Every episode in which India’s presence became a domestic election issue followed the perception that India sought exclusivity rather than partnership.
• C. Raja Mohan’s prescription — a country-first approach, engaging each neighbour on its own terms rather than as a piece of a China strategy — is the corrective, and it implies that India should stop describing its neighbourhood policy in terms of China at all.
• Hardeep Puri’s point runs the other way and is also right: India should not be deterred when a neighbour plays the China card, because visible anxiety raises the price the neighbour can charge.
• The most useful single reform is the simplest: stop competing where China holds structural advantage.
  • There is little point matching infrastructure capital. Institution-building, human capital and regulatory capacity are the domains where India’s comparative advantage is durable and China’s offer is thin.
  • The South Asian University — funded entirely by India for its capital costs and for 59% of its operating budget — is the standing example of what that competition looks like when India chooses its own ground.

“India needs to invest more in its neighbouring states to counter China.”

Muchkund Dubey

The 2026 conjuncture: why “accelerating” is the right word

Four governments changed, and none of them owes India anything

• Bangladesh, February 2026. The BNP won 209 of 297 declared seats with the Awami League barred from contesting, and Tarique Rahman became Prime Minister on 17 February.
  • His first substantive foreign visit was to Beijing in June, producing fifteen memoranda, an inter-party accord with the Communist Party of China, Chinese support for a Teesta project and an exploratory 2+2 dialogue.
  • His proposed visit to India remains stalled over the Hasina question, which means the sequence itself — Beijing first, Delhi indefinitely postponed — is the political fact.
• Nepal, March 2026. The Rastriya Swatantra Party won 182 of 275 seats and Balendra Shah became Prime Minister — a government with no inherited obligations to either neighbour, and with an anti-corruption mandate currently working against Chinese contractors as much as anyone.
• Sri Lanka, since September 2024. Anura Kumara Dissanayake’s NPP has proved more careful than either New Delhi or Beijing expected, taking Indian security cooperation and Chinese investment simultaneously and conceding exclusivity to neither.
• The Maldives, since November 2023. Muizzu demonstrated the full arc from “India Out” to Chinese military assistance to Indian currency swaps and FTA talks inside thirty months.
• What makes this a genuine acceleration is not any single project but the simultaneity. In four capitals at once, relationships have to be rebuilt from the beginning — and China begins each of those negotiations without the historical resentments India carries.

Bhutan is normalising, and that is the structural change

• Bhutan was the one holdout and is no longer behaving like one, which is the most important single development of the period.
  • Twenty-five rounds of boundary talks, a Three-Step Roadmap agreed in 2021, and expert group meetings running at pace — the fifteenth met in Beijing from 30 March to 1 April 2026 — with a Joint Technical Team working on delimitation in undisputed sectors.
  • The disputed areas are 269 sq km in the west, including the Doklam plateau, and 495 sq km in the north at Jakarlung and Pasamlung. India’s concern is almost entirely about the first, because Doklam overlooks the Chumbi Valley and therefore the twenty-kilometre-wide Siliguri Corridor.
  • India’s stated position rests on the 2012 understanding that tri-junction points will be settled in consultation with all three concerned parties — a legal position rather than a veto, and one Bhutan has so far respected.
  • Doklam in 2017 remains the reference case for what happens when the understanding is tested, and it is also why Bhutan has been careful to keep India informed as talks advance.
• S.D. Muni’s judgment is the one India should adopt: full diplomatic relations between Bhutan and China will eventually develop as Bhutanese democracy matures.
  • An India that visibly tries to prevent them only confirms the image of the bullying big brother, and coercive diplomacy toward Thimphu would forfeit the one relationship in the region India has never had to buy.
  • The workable objective is that Bhutan’s settlement should not compromise Indian security — not that there be no settlement.
• Gelephu Mindfulness City, the King’s special administrative region on the Assam border, with Kokrajhar–Gelephu rail connectivity under construction, is India’s answer in the right currency — a stake in Bhutan’s economic future rather than a constraint on its diplomacy.

The India–China thaw complicates the adversarial reading

• India and China have been normalising since late 2024, which cuts against a purely competitive account of Chinese behaviour in South Asia.
  • The patrolling understanding of October 2024, the resumption of the Kailash Mansarovar Yatra, restored direct flights and visa issuance, and the Prime Minister’s attendance at the SCO summit at Tianjin in 2025 all point one way.
  • Most assessments call the thaw tactical rather than strategic — driven by economic pressure and a volatile external environment rather than by any movement on the boundary question.
• The implication for third countries is genuinely ambiguous, and an honest answer says so rather than resolving it artificially.
  • A less confrontational India–China relationship lowers the price neighbours can charge for playing one against the other, which helps India.
  • It also legitimises Chinese presence in the region as ordinary rather than threatening, which does not.
  • And it does nothing about the two instruments that matter most — arms transfers to Pakistan and the corridor through Gilgit-Baltistan — because neither is on any bilateral agenda.

Trilateralism: India, China and Nepal

• Nepal’s preferred self-description is “a bridge, not a buffer”, and trilateral economic engagement is the policy form that description takes.
  • The idea has been raised repeatedly by Kathmandu and welcomed rhetorically by Beijing; India has never rejected it in principle and has never advanced it either.
  • S.D. Muni has argued that as India–China economic engagement grows, the possibility of a framework for the developmental coexistence of the two powers in Nepal should be explored rather than dismissed.
• The honest assessment begins with asymmetric interest.
  • Nepal wants it because trilateralism converts landlocked dependence into transit rents and bargaining room, and because it dilutes the appearance of choosing.
  • China wants it because it normalises Chinese economic presence on India’s northern frontier at very low cost and confers legitimacy no bilateral project could.
  • India is unenthusiastic because its boundary with China is unsettled, because trilateral infrastructure on the Himalayan frontier has dual-use implications, and because India already provides the transit Nepal actually uses.
• Where it could work is narrow and worth naming precisely.
  • Trade facilitation and customs harmonisation on routes that already exist, where the gain is procedural rather than territorial.
  • Tourism circuits, including religious tourism across the Himalaya, where the political cost of cooperation is close to zero.
  • Disaster preparedness and hydrological data sharing, where the alternative to cooperation is shared exposure to glacial lake outburst floods and seismic risk.
  • Power trading, where Nepali generation, Indian demand and Chinese equipment already coexist in practice and only the framework is missing.
• Where it cannot work is equally clear: strategic infrastructure, security cooperation, and anything requiring an agreed map. The realistic conclusion is that trilateralism’s practical scope is confined to areas where the transaction costs of a third party are lower than its political costs — and those areas are real but small.
• The deeper point for India is that refusing the frame outright costs more than engaging it selectively. A standing Indian position that trilateral cooperation is acceptable in named non-strategic sectors would deny Nepal the grievance without conceding anything India values.

Conclusion

The strongest answer to the question of Chinese influence in South Asia refuses both available exaggerations. China has not built an encircling network of bases, has not sprung a debt trap, and has not acquired a single South Asian ally other than the one it had in 1963. What it has done is supply every small state in the region with a credible alternative source of capital, arms and diplomatic cover — and that alternative has permanently changed the terms on which those states deal with India.

• India’s task is not to expel China from the neighbourhood, which is neither feasible nor necessary, but to ensure that when a neighbour prices its options, India’s offer wins on its merits.
• That requires finishing projects, broadening relationships beyond incumbent parties, lowering the friction of trade, and competing in the domains where China’s model has least to offer — human capital, institutions, digital public goods and crisis response.
• The four new governments of 2024–26 are an opportunity as much as a threat. Relationships rebuilt from the beginning can be built better, on interests rather than on individuals, and without the accumulated grievances that made the old ones fragile.