IntelBrief: China’s South Asia Troubles

• China’s efforts to build economic and political influence in South Asia are running into significant headwinds, including with its longtime ally, Pakistan.
• Chinese relations with historic rival India remain tense over periodic border clashes and New Delhi’s participation in several U.S.-backed regional security groupings.
• Pakistani citizens have demonstrated against the conditions imposed by China for investments in Pakistan under Beijing’s ambitious Belt and Road Initiative (BRI).
• China’s economic policymakers see potential value in pursuing investments in Taliban-controlled Afghanistan, which has significant reserves of some critical minerals, but Islamic State groups pose a threat to Chinese investors there.

As China’s strategic influence around the globe grows, Beijing’s focus on South is exceeded only by its intense interest in East Asia. China shares a border with four South Asian states, including a narrow border along Afghanistan’s sparsely inhabited Wakhan Corridor. The corridor neighbors China’s Xinjiang province, where large numbers of Muslim Uyghurs are being detained by the government in what are reported to be camps imposing harsh penalties for expressions of faith or regional culture. Although China is wary of the return of Islamist hardliners amid the Taliban’s regaining power in Kabul, the Taliban poses no conventional military threat to China. Leaders in Beijing remain concerned however that the group is harboring ethnic Uyghur Islamist extremists of the Turkistan Islamic Party (TIP) as it did during its pre-9/11 rule. The TIP, which was listed under the UN’s al-Qaeda sanctions regime when it was formerly known as the East Turkistan Islamic Movement, seeks to use Afghanistan as a base from which to liberate Chinese Uyghurs. Strategically, Beijing is more concerned about the intentions and capabilities of India, whose population is set to exceed that of China this year, and with whom China’s troops have clashed on their border as recently as December 2022. China has long looked to Pakistan as an ally with which to apply pressure on India’s western border in the event of an all-out conflict.

While China has consistently sought to outflank India, Beijing has also aimed to engage New Delhi diplomatically to ease tensions and avoid having to divert additional forces to its western borders. However, in addition to occasional border clashes, Chinese President Xi Jinping has also failed to dissuade India from joining several U.S.-led regional groups, including the Quadrilateral Security Dialogue (“Quad”) and the “I2U2.” The Quad – a security partnership between India, Japan, Australia and the United States – was revived in 2017 as part of a U.S.-led response to Chinese incursions in the the broader Indo-Pacific region. Notably, India also joined China in the Shanghai Cooperation Organization that same year. The I2U2, which India joined in 2021 and also features Israel and the United Arab Emirates, focuses more on technological collaboration on energy, health, and other functional issues than on countering China or any other power. However, traditionally a stalwart member of the Non-Aligned Movement, India’s membership furthers New Delhi’s movement toward Washington. India has refused to participate in China’s Belt and Road Initiatitive (BRI), in part because signing on would have meant accepting China-Pakistan Economic Corridor (CPEC) projects in the parts of the disputed Kashmir region that Pakistan controls.

BRI debts are creating problems for Beijing with its historic security partner, Pakistan, feeding into India’s assertions that China has imposed unsustainable financial conditions on recipients of BRI investments. However, accusations of Chinese “debt-trap diplomacy” are controversial, and existing evidence has not consistently supported the idea that BRI initiatives are driven primarily by Beijing’s top-down geopolitical mandates. According to Bloomberg, roughly 30% of Pakistan’s foreign debt was owed to China as of September 2022; this was about triple the amount it owed to the International Monetary Fund (IMF), according to the IMF. Given Pakistan’s current economic troubles, the country is in talks to reschedule its debts to Chinese and other creditors, and is negotiating to secure an IMF loan, which often requires substantial economic reform. Pakistan’s inability to service its debts has caused the Chinese companies that set up and now run BRI-related power stations in Pakistan to threaten to shut down operations if they are not paid.

In late 2022, months of protests erupted in the Pakistani port city of Gwadar, site of a large China-funded port development project in Balochistan, where there have been historic tensions with Islamabad and a spate of attacks by the Balochistan Liberation Army; protestors voiced concerns about against Chinese-imposed security checkpoints, trade restrictions, and resource shortages in the area. Despite the unrest, Pakistani Prime Minister Shehbaz Sharif joined President Xi during a November visit to Beijing in pledging to “accelerate the construction” of the Gwadar port. However, Xi also expressed “great concern” for the safety of Chinese nationals in Pakistan, urging Pakistani authorities to provide “a reliable and safe environment” for Chinese nationals and interests in the region. In December, a local leader of the protests warned Chinese citizens to leave the area, and, in early January, Pakistani authorities imposed a de-facto curfew on the area to compel protesters to cease their unrest.

In Afghanistan, China has been welcomed by Taliban figures because Beijing did not militarily support the ousted U.S.-backed government and because it has offered economic support; Chinese officials have said they hope for “friendly” relations with the new government. However, neither China nor any other government has officially recognized the Taliban as the legitimate rulers of Afghanistan. While U.S. forces helped the Kabul government stave off the Taliban insurgency from 2001-2021, China confined its activities to economic investment, initiating major mining projects to extract minerals, such as copper, crucial to China’s economy. China also invested in Afghanistan’s small hydrocarbons sector and reportedly eyed projects to develop Afghanistan’s significant deposits of lithium, a mineral critical to the global energy transition. The Taliban’s continued political and economic complicates China’s efforts to import equipment, skills, and hard currency funding into Afghanistan for its infrastructure projects there. Afghanistan’s banks are almost entirely disconnected from the global financial system, and billions of dollars in central bank funds have been frozen by the United States.

However, China remains wary of the Taliban’s hardline Islamist ideology and its past affiliations with radical Islamist groups such as al-Qaeda and the TIP. While Beijing has not cancelled major investments in the country and Chinese investors continue to scout out new opportunities there, little progress has been made on existing projects, possibly owed to Chinese dissatisfaction with the Taliban’s ability to reign in the TIP. Meanwhile, militants of the group, Islamic State Khorasan, have threatened to target embassies in Kabul, including China’s, to “undermine the relationship between the Taliban and member states in the region,” according to a UN report released last week. In December, Islamic State-Khorasan claimed responsibility for an attack on a Chinese-owned hotel in Kabul that has hosted Chinese business travelers since the Taliban takeover. China’s foreign ministry responded by calling for Chinese nationals to evacuate the country, with some predicting that such security incidents would likely dampen China’s enthusiasm for new investment in Afghanistan. Like their Western counterparts, China’s leaders undoubtedly hope that security will improve and Taliban policies will moderate so that Afghanistan will re-integrate into the global community. However, recent actions by the Taliban, particularly on women’s rights, suggest that moderation is not forthcoming.