China expands Asian trading network

China is investing millions to turn the fishing hamlet of Hambantota in Sri Lanka 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 neighbours, Today Singapore reported.

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 a rail network 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 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.

"There is a method in the madness in terms of where they are locating their ports and staging points," Kanwal Sibal, a member of the government's National Security Advisory Board, said of China.

"This kind of effort is aimed at counterbalancing and undermining India's natural influence."

As recently as the 1990s, China 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.

Some of the shift in trade toward China comes from heightened tensions between India and Pakistan. But China has also made inroads in nations that have been more friendly with India, including Sri Lanka, Bangladesh and Nepal.

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 like the Hambantota port. China's Export-Import Bank is financing 85 percent of the cost of the US$1 billion project, and China Harbour Engineering is building it.

President Mahinda Rajapakse has said he offered the Hambantota port project first to India, but officials there turned it down.

Harsha de Silva, a prominent economist said the Sri Lankan government appeared to prefer awarding projects to China because it did not impose "conditions for reform, transparency and competitive bidding" that would be part of contracts with countries like India and the US.

(source: Cargo News Asia)