HAMBANTOTA, SRI LANKA — For years, foreign ships laden with oil, machinery, clothes and other cargo sped past this small town near India as part of the world’s brisk trade with China.
Now, China is investing millions to turn this fishing hamlet into a booming new port, furthering an ambitious trading strategy in South Asia that is reshaping the region and forcing India to rethink relations with its neighbors.
As trade in the region grows more lucrative, China has been developing port facilities in Pakistan, Bangladesh and Myanmar, and it is planning to build railroad lines in Nepal. These projects, analysts say, are part of a concerted effort by Chinese leaders and companies to open and expand markets for their goods and services in a part of Asia that has lagged behind the rest of the continent in trade and economic development.
But these initiatives are irking India, whose government worries that China is expanding its sphere of regional influence by surrounding India with a “string of pearls” that could eventually undermine India’s pre-eminence and potentially rise to an economic and security threat.
As recently as the 1990s, China’s and India’s trade with four South Asian nations — Sri Lanka, Bangladesh, Nepal and Pakistan — was roughly equal. But over the last decade, China has outpaced India in deepening ties.
For China, these countries provide both new markets and alternative routes to the Indian Ocean, which its ships now reach through a narrow channel between Indonesia and Malaysia known as the Strait of Malacca. India, for its part, needs to improve economic ties with its neighbors to broaden its growth and to help foster peace in the region. Some of the shift in trade toward China comes from heightened tensions between India and Pakistan, which has hampered trade between the two countries. But China has also made inroads in nations that have been more friendly with India, including Sri Lanka, Bangladesh and Nepal.
Moreover, protectionist sentiments have marred India’s relationships with its neighbors.
India has had some success in establishing closer ties with Sri Lanka, with which it has a strong bilateral trade agreement. But China has become a partner of choice for big projects here like the Hambantota port.
India is starting to respond to China’s growing influence by becoming more aggressive in courting trade partners. India recently signed a free-trade deal with the Association of Southeast Asian Nations and South Korea.