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Month: December 2018

Is Sri Lanka, China’s New Colony?

China & Sri Lanka: an enduring alliance?

China’s rise as a global economic power – and potentially a global political power too – is attracting more and more attention. From the so-called “Belt and Road Initiative” (BRI) to China’s increasingly aggressive tactics in the South China Sea, the activities of the People’s Republic are one of the biggest stories in international relations.

Whilst in the West, and particularly in Britain and America, the debate is often centred on whether the inexorable side of China represents a threat or an opportunity, the countries living in close proximity to China are scrambling to come to terms with the reality of Chinese power.

Some countries, notably Vietnam, Indonesia and the Philippines, find themselves in territorial disputes with China as a result of the People’s Republic aggressive boundary setting moves in the south China Sea.

In addition, there is the more long-standing political dispute between China and Taiwan centred on the former’s claims of sovereignty over the latter. What all these myriad territorial and political disputes have in common however is the involvement of the United States.

In nearly all cases the US intervenes on behalf of states who feel aggrieved by China’s actions in the South China Sea and beyond. Whilst Washington justifies its own aggressive actions – including challenging Chinese sovereignty over the Spratly islands – as part of its drive to ensure “freedom of navigation” in disputed maritime areas, the reality is that the US is above all concerned with the prospect of China displacing America as the dominant regional power.

But there is another side to the rise of China, both in its immediate environment, regionally and more broadly in a global setting. This is a story of successful Chinese outreach to multiple states, characterised by massive investments in infrastructure and resulting political influence.

One of these states is Sri Lanka, a country strategically perched next to India in the Indian Ocean. Sri Lanka has come a long way since gaining independence from Britain in February 1948. In the 70 years since independence Sri Lanka has established relatively stable political institutions, in addition to successfully prosecuting a quarter century long counter-insurgency campaign against Tamil separatists in the north and east.

Sri Lanka is important to China for many reasons, much of it revolving around the island nation’s strategic position in the Indian Ocean and its proximity to China’s great rival India. In addition, Sri Lanka presents China with a wide range of investment opportunities which in the long-term can help entrench Chinese influence in the country.

China’s strategic motive

In keeping with its emerging great power status China’s approach to foreign policy is shaped primarily by strategic considerations. To that end, the Chinese leadership has identified three core strategic rivals and potential enemies, namely India, Japan and the United States. Historic Chinese relations with all three powers has been marked by high tension and conflict, particularly with India and Japan.

Therefore, the thrust of Chinese foreign policy is to blunt the influence and reach of these three powers in China’s immediate neighbourhood, or areas where China has traditionally identified as its backyard.

For example, China’s support for North Korea is designed to deter the United States from acknowledging Taiwanese independence. More broadly, China’s support for North Korea is also designed to send a strong message to Japan, whose re-militarisation unsettles China’s historical consciousness.

To its immediate West China is confronted by the Indian giant, a country whose population is only marginally smaller than China’s. India not only challenges China economically, but also politically, on account of the fact that India is considered a “democracy” (albeit with an Asian twist) whereas China is still deeply authoritarian and officially at least still wedded to a communist ideology.

Furthermore, at a strategic level, India is a major rival to China, as similar to the People’s Republic India is incrementally augmenting its military capability with a view to projecting power well beyond its immediate sphere of influence. The development of a so-called blue-water navy (basically a maritime force with global reach and capability) is demonstrative of India’s ultimate ambitions.

In view of India’s strategic ambitions, China has devised a variety of economic, political, diplomatic and military tools to contain its big neighbour to the West. In terms of direct political intervention, and in order to offset Indian meddling in Chinese affairs (as demonstrated by India’s hosting of the Dalai Lama), China is suspected of supporting left-wing militant forces in south-eastern India. These forces have come to be known as the Naxalite-Maoist insurgency and are based mostly in Andhra Pradesh state.

In the diplomatic and economic spheres, China is engaged in extensive outreach to India’s neighbouring states, in particular Pakistan, which is viewed as a counter to India in the subcontinent. China has massive investments in Pakistan, notably in the deep-sea port of Gwadar. More broadly, China is stepping up its longstanding military cooperation with Pakistan, particularly in the ballistic and cruise missiles sphere.

China’s outreach to Sri Lanka is ultimately explainable in the context of China’s strategic posture and associated calculus. Although Sri Lanka is not a large and powerful state like Pakistan – and its relations with India is nowhere near as fraught as Indo-Pakistani relations – nevertheless by establishing influence on the island nation China gains more leverage in its emerging great power rivalry with India.

What does Sri Lanka offer to India?

As stated earlier, Sri Lanka’s close proximity to India inevitably makes it attractive to Chinese strategists. And of course, with geographic proximity comes a high degree of cultural proximity. Indeed, there are strong cultural bonds between the two nations, centred on the Tamil community in northern and eastern Sri Lanka, who are the ethnic kin of the large Tamil community in India’s deep south.

The fact that the Tamils of Sri Lanka were embroiled in a decades long conflict with the central government renders this dimension even more important to the Chinese. More on this later. But suffice to say it is in China’s strategic interest for Sri Lanka to have a strong and stable central government.

A unified and strong Sri Lanka is much more likely to oppose core Indian strategic positions, notably the expansion of Indian influence in the Indian Ocean, and to that end a strong and stable Sri Lanka satisfies China’s strategic priorities.

China cynically exploits tensions in Indo-Sri Lankan relations, notably the majority Sinhalese’s guarded attitude toward India, and Sri Lanka’s natural inclination towards India’s rivals. Note that Sri Lanka has strong ties to Pakistan, India’s nemesis on the subcontinent. Moreover, China seeks to contain Western influence on Sri Lanka, and where possible to drive a wedge between Colombo and Western capitals.

For example, China shields Sri Lanka from Western criticism on human rights issues, focussed on Colombo’s reported mistreatment of the Tamil minority in the north and east of the island. By containing and deterring Western influence in Sri Lanka, China is effectively constructing an outer defensive ring around its core territorial, political and economic interests much further away in the South China Sea area.

From this perspective, China’s outreach to Sri Lanka is an important example of China’s emerging global ambitions and a thinly-veiled desire to project power and influence well beyond its immediate neighbourhood.

The economic dimension   

Interestingly, the issue of human rights is bound up with China’s entry into Sri Lanka’s economy. This entry began in earnest in the immediate aftermath of the successful conclusion of the counter-insurgency campaign against Tamil Tiger rebels in May 2009. At the time Colombo was chafing under Western criticism of its alleged human rights abuses, notably the reported killing of thousands of Tamil civilians in the northern Jaffna Peninsula in the closing stages of the war.

China, similar to Russia, has a policy of non-intervention in the domestic politics of the countries it tries to cultivate. To that end, the Chinese not only did not care about the possible massacre of Tamil civilians, but in fact they undertook active measures – by way of diplomacy and media propaganda – to protect Sri Lanka from Western criticism.

Since 2010 China has invested significant sums in infrastructure projects in southern Sri Lanka and more recently Beijing has begun to invest in northern Sri Lanka as well, including the Jaffna Peninsula, which was the site of the most ferocious battles of the Sri Lanka Civil War of 1983-2009. For example, a major Chinese engineering company is set to build 40,000 houses in the Jaffna Peninsula.

Whilst successive Sri Lankan governments have welcomed Chinese investment, Beijing’s increasing economic influence on the island nation is not completely free of controversy. The case of the Hambantota Port Development Project is being increasingly cited to highlight the exploitative dimension of China’s investment strategy in Sri Lanka.

Construction of the port began in January 2008 and it is set to become Sri Lanka’s largest port, displacing the Port of Colombo from the top spot. But the project incurred heavy losses and was only kept going by Chinese loans, to the point where Sri Lanka was effectively forced in December 2017 to lease the port for 99 years to the Chinese.

China’s critics and detractors often use this case to demonstrate Beijing’s alleged cynical use of loans and investment funds to advance political and strategic ambitions. They also argue that massive infrastructure projects driven and funded by Chinese loans and associated finance potentially undermine the sovereignty of small states like Sri Lanka and to that end they can be construed as a form of Chinese imperialism.

How stable is Sri Lanka?

At present Sri Lanka is embroiled in a political crisis after President Maithripala Sirisena fired Prime Minister Ranil Wickremesinghe only to replace him with hardliner Mahinda Rajapaksa. This arbitrary dismissal of a sitting government has been fiercely resisted by the Sri Lankan parliament, to the point where there is political stalemate.

Sri Lanka is currently in the strange position of having two prime ministerial claimants – and potentially two rival governments – and hence on the threshold of deep political turmoil and potential bloodshed. However, despite the deep political uncertainty, the country is relatively calm and smooth administration continues apace.

This speaks to Sri Lanka’s bureaucratic resilience as embodied by the country’s civil service. In the past ten years China has tried hard to cultivate deep links to Sri Lanka’s bureaucracy with a view to investing in the country’s long-term stability. By cultivating allies in the Sri Lankan civil service Beijing believes it can mitigate the instability emanating from Colombo’s volatile politics.

In the final analysis, all the available evidence suggests that China – in keeping with its far-sighted global strategy – is set to deepen its influence in Sri Lanka in the years and decades to come.

Will Vietnam clash with China over the South China Sea?

Bilateral relations between China and Vietnam are not as easy as it may seem. At a first glance, they may be expected to maintain a positive and flawless partnership due to the similar political system. However, a deeper analysis reveals various divergences between the two countries, whose relations are becoming more conflictual with each passing year.

Historical background

China and Vietnam are both the cradle of ancient civilizations, but we can start examining their history since the two states took their current form in the aftermath of WWII.

After more than a century of intromissions and abuses from the part of Western powers and Japan, in 1945 China was devastated by war and politically divided. After a long and destructive civil war between the Communists and the Nationalists, which dated back to the 30s and was temporarily suspended to form a unified front against the Japanese invasion, the People’s Republic of China was proclaimed in 1949 following the victory of the Communists under the leadership of Chairman Mao Zedong. On their part, the Nationalists took refuge in Taiwan, where they founded a state that still remains de facto separated from the mainland. Still, the PRC was weak and isolated. It had very few allies apart from the Soviet Union; whose assistance was not sufficient to spark a sensible economic growth. Virtually all the other powers, especially the United States, were hostile to China. Moreover, Beijing’s relations with Moscow soon started deteriorating, to the point that the two seemed to be on the brink of war in 1969, when a series of border clashes took place.

Vietnam also had a troubled history following the end of WWII. France, the ancient colonial power, restored its control over the country after the brief Japanese occupation during the conflict. Yet, the Vietnamese soon started an insurgency that ultimately ousted the French in 1954. Following the negotiations that ended the war, Vietnam was divided in two states separated by the 17th parallel: the communist Democratic Republic of Vietnam in the north and the pro-American Republic of Vietnam in the south. But peace did not last long. One year later, a communist armed movement known as Vietcong was already active in the South, where it tried to overthrow the pro-Washington government. As the situation deteriorated, the US gradually escalated its support to the South, to the point of sending combat troops in the mid-60s. But the massive deployment of forces was not enough to defeat the Vietcong supported by the North and its allies, namely China and the USSR.

By the late 60s, then, both China and Vietnam were communist countries hostile to the US. Yet, things would soon change. After secret talks, the Nixon administration announced an unexpected diplomatic opening to the PRC, which culminated in the President’s visit to the country in 1972. This move was mainly driven by a double fold strategic logic. First, the US wanted to exploit the Sino-Soviet Split to its own advantage by putting the two communist states against each other and thus increase pressure on the USSR. Second, the Americans hoped to convince China to reduce its support to North Vietnam and thus facilitate the negotiations to end of the Vietnam War; and effectively a diplomatic settlement in this sense was reached in 1973. In spite of this, two years later the North launched a full-scale invasion of the South with its regular military forces. Strained by the long and costly war, the US decided to abandon Vietnam; which was therefore reunited under the communist regime.

Since then, the relations between Vietnam and China rapidly deteriorated. On spite of the similar political system, their alignment to the USSR and other regimes in South-East Asia led them to a short war in 1979 where both sides claimed victory; but their relations gradually normalized after the conflict. Later, China started implementing economic reforms, which sparked an extraordinary economic boom that still continues today; albeit at a slower pace. Vietnam followed its example, and today it is a fast-growing economy in full modernization. In both cases, this was not accompanied by political opening, and the respective Communist parties continue being the centre of the political system in each country. But during the past decade, bilateral relations have been worsening once again over a series of issues; and the trend seem to consolidate.

Sino-Vietnamese Disputes

The first and most important dispute existing between Vietnam and China is the one over the Paracel and Spratly islands, both located in the South China Sea, or SCS. This is very complex issue that goes way beyond the Sino-Vietnamese relations; as it involves overlapping claims by multiple countries over a strategic area for maritime trade that is also a rich fishing ground and is believed to host hydrocarbon reserves. Here it is sufficient to say that both China and Vietnam advance claims on the two archipelagos; but it is important to note that the Paracel are all occupied by the PRC. In fact, Beijing considers practically the whole of the SCS as its possession according to the “Nine-Dash Line” theory; and has been increasing its military presence in the area by conducting patrols, by expanding existing islands or even by building artificial ones, and by positioning military hardware and bases on their soil. Its activities have raised much concern in Vietnam and other riparian states; but due to their division and to the marked power imbalance in its favour, China has managed to gradually but firmly stabilizing its position in the SCS.

While this may look like a trivial quarrel over very small islets and rocks, in reality it has a major geostrategic significance. Legitimately controlling a piece of land that is recognized as an island (and not a simple rock) allows states to rightfully claim the territorial waters and the Exclusive Economic Zone around it. Applied to the SCS archipelagos, this means exerting control over vast maritime spaces that are rich in fish and that may host energy resources. Moreover, the SCS is an essential crossing area for sea trade; therefore, any conflict in the area would seriously disrupt the naval traffic with huge consequences for the global economy. Finally, over time the dispute has taken a symbolic relevance, which exacerbates national animosity and further complicates a peaceful resolution of the issue. Notably, a tense standoff between the two countries took place in 2014 following China’s drilling activities in disputed waters, and in March 2018 Vietnam decided to back down and cancel an important oil project in the area. In this sense, it is also important that Vietnam is modernizing its armed forces; with a particular focus on submarines, fighters and fire-and-forget anti-ship missiles. These are all weapon systems that would be useful in the case of a clash with China in the SCS, and it appears indeed that Vietnam is reshaping its military doctrine in this specific optic.

But there are also other divergences between the two countries. Linked to the SCS dispute, an important issue to consider is China’s economic presence in Vietnam. Many Vietnamese fear that the new economic zones established by their government will end up being dominated by Chinese investors. This has created social tensions that have erupted in violent protests in June this year, with demonstrators openly accusing China and its assertive policy in the SCS. Another problem is the question of waterways; notably the Mekong and the Red River, which both originate in Chinese territory. This has significant implications. First, it means that the PRC can control their flow; with major consequences for Vietnam’s agriculture, which still represents an important part of its economy. Second, and linked with the previous aspect, it means that Vietnam is vulnerable to water pollution generated by Chinese factories located upstream.

Another issue is China’s role in the Association of Southeast Asian Nations, or ASEAN; a regional multilateral organization meant to promote dialogue and cooperation of which Vietnam is part. In regards to ASEAN, China has always been careful not to discuss the SCS dispute during the organization’s meetings, where it could be put in minority by the other states. In contrast, by applying an effective “divide & rule” strategy, the PRC has been capable of dealing with the issue directly with each member; where it can negotiate from a position of force. Moreover, China is expanding its influence over all of ASEAN members; but Vietnam is resisting. This does not exclude some positive trends in Sino-Vietnamese relations. Bilateral trade is important: in 2016, the PRC accounted for 13% of Vietnam’s export for a total worth 26.8 billion dollars; and 31% of the goods that Vietnam purchased came from China, meaning 60 billion dollars in value. Also, in spite of the disputes of the previous year, in 2015 the two countries pledged to keep positive relations. Still, it is clear that Vietnam is concerned over China’s growing leverage over other Southeast Asian countries and over its activities in the SCS; and is therefore reacting.

As a matter of fact, Vietnam is building its ties with other countries in a clear attempt to hedge against China. Hanoi tries not to provoke Beijing and officially continues to apply its “Three No Policy”; meaning no alliance, no foreign military bases on its territory and no relations with a country against a third one. Yet, it is now allowing foreign navies to access the strategic naval base at Cam Ranh Bay for supply and repair; even though it still refuses to lend it to another country. But this example shows that in practice Vietnam is fostering closer political, economic and even military cooperation with other powers like India, Japan, Australia and most importantly the US. Washington is also involved in the SCS dispute, not as a claimant state but as an international security provider, and especially as the guarantor of freedom of navigation. Considering the importance of the SCS for maritime trade, which is essential for the global economy, the US is naturally concerned by China’s actions in the region and is therefore willing to deepen its ties with riparian states to counter its influence. Vietnam is particularly important, due to its geographic location and because it is among the most powerful countries in the area. During an official trip in 2016, former President Barack Obama lifted the embargo on arms sales to Vietnam; and in March 2018 the aircraft carrier USS Carl Vinson visited Vietnam. Considering the troubled past between the two countries, these are quite notable developments.

In spite of some positive signs, the trends described above seem to indicate that economic exchanges and diplomatic promises are not enough to prevent tension. Both powers are indeed acting to secure their own national interest, with China reinforcing its positions in the SCS and Vietnam modernizing its military and fostering ties with the US and other countries. In a broader context of US-China competition, it seems that Vietnam will play an increasingly important role; but at the same time, this will put it in a collision course with the PRC, with potentially detrimental consequences for international security and for the regional stability of an area marked by territorial disputes. Only time will tell what will happen, but it seems that Sino-Vietnamese relations will follow a downgrading course in the coming years.

Is China the new tiger of Bangladesh?

Bangladesh and China have maintained good relations for much of history. Today the two countries share a strong strategic relationship, with China playing a vital role mainly in terms of economic and infrastructure development of Bangladesh. However things weren’t so good especially during the time when Bangladesh gained independence from Pakistan and the subsequent years until around the mid 1970s.

During Bangladesh’s War of Liberation in 1971, there was a outbreak of complex geopolitical rivalries. India had allied with Bangladesh due to their long-term conflicts with Pakistan, and more so because Bangladesh was actually a part of Pakistan after the end of the British empire since 1947. China had been allied with Pakistan for most of history, and the ties strengthened especially around the time of the Sino-Indian war in 1962. As a result China opposed Bangladesh’s independence and vetoed their UN membership until 1974.[1]

It was only after the military coup in Bangladesh in 1975 that relations between Bangladesh and China started to improve. Prime Minister of Bangladesh since their independence, Sheikh Mujibur Rahman had close ties with India, and only months after the military takeover, China eventually recognised Bangladesh as an independent state as diplomatic relations were secured.[2] This dramatic transformation was fascinating, but it did not come as a surprise as the military rule led by President Ziaur Rahman distanced Bangladesh from India and the Soviets[3], which can possibly be regarded as one of the most significant reasons for their improved relationships. Ziaur Rahman helped restore free market economy in Bangladesh[4] and made a visit to China in 1977 which is regarded as a crucial step in laying groundwork for bilateral cooperation, which was followed by Chinese visits to Bangladesh in the late 1970s. Since then state visits between the two countries have been regular most of which have resulted in positive discussions and signings of agreements on political, economic and security issues.

Current relations

Bangladesh and China share a very strong relationship that ranges from the spheres of the economy, politics, development to defence and security. Today, Bangladesh considers China an “all-weather friend and a trusted ally”[5]. The cooperation dates back to Bangladesh’s  military rule in the mid-70s, however the democratically elected governments since 1991 have been able to keep up the good relations. In a 2010 visit to Bangladesh by then Chinese Vice President Xi Jinping, he stated that Sino-Bangladesh relations would remain strong regardless of any change in the domestic or international situation.[6] Bangladesh Prime Minister Sheikh Hasina on the other hand reiterated the importance of the country’s bilateral relations with China considering them a major ally of the highest significance.[7]

Economic ties

One of the most important aspects of the Sino-Bangla bilateral relations is the economic cooperation. China are by far the largest trading partner of Bangladesh with the latest World Bank figures revealing that Chinese exports to Bangladesh to be worth over US$ 10 billion (in 2015)[8]. On the other hand Bangladesh is China’s third largest trade partner. Majority of Bangladesh’s imports from china consist of raw materials for clothing and textile.[9] However the balance of trade between the countries is significant with Bangladesh having a deficit of approximately US$ 9 billion.[10] Reduction in trade deficit has been a primary concern for Bangladesh over the years, and following negotiations China agreed to provide duty-free access to around 5000 Bangladeshi products to the Chinese market under the Asia Pacific Trade Agreement (APTA) which has so far resulted in a slight decline in the ratio of trade deficit[11].

Possible Free Trade Agreement?

Talks have been in progress for several years about Bangladesh seeking a zero-tariff access of 99 percent items including Ready-made garments products in order to improve balance of trade. China’s meteoric rise in becoming the 2nd largest economy in the world only behind the United States by toppling Japan was possible largely due to its diversified economy, while having 14 FTA’s with developed as well as developing countries around the globe.

However there are some challenges of the FTA, mainly with regard to China’s ‘Made in China 2015’ industrial policy plan. There are significant restrictions on investing in China, and also preference is given to state-owned enterprises that control 38 percent of industrial assets in China, skewing competition in the market in favour of those.[12] Also another concern for foreign investors is the ‘Chinese ways’ of implementation and enforcement of laws and regulations which tend to be ambiguous and lax.

A major geopolitical challenge concerning the FTA would come from the United States and India, especially with India also having a strong alliance with Bangladesh. Chances are that India may take the Chinese assertion in its backyard as a means of increasing influence in India’s sphere, while the United States may consider an FTA as a geostrategic obstacle in containing China at the Bay of Bengal and the Indian Ocean region. However, if Bangladesh wants to achieve a fairly unrestricted access to Chinese markets it needs to keep pushing further on the negotiation table, while asserting to their other major allies, India and the United States that the actions are for their own best interests mainly in terms of economic development.

Will the US-China trade war have an impact on Bangladesh?

The recent trade war instigated by Donald Trump with his protectionist approach, with Chinese retaliations following by, has had impacts in the Bangladeshi economy. There has been a rise in steel prices (mainly rods) in the domestic market threatening both the major public infrastructure projects and the real estate market due to the US imposing tariff on US$ 34 billion worth of exports from China, while the latter imposed tariff on American cotton, and while China plan on importing cotton from India, the prices had already increased by 10-12 percent. It must be noted that more than half of Bangladesh’s cotton imports are from India  [13]. Soaring cotton prices would significantly hurt Bangladesh’s economy as they would affect the readymade garment sector.

Despite having strong economic ties there have been disagreements; a significant one is Bangladesh’s refusal of agreeing to China’s terms and conditions for the construction of the Sonadia deep-sea port in 2014.

Defence and Security Cooperation

Defence cooperation has been one of the major strengths in the bilateral relations between the two countries. China happens to be the only country that Bangladesh has signed a defence agreement with, which was done in 2002. Since then China had been the largest supplier of weapons and military equipment to Bangladesh, with latter being the 2nd largest recipient of Chinese arms in the world between 2011 and 2015[14]. Between 2013 and 2017 China has provided Bangladesh with 71 percent of all their arms purchases[15]. Bangladesh also recently purchased their first submarines to add to their naval fleet causing concerns in India. The Bangladeshi armed forces have acquired large numbers of tanks, large-calibre artillery, armoured personnel carriers, small arms and light weapons (SALW) as Chinese arms are the Bangladeshi Army’s weapon of choice while the Navy use Chinese frigates with missiles, missile boats, torpedo boats among others. China have also been supplying fighter jets and training aircraft to the Bangladeshi Air Force since 1977[16].

Very recently China and Bangladesh made crucial developments in security cooperation. The bilateral relations between the two countries have been elevated to ”Strategic Partnership of Cooperation”. The deal is aimed at intelligence sharing and counterterrorism activities, although other important matters such as cybercrime, militancy, transnational crimes, narcotics, fire service, and visa issues were also discussed during the signing of this major agreement[17].

Development cooperation/ Infrastructure development

Development cooperation is an integral part of the bilateral relations between China and Bangladesh. China has played a crucial role in the infrastructure development of Bangladesh over the years. It has assisted Bangladesh in building bridges, roads and railway tracks and power plants. The development assistance from China to Bangladesh and other developing countries mostly come as LOC’s. During a recent Bangladesh visit in 2016, President Xi Jingping promised US$24 billion in economic assistance to Bangladesh mainly as LOCs related to 24 projects[18].

China assisted Bangladesh in the construction of six bridges commonly known as the ““China- Bangladesh Friendship” bridges[19]. China also helped Bangladesh in constructing the Barapukuria coal-fired power plant located in Dinajpur in the North West of Bangladesh and was commissioned in 2006[20]. During Jingpin’s visit to Bangladesh in 2016, the countries signed agreements for two 1320 MW coal-fired power plants- one Payra, Patuakhali and the other in Banshkhali, Chittagong- making China the largest energy partner to Bangladesh overtaking India[21].

China has also provided economic assistance to Bangladesh in terms of free aid and token gifts. Two major agreements were signed in 2010 for establishing a fertiliser factory, and telecommunications network systems in Bangladesh- that were to be set up with a US$ 770 million LOC from China with a two percent interest rate payable within 20 years[22]. There had been discussions for several years on potential road and railway connections linking Chittagong with Kunming that would boost the economies of both the countries however that has not materialised as of yet[23]. Currently China is developing a 750-acre industrial park in Chittagong which will take five years to become fully operational and it will largely be used by Chinese manufacturing firms[24].

Conclusion

The good relations shared between China and Bangladesh have always been of mutual interests and both countries benefit from that. Although the growing relations between China and Bangladesh raise geopolitical tensions in the South Asia region and the Bay of Bengal, there should not be much doubt that China’s primary interest lies in the booming economy of Bangladesh, which has been ever so dependent on their bilateral trade relations. Bangladesh Prime Minister Sheikh Hasina has recently said that there is nothing to be concerned about for India while not explicitly mentioning China or any other country, and that Bangladesh need funds for the sole purpose of development and that she would welcome any country that is willing to invest in the country; she also urged India to maintain cordial relationship with all its neighbours[25]. Keeping close ties with Bangladesh will no doubt be hugely beneficial for China as the demand for oil and gas have risen largely owing to its growing industries, and having a strong geopolitical presence in the Bay of Bengal and the littoral countries could give them an advantage in terms of accessibility to various ports. On the other hand Bangladesh can only benefit from the cooperation with a major economic power as it has done so in terms of their diplomatic, economic and security affairs and would be keenly anticipating further developments in their bilateral cooperation.

[1] http://countrystudies.us/bangladesh/108.htm

[2] https://www.researchgate.net/publication/320546820_SINO-BANGLADESH_RELATIONS_AN_APPRAISAL

[3] http://countrystudies.us/bangladesh/108.htm

[4] http://siteresources.worldbank.org/EXTPREMNET/Resources/489960-1338997241035/Growth_Commission_Working_Paper_22_Economic_Reforms_Growth_Governance_Political_Economy_Aspects_Bangladesh_Development_Surprise.pdf

[5] https://www.orfonline.org/expert-speak/41935-decoding-china-bangladesh-relationship/

[6] Xinhua, 16 June 2010.

[7] “China pledges free market access”, The Daily Star, 19 March 2010.

[8] https://wits.worldbank.org/CountrySnapshot/en/BGD

[9] https://www.thedailystar.net/op-ed/politics/expanding-the-bangladesh-china-trade-frontier-1296583

[10] https://www.orfonline.org/expert-speak/41935-decoding-china-bangladesh-relationship/

[11] https://www.thedailystar.net/op-ed/politics/expanding-the-bangladesh-china-trade-frontier-1296583

[12] https://www.dhakatribune.com/opinion/op-ed/2018/05/18/free-trade-agreement-with-china-a-necessity

[13] https://www.thedailystar.net/opinion/more-just-facts/what-does-the-us-china-trade-war-mean-bangladesh-1604986

[14] https://thediplomat.com/2017/01/why-chinas-submarine-deal-with-bangladesh-matters/

[15] https://www.sipri.org/sites/default/files/2018-03/fssipri_at2017_0.pdf

[16] https://www.researchgate.net/publication/320546820_SINO-BANGLADESH_RELATIONS_AN_APPRAISAL

[17] https://www.dhakatribune.com/bangladesh/nation/2018/10/26/bangladesh-china-sign-3-agreements-on-security-cooperation

[18] https://www.orfonline.org/expert-speak/41935-decoding-china-bangladesh-relationship/

[19] https://www.researchgate.net/publication/320546820_SINO-BANGLADESH_RELATIONS_AN_APPRAISAL

[20] https://china.aiddata.org/projects/33957

[21] https://www.thethirdpole.net/en/2016/10/18/china-becomes-bangladeshs-largest-energy-partner/

[22] Rezaul Karim Byron, “$ 770 million Chinese loan tied with conditions”, The Daily Star, 28 September 2010.

[23] https://www.thedailystar.net/news-detail-259521

[24] https://www.reuters.com/article/us-bagnladesh-china/china-to-develop-bangladesh-industrial-zone-as-part-of-south-asia-push-idUSKCN1HB1M2

[25] https://economictimes.indiatimes.com/news/politics-and-nation/india-need-not-worry-about-bangladesh-china-ties-sheikh-hasina/articleshow/63037906.cms

What is the role of Italy in Europe?

Italy is facing a delicate political and economic situation. Once a centre of the Western Civilization, it gradually lost its centrality throughout the centuries. More recently, it plunged in a severe recession following the global financial crisis, and it has shown signs of recovery only in the past few years. Yet, it remains the Eurozone’s third largest economy and fourth in the EU as a whole, and it remains one of the most influential countries in the Union, of which it has been a supporter for decades. However, the current coalition government formed by the Five Star Movement and the League is casting doubts over Italy’s commitment to the EU, and notably over its budgetary rules. This in turn raises concerns over its own economic recovery and also on the tenure of the EU as a whole, which is caught between two diverging views of European integration.

Italy’s contribution to the Western Civilisation

The Italian Peninsula was first unifed under a single political entity by the Romans, whose legions ultimately conquered a vast Empire centred on Italia. But after a long decline, it ultimately fell during the 5th century AD. Yet, it left an immense cultural heritage, itself a product of the contacts with conquered peoples, first and foremost the Greeks; without which modern-day Western civilization would not be the same.

But after the demise of the Roman Empire, Italy has been divided for centuries. Yet, it continued having a huge influence over Europe in cultural, economic and also political terms. The Italian Maritime Republics played a pivotal role in trade, and following the Crusaded they established outposts in the Outremer that became one of the main vehicles of contact with the more advanced Islamic world. Italy was also an important manufacturing centre, and modern finance finds its roots in its economic activities, notably those of Venice and Florence. This, of course, had a political spillover. The Fourth Crusade, which ended with the occupation of Constantinople for nearly sixty years, was largely driven by Venice’s economic interests. A family of businessmen, the Medici, managed to transform their wealth in political influence and took power in Florence. Italy’s northern cities played a central role in the long struggle between the Papacy and the Holy Roman Empire, and their quest for autonomy kept the latter busy for decades. As a result of this economic prosperity, culture flourished: be it in literature, art, philosophy or other fields. In Europe, only the cities in the Flanders and those of the Hanseatic League could rival the Italians. As for the South, it was the setting of intense cultural interchanges, especially with the Byzantines and the Arabs; which made of Sicily a major cultural centre that, along with Spain, allowed the reintroduction in Europe of many Classical works that had been forgotten. All this gave a fundamental contribution to the period of cultural and economic revival known as the Renaissance; which left an immense heritage to today’s Europe.

Yet, Italy was politically divided. Various city-states rose and fall, but none of them could become powerful enough to unify all the land, as others always formed a coalition to block its expansion; often with the aid of foreign powers that frequently invaded the Peninsula. Starting from the XVII century, its economic and cultural prominence also started declining in favour of the rising nation-states like France, Spain and England.

Reunification & World Wars

After centuries of division, Italy was finally unified in the 19th century following a long process known as Risorgimento. Under the able statesmanship of Cavour, the Kingdom of Sardinia (whose centre was actually in Piedmont) managed to unify most of the Peninsula; thus proclaiming the Kingdom of Italy in 1861. The new state soon started a modernization process that marked its rise among Europe’s main powers; even though it never got close to France, Britain, Germany or Russia. Its industry developed, and with it the military. With time, it also managed to gain some colonies in Africa.

Italy fought alongside the Allies in WWI, and was among the victorious powers. But right after the conflict, Italy found itself in a troubled economic situation due to the huge costs of the war. In the early 20s, the country was in social turmoil. The socialists and the recently-created Communist Party were gaining influence; resulting in mass demonstrations during the “Red Biennium” of 1919-1920. Fearing a revolution, the government attempted to exploit another movement to counter the left’s rise: the Fascists led by Benito Mussolini. However, the situation soon went out of control. In 1922, the Fascists marched in arms on Rome; and with a decision that would later cause much debate, the King appointed Mussolini as head of the government to avoid a civil war. Soon, Mussolini dismantled the democratic order and established a dictatorship. Its legacy is highly controversial, notably as it ended up allying with Nazi Germany and collaborating with it during the Holocaust; but in terms of power politics Mussolini managed to extend Italy’s territory, to strengthen its armed forces and to make of Italy one of the main players in the international politics of the time. Yet, as before, the country remained globally weaker when compared to other powers.

Yet, the overall balance of the fascist regime is definitely negative. In 1940 it brought Italy in a conflict it was unprepared for and which ended up in a catastrophic defeat. Additionally, since September 1943 Italy was split in two: the south, liberated by the Allies, joined them in the war against Germany; while the north and centre of the country became a puppet state controlled by the Nazis. This resulted in a civil war; not only between the two states, but also between the partisans on one side and Fascist supporters plus the German troops on the other. This conflict left a deep mark on post-war Italy and on its national identity.

Italy after WWII 

When WWII ended, Italy was in ruins. After a complex political process, it became a Republic in 1946 and adopted a new Constitution two years later. Like Germany and Japan, this also included provisions meant to avoid that the country may undertake once again an expansionist policy; but it was still authorized to have its own armed forces for strictly defensive purposes. The Christian Democracy became the party around which Italian governments would be formed for the decades to come. In foreign policy, Italy joined NATO in 1949 and the European integration process in 1951. But in spite of its alignment with Western powers, the Communist Party was very strong, and it remained the main opposition force until the 90s. In economic terms, Italy soon experienced an extraordinary GDP growth: during the 50s, its size grew of almost 6% per year on average, and this figure was constantly higher in the five years between 1958 and 1963. This expansion was equal or superior to that of most European countries, and it completely transformed Italy by making of it one of the continent’s main economies. The factors behind the “economic miracle” are multiple; and include the large and cheap labour force, foreign aid received via the Marshall Plan and the advantages of economic integration with fellow Western European countries.

Yet, with time this growth slowed down, and Italy was surpassed by other economies. Again, there are multiple reasons. The oil shocks in the 70s hit the country, as it was (and remains) dependent on energy imports. But Italy also lost its competitive advantage as salaries and costs grew. To counter this, the governments used to devaluate the lira to make exports cheaper; but this was just a short-term and ineffective solution, because it soon caused inflation which in turn had detrimental effects on competitiveness and on foreign debt. In the end, also in the optic of adopting the Euro, starting from 1987 Italy decided to respect the communitarian monetary rules and stabilize the Lira, thus ending decades of devaluation-inflation cycles to appreciate the currency, reduce inflation and converge with other countries. But a series of factors caused a crisis of the Lira in 1992, which resulted in a severe devaluation. Still, after implementing corrective measures, the path towards adopting the Euro continued. Italy tried to align its macro-economic parameters with those of fellow countries and to respect the rules on debt and public deficit. So, in spite of the scepticism of other states (notably Germany) and of not respecting completely the convergence criteria, Italy was allowed to adopt the Euro in 2002.

In the meanwhile, significant changes also occurred in international and domestic politics. Right after the dissolution of the USSR and the Warsaw Pact, the Italian Communist Party was dismantled. But the Christian Democracy was also fundamentally shaken by a series of investigation on corruption, and it disappeared as well. The political order that had lasted since the late 40s was over, and even though the Constitution was not modified, this marked the passage to the “Second Republic”. In the new context, media magnate Silvio Berlusconi rapidly became a prominent politician by exploiting his wealth and the very media he owned. Another emerging political force was the North League: evoking the struggle of the northern cities against the Empire during the Middle Ages, it advocated for secession of the rich regions of the north or at least for more autonomy. Yet, Italy continued to experience political fragmentation and frequent changes of government.

In 2011, the country was shaken by the debt crisis that had begun in Greece, itself a consequence of the US financial crisis of 2008. The government in charge resigned and was substituted by a “Government of Experts” chaired by economist Mario Monti, who soon adopted austerity measures to restore financial stability. Still, the economic recovery was sluggish. This, combined with the immigration crisis, finally led to the victory of two populist and Eurosceptic parties in the 2018 elections, namely the Five Star Movement and the League (which had unofficially dropped the label “North” in an attempt to become a nation-wide party). After a long deadlock, they formed a coalition government whose orientations have created concerns in Brussels, especially over economic policy.

Italy and the EU

The Italian government has recently presented a budgetary manoeuver that is considered too risky by the EU, and this has led to a vivid political skirmish between the two sides.

The Italian executive wants to implement expansionary policies to boost domestic consumption and consequently economic growth. These include tax cuts and a much-debated basic income for the lower classes. But this would bring the public deficit to 2.4% of the GDP; which, even though it does not exceed the legal gap of 3%, is considered too high by the EU. As a matter of fact, the Commission fears that the stimulus will not be sufficient to foster growth and that the only result would be to put further strain on Italy’s public debt, which is already at almost 132% of GDP against a limit of 60% demanded by EU rules; thus damaging its financial credibility and nullifying the progress it has struggled to make in a decade of austerity. But the Italian government has rejected the requests to modify the budgetary manoeuver, on the basis that it is up to Italians to decide and that they are not compelled to respect the demands of EU institutions, often portrayed as a diktat in the executive’s discourse. Italy has also found some international support, notably from US President Donald Trump, who in August had offered to buy Italian bonds. While it is legally possible, considering that Italy is now challenging the EU, the Union’s institutions may perceive this as an unnecessary intromission.

Assessing what will happen to Italy is hard, but the government’s economic policy does present some risks that may harm the country’s growth, which may result in new EU-backed austerity measures. But the greater danger is political: if the feud continues escalating, unpredictability will damage both parties and in the worse scenario may even lead to Italy’s exit from the EU, which would be another severe blow to the European integration project in a moment where Brexit is also unfolding along with vivid discussions between the Visegrad countries and the EU institutions. As we examined in another video, this divergence over the nature and the powers of the EU is the kind of “civil war” that may ultimately threaten its tenure, with unpredictable economic and political consequences.

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