By : Simar Kaur, Research Analyst, GSDN

Introduction 

As the second-largest economy and leading industrial nation in the world, the issue of energy security is not only of economic importance but also one of the pillars of sovereignty for China. As a result of the tremendous energy needs required to power its industry, data centres, electric car fleet, and cities, China has become the biggest consumer of imported crude oil and liquefied natural gas (LNG), getting about 70 per cent of its oil supplies and 40 per cent of its gas supplies from foreign sources. The tremendous dependence on foreign energy supplies, especially from such unstable regions as the Middle East, has long been regarded as one of the key weaknesses of China by military strategists in Beijing and Washington. However, a deeper analysis of the Chinese energy situation in June 2026 shows a completely different picture. Using decades of experience, China has managed to transform this weakness into a kind of calculated vulnerability. 

The Nature and Scale of Dependency 

Understanding the energy problem of China requires that one first appreciate the scale of the problem. Although China is the top producer of coal in the world and an important producer of oil, with a production capacity of about 200 million tonnes per year, China consumes more than what it produces. The fossil fuel dilemma that faces China is quite pronounced in that about 75 per cent of China’s total energy consumption comes from fossil fuels, while coal accounts for over 55 per cent of that total. The major weakness comes in the form of oil. China’s crude oil imports are largely dependent on the single maritime strait that serves as the Strait of Hormuz. By 2025, about half of China’s crude oil import sources will be from the Middle East. The single point of failure represented by the strait through which an estimated 80 per cent of Asia’s crude oil and LNG flows has been a source of Chinese anxiety for decades now. The war in the region, resulting in a closure of the strait at the start of 2026, seems to have justified these anxieties, as evidenced by the occurrence of what the International Energy Agency described as “the most serious global interruption in energy supplies” and a spike in international oil prices to over US$110 per barrel. This dependency provides a direct link through which geopolitical risks can affect the domestic economy. High oil prices are included in producer and consumer prices, functioning as a tax upon the industrial system. But in contrast to Japan and South Korea, which are much more vulnerable to Strait of Hormuz problems, China has worked for many years to avoid becoming a hostage to its dependency. 

The Strategy of Supply Source Diversification  

A major strategy that has been put in place in an attempt to defend itself from any external threat is diversification of import sources. The rationale behind Beijing’s strategy has been that it does not want its “energy bowl” to be kept in one basket. It has been trying to change the geography of its energy import. Crude oil imports have shifted from the Middle East in a very clear example. The Middle East has seen its proportion of total oil imports decline from about 70% in 2016 to about 55% by 2025. Russia is now the biggest supplier of crude oil to China, as the proportion of Russian oil to China’s total oil imports has risen to nearly 20% in the first five months of 2026. This is due to increasing trade between the two nations despite Western sanctions. In addition to Russia, China has developed oil supply links to other regions, including Central Asia (through overland pipelines), Africa (mainly Angola) and South America (Brazil). By 2025, China had developed oil import connections to about 50 countries. The same trends can be observed in the case of coal. Traditionally, China has been heavily dependent on Indonesia; coal imports from the archipelago accounted for almost 43 per cent of the total imports in 2025 . But when Indonesia introduced long-term cuts in their export quotas in 2026 in order to meet its own domestic needs for nickel smelting, China managed to cope with the situation quite well. In the absence of the supply problem, it found new resources for importing from other nations, including Russia (an increase of 33 per cent), Mongolia (an increase of 42 per cent), and Australia. 

The Logistics of Resilience: Pipelines and Stockpiles 

In addition to importing from other countries, China has also made major investments in infrastructure that would guarantee the security of its supply chains. Route diversification is as crucial as source diversification. The construction of overland pipelines provides a clear alternative to the risky sea routes of the Indian Ocean and Strait of Hormuz. The crude oil pipeline network between China and Russia (Eastern and Western routes) currently has an annual capacity greater than 100 million tons of crude oil passing through an infrastructure that is totally safe from any disruptions by sea attacks. This is enhanced by a pipeline network of over 200,000 km for oil and gas in the whole of China. Another vital element of defence is the formation of a huge strategic petroleum reserve. Although China is not a member of the International Energy Agency (IEA) and does not make public figures about its reserves, experts estimate that both strategic and commercial reserves in the country are within the range of 12 billion to 14 billion barrels. This is an enormous amount of petroleum reserves, and according to some calculations, they could meet China’s consumption for more than 110 days without any imports at all. Such reserves have been accumulated gradually through years of buying inexpensive crude in times of economic depression. In response to the 2026 Hormuz crisis, the Chinese government exercised self-control in its resource releases, indicating that the problem was serious but not critical.  

Domestic Structural Transformation: The “Energy Powerhouse” Goal  

The fundamental change in China’s energy strategy is not how it handles its imports; rather, it is decreasing its economic dependence on them. The objective of China being an “energy powerhouse” is now officially incorporated in China’s 15th Five-Year Plan (2026-2030). The idea of an “energy powerhouse” implies much more than abundant energy supplies. It entails system resilience, technological independence, and green energy dominance. The key component of this new approach is the rapid expansion of non-fossil energy capacity. China is already the clear global leader in renewable energy production, as its renewable energy capacity totals 2.4 billion kilowatts by March 2026, representing more than 60 per cent of its total installed capacity. Its renewable energy production has totalled 37 per cent of the total power production in the first quarter of 2026. The goal of the government is to raise the proportion of non-fossil fuels in total energy consumption to 25 per cent by 2030. This is not only a policy on the environment but a matter of national security as well, to “secure the energy bowl in your hands”. Electrification in transport is probably the most striking part of this structural change. According to recent reports, about 45 per cent of new vehicles registered in China in 2025 were New Energy Vehicles (NEVs). These figures translate into a noticeable decline in oil consumption. Thus, electric trucks operating in China have displaced around 1 million barrels per day of oil demand in 2025, and the amount is expected to rise to 2.7 million barrels per day in 2030. Such an effort helped to reduce the risk from oil price increases. Moreover, China is using its industrial capacity to build buffers for itself in terms of technology. The establishment of efficient coal-to-chemicals industries allowed for creating domestic substitutes for imported petrochemical feedstocks in the case of a lack of naphtha and LPG. The use of coal is quite contradictory in terms of greenhouse gases, but it helps as an additional source in case of supply disruptions.  

Systemic Integration: Moving from Capacity to Capability  

The most crucial turning point in the process of the transformation of China’s energy mix involves a change from an emphasis on increasing the capacity of energy production to the process of incorporating the capacity of energy production into an intelligent “new energy system”. The development of renewable energy sources, including solar and wind energy, has created new problems connected with intermittency and grid congestion. This problem is resolved through the 15th Five-Year Plan, which puts special attention to energy storage, smart grids, and UHV transmission lines. As of April 2026, it was clear how the structural dilemma facing China was evident through the data presented. Despite record-breaking renewable energy installations, solar and wind power production was constrained by unfavourable weather conditions as well as grid management challenges. As such, there was an upturn in the production of power using coal, marking the fourth consecutive month. This shows the strategic function played by coal in China’s energy policy. Although the ultimate vision is to make coal a supplementary source of energy to ensure grid reliability, the current role of coal as a steady domestic source of base-load power creates a strategic buffer to the uncertainties that would arise from oil and gas imports. Nonetheless, no timeframe has been indicated for the changeover from coal, and the expectation is that the consumption will “peak.”  

Geopolitical Implications and Global Power 

It means that China’s increased energy resilience poses important consequences for its foreign policy. Western expectations that the government would be forced to act as a mediator and security provider in the Middle East just because of its energy dependence on this region turned out to be overly simple. Thanks to diversified sources, reserves, and the increase in domestic capacity, Beijing has significantly decreased the ability of the Middle East to impose its demands on China. On the contrary, China is acting in a rather flexible way now. If Beijing’s interests coincide with those of other states, for example, preventing the destruction of international energy flows, then it will cooperate with them. However, if it comes to Western coercion that may endanger China’s ability to get cheap oil from sanctions-hit countries like Iran, then it will resist. In addition, China has plans to leverage its energy revolution to increase its soft power. Being the biggest producer of solar panels, batteries, and other clean energy equipment, China commands over 80% of the world’s solar value chain. With the conflict in the Middle East, there now exists a chance for China to offer its clean energy equipment to countries of the Global South in order to use them for energy security and cut down on dependency on oil imports. In this way, China gets to export its technology, set international standards, and create infrastructure dependence – essentially making it into a “powerhouse of energy”.  

Conclusion 

The evaluation of China’s energy dependency is an example of a state caught up in a deep strategic shift. Indeed, “vulnerability” caused by being the greatest energy importer in the world is being carefully disassembled via a multi-layered strategy, which has turned China into an extremely resilient state amid the energy shocks faced at the global level. It cannot overcome its dependency on energy imports; however, China has managed to make peace with the risk, thus turning what once was the vulnerability into an effectively managed issue. The 2026 Strait of Hormuz incident serves as proof of the effectiveness of China’s strategy and shows that the diversification of supply, stockpiling, and restructuring of its energy consumption have formed a resilient system capable of absorbing significant shocks. China’s energy path has become aimed at achieving its “energy powerhouse” status through electrification of its economy and the possession of key energy technologies rather than reducing its size. As for global rivals of China, its energy policy is becoming a strength instead of a liability. 

By : Andey Vivaan, Research Analyst, GSDN

Introduction 

When India, the United States, the European Union and key Gulf countries announced the India–Middle East–Europe Economic Corridor (IMEC) during the G20 Summit in New Delhi on September 09, 2023, it immediately attracted global attention. Many observers viewed it as more than another infrastructure project; it represented an attempt to reshape trade routes linking Asia, the Middle East and Europe. Bringing together India, the United States, the European Union, Saudi Arabia, the United Arab Emirates, France, Germany and Italy the project seeks to establish a multimodal corridor connecting South Asia, West Asia and Europe through ports, railways, energy infrastructure and digital connectivity. At the time of its launch, many analysts argued that IMEC had the potential to reshape global trade and reduce dependence on traditional maritime routes. Whether it can achieve these ambitions, however, remains uncertain.  

The timing of the initiative was significant. The COVID-19 pandemic had exposed the fragility of global supply chains, while disruptions such as the March 2021 blockage of the Suez Canal and later security challenges in the Red Sea demonstrated how vulnerable international commerce had become. Governments and businesses increasingly recognized the need for diversified trade corridors capable of reducing logistical risks and ensuring uninterrupted movement of goods. Against this backdrop, IMEC emerged not merely as another infrastructure project but as a strategic effort to build resilient supply chains linking three economically dynamic regions. 

From India’s perspective, IMEC represents an opportunity to strengthen its position within global value chains while expanding connectivity with Europe through the Gulf. For the Gulf countries, particularly Saudi Arabia and the United Arab Emirates, the corridor complements their broader economic diversification strategies aimed at reducing dependence on hydrocarbons and transforming themselves into global logistics and technology hubs. European countries view IMEC as a means of strengthening supply chain resilience while deepening economic engagement with both India and the Gulf. 

Nearly three years later, however, important questions remain regarding its implementation. Regional conflicts, political uncertainty in West Asia, financing challenges, infrastructure gaps, and shifting geopolitical priorities have slowed the project’s momentum. The conflict in Gaza, instability in the Red Sea, and wider geopolitical tensions have complicated the environment in which the corridor must operate. These developments have prompted policymakers and analysts to ask an important question: Will IMEC ever fructify, or will it remain an ambitious geopolitical vision that struggles to become reality? 

This article examines the origins of IMEC, its strategic and economic importance, the opportunities it presents, the challenges it faces, and whether it possesses the political and economic foundations necessary to become one of the defining connectivity projects of the twenty-first century. 

Understanding IMEC 

IMEC aims to connect India with Europe through the Middle East using a combination of sea routes, railways and modern logistics infrastructure. Officially announced during the G20 Summit on September 09, 2023, the project aims to connect India with Europe through the Middle East using a combination of sea and land routes. 

The corridor consists of two interconnected segments. The Eastern Corridor Links Indian ports with the United Arab Emirates through maritime transport across the Arabian Sea. The Northern Corridor extends from the Gulf through Saudi Arabia and Jordan to Israel’s Mediterranean port of Haifa, from where goods would continue to European destinations. 

Unlike traditional shipping routes that rely almost entirely on maritime transportation, IMEC combines ports, railways and logistics hubs into a multimodal network. This design is intended to reduce transit times, improve efficiency, and create more resilient supply chains capable of responding to disruptions. 

More importantly, IMEC is not limited to transportation alone. It also includes several complementary components. These include electricity transmission networks, green hydrogen pipelines, digital connectivity through submarine communication cables, and modern logistics infrastructure. Such integration reflects a broader vision that extends beyond moving cargo and seeks to create an interconnected economic ecosystem across three continents. 

The participating countries signed a Memorandum of Understanding (MoU) to promote cooperation in planning, financing, and implementing the corridor. Although construction responsibilities remain distributed among individual countries, its success will depend on how effectively governments, private investors, and international financial institutions work together. 

Why IMEC Matters 

At first glance, IMEC may appear to be another transport corridor, but its significance goes much further than reducing shipping time. It represents a strategic response to changing patterns in global trade, growing geopolitical uncertainty, and increasing concerns regarding supply chain security. 

One of the strongest arguments in favor of IMEC is the growing need to diversify global trade routes. Recent years have repeatedly demonstrated the vulnerability of existing maritime corridors. The blockage of the Suez Canal in March 2021 disrupted approximately 12 percent of global trade, while attacks on commercial shipping in the Red Sea during 2023 and 2024 forced vessels to take much longer routes around the Cape of Good Hope. These disruptions increased transportation costs, delayed deliveries, and highlighted the risks of relying excessively on a limited number of maritime chokepoints. 

For India, the corridor offers an opportunity to strengthen connectivity with Europe, reduce logistical dependence on vulnerable maritime routes and support its long-term manufacturing ambitions.  

For Europe, the corridor supports efforts to diversify supply chains at a time when geopolitical tensions increasingly influence international commerce. Strengthening economic links with India and the Gulf also aligns with Europe’s broader objective of reducing overdependence on single production centers. 

The Gulf countries also stand to benefit significantly. Saudi Arabia and the United Arab Emirates have invested heavily in transforming themselves into global logistics, manufacturing and technology centers. IMEC complements national programmes such as Saudi Vision 2030 and the United Arab Emirates’ Operation 300bn, both of which seek to diversify economic activity beyond oil exports. 

Rather than serving merely as transit countries, Gulf states aim to create industrial ecosystems around logistics hubs, manufacturing clusters, renewable energy projects and digital infrastructure. IMEC therefore supports their transition from hydrocarbon-dependent economies towards diversified economic models. 

IMEC and China’s Belt and Road Initiative 

Since its announcement, IMEC has frequently been compared with China’s Belt and Road Initiative (BRI). Although many observers initially described IMEC as a direct response to the BRI, such comparisons oversimplify the nature of both initiatives. 

China launched the Belt and Road Initiative in 2013 with the objective of improving connectivity across Asia, Europe and Africa through large-scale infrastructure investment. Over the past decade, China has invested more than US$1.3 trillion across numerous transport, energy and infrastructure projects. 

IMEC differs significantly in both structure and philosophy. While the Belt and Road Initiative has primarily relied upon bilateral financing led by Chinese state institutions, IMEC is designed as a multilateral partnership involving democratic economies, regional powers and international institutions. 

The emphasis also differs. Rather than focusing solely on infrastructure construction, IMEC seeks to integrate sustainable development, transparent financing, digital connectivity, and clean energy cooperation into its overall framework. Supporters argue that these principles may make the corridor more financially sustainable and politically acceptable over the long term. 

At the same time, many participating countries reject the idea that IMEC should be viewed purely as an anti-China initiative. Instead, they present it as an additional connectivity option that complements rather than replaces existing trade routes. 

Yet, geopolitical competition cannot be ignored. As connectivity increasingly becomes a tool of international influence, both IMEC and the Belt and Road Initiative reflect broader efforts by major powers to shape the future architecture of global commerce. 

Economic Opportunities Offered by IMEC 

If implemented as planned, IMEC has the potential to reshape trade flows across Asia, the Middle East, and Europe. According to several feasibility assessments, the corridor could reduce cargo transit time between India and Europe by as much as 40 percent, while significantly lowering logistics costs. Faster transportation would improve supply chain efficiency, reduce inventory costs, and enhance the competitiveness of exporters across participating countries. 

For India, the corridor supports the government’s ambition of becoming a major global manufacturing hub. As global companies diversify production away from concentrated supply chains, efficient connectivity with Europe and West Asia could make Indian manufacturing more attractive for foreign investment. The corridor also complements initiatives such as Make in India and the National Logistics Policy, both of which seek to improve India’s export competitiveness. 

The Gulf countries also expect substantial economic gains. Saudi Arabia and the United Arab Emirates no longer view themselves solely as oil exporters. Through programmes such as Saudi Vision 2030 and the United Arab Emirates’ Operation 300bn, both countries aim to develop advanced manufacturing, logistics, renewable energy and digital industries. IMEC supports these ambitions by positioning the Gulf as a global logistics hub connecting three continents. 

Europe could also benefit from greater supply chain resilience. The European Union has increasingly recognised the importance of reducing excessive dependence on limited transport corridors and single production centres. By improving connectivity with India, Europe gains access to one of the world’s fastest-growing major economies while strengthening trade links with the Gulf region. 

Beyond trade, IMEC also includes digital infrastructure, electricity transmission, and green hydrogen pipelines. These additional components transform the corridor from a transport project into a broader economic partnership capable of supporting future technological and energy cooperation. 

Challenges That Could Delay IMEC 

Despite its enormous potential, IMEC faces multiple obstacles that raise questions regarding its long-term feasibility. 

Perhaps the greatest challenge facing IMEC today is the political instability across West Asia. Much of the corridor passes through one of the world’s most politically sensitive regions. The conflict in Gaza significantly slowed discussions surrounding IMEC, while continuing tensions involving Israel have complicated planning for the Northern Corridor. 

Security concerns in the Red Sea have further highlighted the vulnerability of trade routes passing through West Asia. Attacks on commercial shipping increased transportation costs and demonstrated that geopolitical tensions can directly affect international commerce. 

Another major concern involves infrastructure gaps. Although several participating countries already possess advanced ports, some important railway links remain incomplete. The proposed overland network connecting the Gulf to the Mediterranean still requires substantial investment before cargo can move seamlessly across the corridor. 

Port capacity also presents challenges. While facilities such as Jebel Ali can handle extremely large cargo volumes, Mediterranean infrastructure particularly around Haifa requires further expansion if IMEC is to operate at scale. 

Political coordination represents another obstacle. Unlike purely national infrastructure projects, IMEC requires sustained cooperation among numerous governments with differing political priorities, economic interests,and security concerns. Any deterioration in bilateral relations could slow down implementation. 

Financing and Institutional Challenges 

Large-scale infrastructure projects require not only political commitment but also long-term financial support. Financing remains one of IMEC’s biggest challenges. 

Unlike China’s Belt and Road Initiative, which has largely relied upon financing from Chinese state-owned banks, IMEC seeks to attract investment from governments, sovereign wealth funds, multilateral institutions and private investors. While this diversified model may improve transparency and reduce debt concerns, it also makes decision-making more complex. 

Private investors are unlikely to commit billions of dollars unless the region remains politically stable. Ongoing conflicts in West Asia increase investment risks and may discourage private participation, particularly for projects located near politically sensitive areas. 

Several analysts have argued that IMEC’s success will depend upon innovative financing mechanisms combining public and private investment. Sovereign wealth funds such as Saudi Arabia’s Public Investment Fund (PIF), Mubadala Investment Company, and Abu Dhabi Developmental Holding Company (ADQ) could play an important role in supporting corridor development alongside international financial institutions. 

Strong governance mechanisms will also be essential. Standardized customs procedures, digital documentation systems, and regulatory coordination across participating countries will determine whether the corridor operates efficiently once completed. 

India’s Strategic Role 

India occupies a central position within IMEC. As the eastern gateway of the corridor, India’s ports, manufacturing sector and logistics infrastructure will determine much of the project’s commercial success. 

Since the corridor announcement, New Delhi has actively pursued diplomatic engagement with both Gulf and European partners. India signed an Intergovernmental Framework Agreement with the United Arab Emirates in February 2024, establishing mechanisms for customs cooperation, digital documentation and logistics coordination. 

India has also strengthened cooperation with European partners. Discussions with France, Italy, Greece and Cyprus have focused on improving maritime connectivity and integrating European ports into the future corridor. These diplomatic efforts demonstrate that IMEC is viewed not merely as an infrastructure initiative but as a long-term geopolitical partnership. 

Even so, India continues to emphasize that IMEC should not be interpreted as a confrontational project directed against any country. Instead, Indian policymakers present the corridor as an initiative designed to strengthen global connectivity while promoting resilient and diversified supply chains. 

For India, IMEC is not only an economic project but also an opportunity to strengthen its strategic influence across West Asia and Europe. This suggests that the corridor has become an important part of India’s broader foreign policy and regional engagement.  

Will IMEC Ever Fructify? 

Whether IMEC succeeds will ultimately depend on political commitment, financing and regional stability rather than announcements alone. The economic rationale behind IMEC remains compelling. Global supply chains require diversification; businesses seek more reliable logistics networks, and participating countries share strong commercial incentives. These structural factors continue to support the corridor despite recent setbacks. 

However, economic logic alone cannot guarantee success. Regional conflicts, changing political priorities and financing constraints have already demonstrated how vulnerable large connectivity projects can become. IMEC will require continuous diplomatic engagement, coordinated infrastructure development, and long-term financial commitment from all participating countries. 

One encouraging development is the growing leadership shown by the Gulf countries. Sustained political stability will matter just as much as infrastructure investment if the corridor is to move beyond planning  

Saudi Arabia and the United Arab Emirates have continued investing in logistics infrastructure, industrial development and digital connectivity even as broader geopolitical tensions persist. Their economic transformation strategies align naturally with IMEC’s objectives and could help sustain momentum during periods of political uncertainty. 

Rather than expecting immediate completion, IMEC is likely to develop gradually through phased implementation. Initial progress may occur along politically stable segments before more complex components become operational. Such an incremental approach may prove more realistic than attempting simultaneous implementation across the entire corridor. 

In many ways, IMEC’s future will depend upon whether participating countries continue viewing connectivity as a shared economic opportunity rather than a geopolitical competition. 

Conclusion 

The India–Middle East–Europe Economic Corridor (IMEC) has emerged as one of the most ambitious connectivity projects in recent years. By combining maritime transport, railways, digital infrastructure and energy networks, IMEC has the potential to reshape trade between Asia, the Middle East and Europe while improving supply chain resilience.  

Its importance extends beyond economics. IMEC reflects changing geopolitical realities in which connectivity has become an instrument of strategic influence, economic security, and international cooperation. For India, the corridor strengthens its position within global value chains. For the Gulf countries, it supports long-term economic diversification. For Europe, it provides greater resilience against future supply chain disruptions. 

Despite its potential, several challenges remain. Political instability, regional conflicts, infrastructure deficiencies, financing requirements, and regulatory coordination continue to slow implementation. The project’s success will ultimately depend upon sustained political commitment rather than initial enthusiasm. 

In my view, IMEC is unlikely to become fully operational in the immediate future but describing it as a failed initiative would also be premature. Large international infrastructure projects typically evolve over many years, adapting to changing political and economic circumstances. Although progress has been slower than many had expected, the diplomatic engagement and infrastructure planning seen so far indicate that participating countries still view IMEC as a long-term strategic project.  

In my opinion, IMEC’s future will depend less on ambitious announcements and more on whether participating countries can maintain political cooperation and deliver on their infrastructure commitments over the coming years.  

By: Khushbu Ahlawat, Consulting Editor, GSDN

Introduction

For much of the past three years, China’s approach to global artificial intelligence governance has unfolded through declarations, action plans and capacity-building pledges — a steady accumulation of soft-power gestures rather than hard institutional commitments. That changed in July 2026, when Beijing used the World AI Conference and the accompanying High-Level Meeting on Global AI Governance in Shanghai to unveil something considerably more durable: the World Artificial Intelligence Cooperation Organization (WAICO), a standing intergovernmental body headquartered in Shanghai, backed by a formal Council and Secretariat, and launched alongside a package of action plans, a Chair’s Statement, and a new initiative on AI-agent interoperability. The shift is significant not because any single document reshapes global AI governance overnight, but because it marks China’s transition from AI diplomacy — persuasion, outreach, goodwill — to AI institution-building, with all the durability and agenda-setting power that implies.

This article examines what China unveiled in Shanghai, how it fits into Beijing’s broader strategy of “selective shaping” in global technology governance, how it differs from Washington’s more security-driven approach, and what the resulting contest is likely to mean for the shape of the global AI order over the coming years.

Xi’s Vision and the Logic of Selective Shaping

President Xi Jinping’s opening address at the conference set out four organising priorities for China’s AI diplomacy: openness and cooperation, equitable access to AI technologies, keeping AI systems secure and under human control, and channelling global coordination through United Nations-centred processes rather than parallel, exclusive groupings. Xi paired this framing with pointed criticism of what he characterised as the “overstretching” of national-security justifications in technology policy — an implicit but unmistakable rebuke of Washington’s export-control regime — while also announcing concrete deliverables: 5,000 AI training opportunities for partner countries, a network of international AI application cooperation centres, and the rollout of China’s MAZU meteorological early-warning system across 30 countries.

These commitments build directly on foundations Beijing laid earlier in the decade — its 2023 Global AI Governance Initiative and its 2024 AI Capacity-Building Action Plan — but the Shanghai package goes further by tying that earlier rhetoric to infrastructure, skills training, data resources, security cooperation and practical deployment. The underlying strategy is best described as selective shaping: rather than attempting to rewrite the entirety of global AI governance, China is concentrating its diplomatic and technical resources on the specific domains where fragmented existing rules leave room for a new entrant to set the terms — technical standards, capacity-building programmes, and governance forums where no dominant framework has yet taken hold. Combined with the continued global diffusion of Chinese open-source AI models, this gives Beijing’s strategy a reach that extends well beyond the diplomatic set-pieces of any single summit.

From Rhetoric to Architecture

The documents released alongside Xi’s address — the Chair’s Statement, the Action Plan on AI Cooperation and Development, the Action Plan on International AI Ethics and Governance, and the Global Cooperation Initiative on Agent Mutual Trust, Interconnection and Interoperability — together sketch a policy architecture organised around four linked pillars: access, capacity, safety and interoperability. The underlying logic treats these pillars as mutually reinforcing rather than competing priorities. Wider diffusion of AI technology to developing countries, in this framing, is meant to be accompanied by the training and infrastructure needed to use it responsibly, while a parallel layer of standards, traceability mechanisms and human-oversight requirements is meant to provide the governance guardrails.

It is worth noting, however, that the package remains considerably stronger on stated principles than on operational detail. Funding commitments, implementation timelines, reporting mechanisms and clear lines of institutional responsibility are all largely unspecified. What the Shanghai outcomes provide is not a fully operational governance regime but a map of the terrain China intends to contest — precisely the domains where its existing technical capabilities, its development-partnership relationships, and its institutional design choices can reinforce one another most effectively. This is selective shaping translated into policy architecture: a deliberate concentration of effort in areas where Beijing already holds real advantages, rather than a diffuse attempt to compete across every front of AI governance simultaneously.

WAICO: A Permanent Vehicle for Influence

The most consequential single outcome of the Shanghai summit is WAICO itself. Where previous Chinese AI initiatives functioned largely as summit-cycle declarations, WAICO is structured as a permanent intergovernmental organisation, complete with a governing Council, a standing Secretariat, and a mandate covering capacity-building, the development of governance rules and technical standards, interoperability frameworks, support for open-source ecosystems, and coordination with United Nations processes — though its remit is explicitly confined to civilian applications of AI.

Structurally, WAICO has been designed to project multilateral legitimacy. Membership is formally open to all states, voting rights are equal across members, and decisions are meant to be reached by consensus wherever possible, falling back to a two-thirds majority only where consensus cannot be achieved. Representatives of 29 countries signed the organisation’s founding agreement in Shanghai, giving it an initial membership base broader than many comparable initiatives manage to secure at launch. Whether this formal openness translates into genuine multilateral governance, however, remains an open question. The organisation’s long-term significance will hinge on issues that founding agreements rarely settle in advance: whether member states beyond China are willing to fund substantive programming, whether they gain real influence over the institution’s agenda-setting, and whether the organisation comes to be seen internationally as a genuinely shared platform rather than a Chinese-led body wearing multilateral packaging.

Two Models of AI Diplomacy

China’s institutional turn stands in deliberate contrast to the approach Washington has taken. The United States’ strategy, most clearly articulated through its own AI Action Plan, combines heavy domestic investment in innovation and compute infrastructure with an international diffusion strategy built around exporting the American AI technology stack to trusted partners. That external offer is bundled together with a parallel architecture of restriction: controls on the access of strategic rivals to advanced hardware, tighter investment screening, supply-chain security partnerships, and initiatives such as Pax Silica, the State Department’s flagship programme on AI and supply-chain security. In effect, Washington’s model ties access to trust, security clearance and strategic alignment.

The restrictive dimension of this approach has been expanding steadily. Since 2022, the United States has progressively tightened controls on Chinese access to advanced semiconductors and the equipment used to manufacture them. That logic briefly extended to frontier AI models themselves in June 2026, when the Commerce Department restricted foreign-national access to Anthropic’s Fable 5 and Mythos 5 systems under export-control authority — a measure later lifted once additional safeguards were put in place, but one that illustrated, even in its brief duration, how access to the most capable AI systems may increasingly be gated by nationality, institutional trust, intended end use and formal security review rather than by price or technical readiness alone.

Beijing’s model is organised on different premises. Rather than structuring access through tiers of vetted trust, China presents broad participation, capacity-building support and formally open institutional membership as the foundational pillars of its governance offer. It would be a mistake, though, to read this contrast simply as an open China facing a closed United States — both powers are, at bottom, working to expand the international footprint of their own technology stacks. Washington pursues that goal through selective, trust-gated partnership; Beijing pursues it through wider formal access that is nonetheless designed to draw partner countries toward Chinese models, infrastructure, standards and institutions. China’s own criticism of security “overstretching” abroad, moreover, coexists comfortably with an extensive domestic apparatus of content controls, algorithmic regulation, security reviews and a deliberate national push toward technological self-reliance — meaning Chinese “openness” is best understood as openness to the outward diffusion of Chinese capability, not as unrestricted access to information or markets within China itself.

This distinction comes into sharpest focus when WAICO is set alongside Pax Silica. The two are not functional equivalents competing for the same role, but rather embodiments of two different organising principles for international technology cooperation: WAICO seeks legitimacy through broad formal membership, capacity-building outreach and multilateral process, while Pax Silica prioritises trusted-partner networks, supply-chain resilience and coordinated strategic alignment among a narrower set of allies. As of July 2026, participation in the two frameworks remains almost entirely distinct, with Kazakhstan the sole country to appear on both membership lists — a small but telling sign that the two ecosystems are not designed as mutually exclusive blocs, even as most states so far are gravitating toward one or the other rather than both.

The Narrowing Technology Gap

China’s institutional offer is also being reinforced by genuine technical progress, which lends its diplomatic push a credibility it might otherwise lack. The performance gap between the leading American and Chinese frontier AI models has narrowed considerably: as of March 2026, the top-performing US model held only a 2.7 percent lead over its closest Chinese counterpart on major benchmark measures. Recent releases such as Moonshot AI’s Kimi K3, together with China’s increasingly influential open-weight model ecosystem, give Beijing the ability to pair its diplomatic and institutional outreach with technology that is both capable and comparatively inexpensive to deploy. This does not erase the advantages the United States retains in advanced chip design, large-scale compute infrastructure and certain frontier capabilities — but it does mean China’s governance and capacity-building offer now comes attached to genuinely competitive technology, rather than functioning as a purely diplomatic overture.

Toward Overlapping Ecosystems, Not Rival Blocs

Looking ahead, the credibility of China’s institutional strategy will depend far less on the ambition of what was announced in Shanghai than on whether Beijing can convert its commitments — on capacity-building, standards development, infrastructure support and technology access — into programmes that partner countries find genuinely useful, affordably priced and responsive to their own development priorities, rather than instruments primarily designed to serve Chinese interests. The United States, for its part, faces a distinct challenge: widening the circle of countries with access to its most advanced AI capabilities while preserving partner confidence that such access will remain predictable, rather than subject to shifting export-control decisions and open-ended security screening each time strategic circumstances change.

The deeper contest between these two models, in other words, is not really about openness versus restriction — it is about the terms on which dependence is created. China’s approach may lower the practical barriers to adopting AI technology while gradually deepening reliance on Chinese platforms, technical standards and supply chains. The American approach may offer access to more advanced underlying capability, but on increasingly conditional terms tied to strategic alignment. Most governments are unlikely to resolve this tension by choosing one camp outright. Instead, they will need to weigh AI partnerships not only on cost and immediate technical performance, but on their longer-term consequences for technical standards, infrastructure dependence, data governance and national policy autonomy.

Conclusion

China’s launch of WAICO marks a genuine inflection point in the global contest over AI governance — not because it settles that contest, but because it gives Beijing, for the first time, a standing institutional platform rather than a rotating cycle of summit pledges through which to pursue it. Set against Washington’s trust-gated, security-conscious model of diffusion, the result is unlikely to produce two cleanly separated technological blocs. It is more likely to produce exactly what current participation patterns already suggest: a global AI order defined by overlapping ecosystems, differentiated levels of access, and selective alignment by countries seeking to capture the benefits of both systems while safeguarding their own technological and policy autonomy. How that balancing act plays out — and which institution proves more durable once the initial diplomatic momentum fades — will be one of the defining questions of technology geopolitics over the remainder of this decade.

By : Hridbina Chatterjee, Research Analyst, GSDN

For nearly eight decades, Japan’s geopolitical identity was anchored by a singular, legally binding philosophy: absolute pacifism. Enshrined in Article 9 of its 1947 constitution, the nation famously renounced war as a sovereign right and pledged never to maintain land, sea, or air forces for offensive purposes. For generations, the Japan Self-Defense Forces worked under strict constitutional constraints, maintaining a defense budget informally capped at one percent of gross domestic product and focusing strictly on the immediate protection of the home islands. This defensive posture, known as exclusively defense-oriented policy, relied heavily on the security umbrella provided by the United States of America under the bilateral security treaty. Under this arrangement, Japan acted as the shield while the United States provided the spear. This system provided unprecedented stability during the Cold War and the immediate post-Cold War eras, allowing Japan to focus its resources on national economic reconstruction and technological development. 

However, the security landscape of East Asia has fundamentally shifted over the past decade. Confronted by what Tokyo officially describes as the most severe and complex security environment since World War II, Japan has embarked on its most radical military transformation in the postwar era. This historic pivot is marked by a massive surge in national defense spending, the acquisition of long-range counterstrike capabilities, and a major reinterpretation of its traditional defensive doctrine. Japan is rapidly transforming from a highly restrained island nation into a proactive, heavily armed pillar of Indo-Pacific security. The shift is driven by a realistic assessment of regional threats, including the rapid military expansion of the People’s Republic of China, the unpredictable nuclear provocations from North Korea, and a newly hostile relationship with the Russian Federation following global geopolitical shifts. 

The Shifting Regional Matrix: The China Challenge 

Tokyo’s increased military buildup is largely due to the fast expansion and aggressive behavior of the People’s Republic of China. Japan had long viewed China primarily as an economic partner, developing extensive interdependencies through trade, investment, and manufacturing networks. However, the large investment by Beijing to modernize its military and its willingness to use its military for hard-power purposes have caused Japan to re-evaluate its entire approach toward China. Japan’s strategic documents now clearly identify the military activities of the People’s Republic of China as the most significant strategic threat to regional peace and stability. The rapid modernization of the People’s Liberation Army, including its naval expansion, advanced ballistic missile capabilities, and sophisticated cyber warfare divisions, has altered the balance of power in the Western Pacific. 

This issue is not likely to remain theoretical, because every day Japanese territory is under dispute with the People’s Republic of China in the waters and airspace around Japan. The two nations are involved in a continuous territorial dispute over the Senkaku Islands, which are referred to as the Diaoyu Islands by China, located in the East China Sea. Ships of the Chinese Coast Guard and Navy are continuously violating Japan’s territorial waters to assert China’s claims to the Senkaku Islands. These incursions have become highly systematized, with Chinese vessels staying for extended periods within the contiguous zone and territorial seas, actively challenging the administrative control that Japan has maintained for decades. In response, the Japan Coast Guard and the Maritime Self-Defense Force have been forced to deploy substantial assets continuously, straining operational readiness and creating dangerous friction points that could trigger an accidental military escalation. 

In addition to these localized confrontations, Japanese strategists are deeply concerned about the risk of conflict in relation to Taiwan. Taiwan lies not more than 100 kilometers away from Japan’s furthest inhabited island of Yonaguni and has a key geostrategic link to Japan’s existence. Japan understands that an armed conflict in Taiwan would inevitably involve the United States, a long-term ally of Japan, and an entity directly endangering Japan’s territory. The maritime supply lines passing through the Taiwan Strait and the Bashi Channel are the economic lifeblood of Japan, carrying most of its energy imports and trade goods. A blockade or invasion of Taiwan would effectively allow the military forces of the People’s Republic of China to project power directly into Japan’s southern flank, jeopardizing the security of the entire southwestern island chain. 

Chinese military operations, including carrier operations and large-scale missile firing exercises that landed within Japan’s Exclusive Economic Zone on August 4, 2022, have resulted in forming a common opinion among Japanese leaders that Taiwan’s defense is closely related to the defense of Japan. During those exercises, five ballistic missiles fired by the People’s Liberation Army landed inside Japan’s designated waters, demonstratingclearly that any cross-strait conflict would immediately spill over into Japanese sovereign territory. This realization has galvanized public opinion and unified political factions in Tokyo around the necessity of preparing the nation for a high-intensity regional conflict. 

The Proximate Threats: North Korea and Russia 

While China is a long-term structural problem, North Korea is a short-term and highly unpredictable military menace. Pyongyang has sped up the pace of ballistic missile tests and fired missiles that either fly directly over the Japanese archipelago or fall into the Sea of Japan. These are no longer just simple tests, as North Korea has developed advanced solid-fuel missiles, hypersonic glide vehicles, and underwater missiles made for circumventing regional defenses against missiles. The transition to solid-fuel technology means that missiles can be fueled in secret and launched with minimal warning, severely reducing the reaction time for defensive systems. 

Furthermore, North Korea’s advanced nuclear program made Japan acknowledge that it has an aggressive neighbor that can strike Japanese cities with nuclear weapons in a matter of minutes. The changes in the quality and quantity of Pyongyang’s strike capabilities have made Japan realize the limitations of its purely defensive missile interception systems. Seeing the threat of saturation attacks, where dozens of missiles are launched simultaneously to overwhelm defense networks, Japan recognized that it could not rely solely on anti-missile defense. The existing two-tier defense system, consisting of Aegis-equipped destroyers with Standard Missile-3 interceptors and land-based Patriot Advanced Capability-3 batteries, requires expansion to address these advanced threats. 

Among the factors contributing to this complex threat matrix is a newly unfriendly Russia. Up until recently, Japan maintained a prudent diplomatic engagement with Moscow, hoping to solve a historic territorial issue regarding the Northern Territories, known as the Kurile Islands in Russia. Russia’s invasion of Ukraine on February 24, 2022, however, ruined these diplomatic efforts. Japan coordinated its moves with the Group of Seven in this context, imposing strict sanctions against Russia. In response, Russia labeled Japan as an unfriendly state, suspended peace treaty negotiations, and increased the frequency of its military exercises together with China in the Sea of Japan and the Sea of Okhotsk. The strategic alignment between Moscow and Beijing has resulted in joint naval circumnavigations of the Japanese main islands and combined long-range bomber patrols, forcing Japan to defend multiple strategic vectors simultaneously. 

Redefining Strategy: Counterstrike and Constitutional Evolution 

To address these complex threats, Japan has started to loosen its old military inhibitions. This fundamental change began on December 16, 2022, when Japan amended its National Security Strategy, the National Defense Strategy, and the Defense Buildup Program. Under these revised frameworks, Japan set a transformative target to increase its national defense spending to two percent of its gross domestic product by the year 2027. This budget trajectory represents a massive financial shift, moving the defense allocation from approximately US$ 40 billion annually to over US$ 80 billion per year, making Japan’s defense budget the third largest in the world. The enormous influx of funds has crushed the long-lasting one percent barrier, demonstrating a clear departure from postwar fiscal policy. 

What distinguishes this military buildup is Japan’s acquisition of the so-called combat power of counterstrikes, also known as standoff defense capabilities. For the first time since World War II, Japan deliberately acquiresand develops weapons that can reach targets in deep enemy territory to deter incoming attacks. To quickly find a solution to this lack of combat power, Japan signed a major procurement contract with the United States on January 18, 2024, to purchase up to 400 Tomahawk land-attack cruise missiles with a value of approximately US$ 1.7 billion. These long-range cruise missiles will be deployed on Maritime Self-Defense Force Aegis destroyers, providing an immediate operational deterrent. 

Simultaneously, Japan is accelerating the development and deployment of its own domestic weapon systems. This includes the upgraded Type-12 surface-to-ship missile, which is being modified to extend its striking distance from 200 kilometers to over 1,000 kilometers, allowing it to be launched from land, naval vessels, and aircraft. Japanese authorities firmly assert that such long-range systems do not go against the constitution, describing them as vital elements of passive deterrence. The reasoning behind this assertion is simple, as by providing proof of its capacity to target enemy military infrastructure instead of waiting to intercept missiles, Japan effectively increases the cost of an assault and makes the enemy think twice before attacking. 

Innovation in the Face of Demographics: Drones and Artificial Intelligence 

In its quest to strengthen its military force, Japan is hindered by a significant problem: its population is aging fast and shrinking. The Japan Self-Defense Forces have continually fallen short of recruitment plans, unable to find enough enlistees due to intense competition in the domestic job market and a shrinking youth demographic. This demographic situation has led to a change in Japan’s military modernization, which relies more on technology as a substitute for human personnel. Automation, remote operations, and artificial intelligence have moved from experimental concepts to central pillars of procurement policy. 

Tokyo is acting by investing heavily in unmanned and autonomous systems across all operational domains. As part of its revised littoral defense strategy, Japan organizes the use of many unmanned aerial, surface, and underwater drones to perform continuous surveillance and maritime activities. These systems operate as force multipliers, monitoring the large and vulnerable southwestern island chain without sending thousands of personnel into dangerous operational areas. The incorporation of large, unmanned surface vessels and long-endurance aerial drones allows the military to maintain situational awareness at a fraction of human cost. 

Japan is making significant investments in its space intelligence capabilities as well as artificial intelligence technology at the same time. The Ministry of Defense is developing a satellite constellation network to achieve real-time situational awareness and effective targeting data for its new long-range standoff missiles. In addition, Japan has joined the Global Combat Air Programme in cooperation with Italy and the United Kingdom, formalized through an international treaty signed on December 14, 2023. This joint venture aims to develop a next-generation stealth fighter jet by the year 2035. The project provides the use of advanced aircraft alongside intelligent autonomously operated drones, integrating sophisticated software and artificial intelligence in the international defense network to maximize combat efficiency. 

Recalibrating the Alliance and Expanding Partnerships 

In the past, Japan and the United States had an imbalanced relation: the United States oversaw offensive actions and nuclear deterrence while Japan focused primarily on its defensive tasks. However, the transformation of Japan into a modern military actor has started changing this asymmetry. Now Japan is increasingly improving its intelligence capabilities, cyber defense infrastructure, and logistics operations to become an active participant in the provision of regional security. Washington actively encourages this evolution, believing that a stronger Japan will become a key player in maintaining stability in the Indo-Pacific region. The alliance undergoes important structural changes, including improvements in their mutual command and control systems to maintain seamless coordination during a multi-domain military conflict. 

Despite the overwhelming importance of the United States partnership, Japan is working on establishing new strategic alliances in view of potential political changes across the globe. Japan has created an intricate network of small-scale security cooperation across the Indo-Pacific region. It reached a Reciprocal Access Agreement with Australia, which entered into force on August 13, 2023, and signed a similar agreement with the United Kingdom on January 11, 2023. These legal frameworks allow Japan to engage in fluid, large-scale military training and joint operations with key security partners. 

Significant strides have also been made towards improving defense cooperation with South Korea, putting aside historical grievances to address immediate common challenges. This reconciliation saw the formation of a trilateral hub for defense with the United States to properly address threats posed by North Korea, including the real-time sharing of missile warning data established on December 19, 2023. Apart from that, Japan has actively been providing defense equipment, patrol vessels, and coastal radar systems to countries in Southeast Asia, particularly the Philippines and Vietnam, under its new Official Security Assistance program launched in April 2023 to bolster the maritime security capabilities of partner nations. 

Conclusion: A New Era of Proactive Deterrence 

The swift military rise of Japan symbolizes the beginning of the end of the postwar years in which the country refrained from engaging in military matters. It has become obvious to Japan that the international rule-based order cannot be secured only through economic diplomacy or verbal warnings. The presence of assertive neighbors, evolving global alliances, and the emergence of gray-zone tactics has left Japan no other option but to adapt its national strategy. This shift reflects a transition toward a realistic approach to statecraft, where military readiness is viewed as an essential prerequisite for sustainable peace. 

Despite these extensive changes, Japan has not lost its fundamental commitment to its image as a peace-loving nation or its rejection of aggressive militarism. Instead, the current transformation marks a thoughtful transition towards the doctrine of proactive involvement in the creation of peace employing robust deterrence. Japan does so by strengthening its southwestern islands, developing long-range strike capabilities, adopting autonomous technologies, and deepening the interconnectedness of its military systems with other allies in the region. By doing so, Japan aims to ensure its survival while contributing to a stable and balance-of-power framework in the Indo-Pacific. 

By: Khushbu Ahlawat, Consulting Editor, GSDN

Introduction

Electric vehicles have quietly become one of the most consequential instruments of Chinese influence in South Asia. What began as a commercial export opportunity — cheap, well-engineered vehicles for price-sensitive markets — has evolved into something far more structural: a bundled export of vehicles, batteries, charging networks and digital ecosystems that is steadily resetting the region’s technological standards and deepening its dependence on Beijing. Asia became the largest destination for Chinese EV exports in April 2026, with shipments surging by nearly 40 percent, and within that wider Asian wave, the six smaller economies of South Asia — Nepal, Bangladesh, Sri Lanka, Pakistan, Bhutan and the Maldives — have emerged as an increasingly important theatre for Chinese industrial strategy. For India, long the region’s dominant supplier of automobiles and petroleum, this is not merely a commercial challenge. It is a test of whether traditional advantages of geography and market familiarity can withstand a competitor that is exporting entire mobility systems rather than individual products.

This article traces the roots of China’s EV dominance, examines how that dominance is being projected into South Asian markets, and considers the strategic, security and economic implications for India as the region’s clean-transport future takes shape.

The Foundations of China’s EV Dominance

China’s position at the centre of the global EV industry did not emerge organically; it is the product of three decades of deliberate, state-directed industrial policy. Between 2009 and 2023, Chinese authorities poured more than US$230 billion into building out the EV sector, with government spending accounting for roughly 60 percent of all global EV-related expenditure as recently as 2025. A dense architecture of purchase-tax exemptions, performance-linked subsidies and vehicle scrappage incentives accelerated domestic adoption, while parallel investment in charging infrastructure gave China control of around 80 percent of the world’s installed charging capacity. The scale of output that resulted is striking: China sold some 13 million electric vehicles in 2025 alone, accounting for roughly two-thirds of global EV sales, with 2026 sales projected to climb even higher.

This dominance rests on more than assembly-line output. China has built a vertically integrated industrial base spanning the mining and refining of critical minerals, battery-cell manufacturing, and the software and connectivity layers that increasingly define a modern vehicle. It controls close to 70 percent of global rare-earth mining, roughly 90 percent of rare-earth separation and processing, and more than 80 percent of lithium-ion battery manufacturing capacity worldwide — figures that leave little room for competitors to challenge Chinese firms on cost. A single company, Contemporary Amperex Technology (CATL), controls close to 40 percent of the global lithium-ion battery supply, illustrating just how concentrated this vertical integration has become. Automakers such as BYD, SAIC, Geely, Changan, NIO and Xpeng have translated this manufacturing base into global market presence, often undercutting established Western and Japanese rivals on price alone.

Beijing’s motivations extend well beyond commercial opportunity. Electric vehicles represent a rare arena in which China can set the technological rules of the game rather than follow standards established elsewhere — a chance to break the historical pattern of Western and Japanese dominance in conventional automobiles. The sector also serves China’s energy-security interests by reducing exposure to oil-import shocks, while advancing its stated goal of carbon neutrality by 2060. Domestically, however, slowing demand and intense price competition have left Chinese manufacturers with significant overcapacity, giving firms a powerful commercial incentive to look outward — and South Asia, with its underdeveloped domestic auto industries and rising climate commitments, has proven a particularly receptive destination.

A Receptive Market on India’s Doorstep

South Asia’s appeal to Chinese EV exporters rests on a convergence of factors. Western markets have erected high tariffs and other barriers against Chinese vehicles, pushing exporters to seek volume elsewhere. South Asian governments, meanwhile, have adopted ambitious green-transition targets that create ready-made policy demand: Nepal aims for carbon neutrality by 2045, Sri Lanka has set a net-zero target for 2050, Bhutan has folded sustainability into its Gross National Happiness framework, and Bangladesh is targeting 30 percent EV deployment by 2030. Layered on top of these commitments is the economic logic of fuel-import substitution — several regional economies have faced repeated balance-of-payments strain since the pandemic, and shifting away from imported petroleum has become as much a fiscal imperative as an environmental one.

Chinese vehicles compete aggressively on price in these markets, a function of mature domestic supply chains, lower input costs and financing terms that are difficult for rivals to match. In Nepal, Chinese manufacturers already account for the majority of new EV sales, helped by higher dealer margins on Chinese models than on competing brands. Beyond price, Beijing has deployed government-to-government gestures to build market familiarity and goodwill: in January 2026, China donated a fleet of 100 electric buses to Sri Lanka for deployment on its Colombo-Kandy and Colombo-Galle routes, with comparable gestures extended to Nepal. Such donations do more than generate goodwill — they lock recipient countries into dependence on Chinese spare parts, maintenance expertise and after-sales service, a dependence that recurs each time a vehicle needs a replacement part. Sri Lanka has since gone further, formally requesting Chinese assistance to build out a nationwide charging network.

Chinese firms have also begun establishing a limited manufacturing footprint within the region, though not the kind that builds genuine domestic capacity. In Pakistan, BYD has set up an assembly facility linked to the China-Pakistan Economic Corridor, but operations remain confined to assembly, with no local research and development or component manufacturing taking root. Bangladesh shows a similar pattern: since its 2021 National Electric Mobility Action Plan, Chinese firms have expanded distributor networks and explored battery assembly within export processing zones, though committed investment has been slower to materialise. Bangladesh’s broader financial dependence on Chinese capital across multiple sectors gives Chinese EV firms a structural head start over Asian and European competitors, who lack equivalent existing relationships and supply-chain access.

The resulting trade data tell a clear story. Chinese EV imports into South Asia have risen sharply in both volume and value since 2019 — a year that marked a discernible inflection point in Chinese EV export strategy. In Nepal and Bhutan, roughly 90 percent and 60 percent respectively of all vehicles imported from China are now electric. Imports have grown especially fast in Sri Lanka and more moderately in Pakistan, the Maldives and Bangladesh, with the demand for EVs pulling up overall Chinese vehicle imports across most of the region — Bangladesh being a partial exception. Chinese EVs now dominate the electric-vehicle segment in most South Asian markets, with the Maldives (where Japanese vehicles and two-wheelers still hold sway) and, to some extent, Bangladesh (where EV policy and public appetite are only now taking shape) standing as the main outliers.

From Commerce to Leverage: The Strategic Dimension

The deeper significance of this expansion lies in what analysts have begun calling “dependency diplomacy” — a pattern in which technological and industrial reliance quietly converts into durable economic and political leverage. The mechanics of this dependency are structural rather than coercive. Sri Lanka, for instance, holds meaningful reserves of critical minerals but lacks the processing capacity to convert them into battery-grade materials, meaning it remains a price-taker even in a sector built partly on its own resource endowments. Across the region, countries depend on Chinese suppliers for critical minerals, advanced components and semiconductors, and lack the recycling infrastructure to manage batteries once they degrade — leaving governments and consumers facing either costly imported replacements or the premature retirement of vehicles. Because Chinese firms have shown little appetite for meaningful technology transfer, the assembly operations that do take root in the region tend to generate logistics and retail employment rather than the engineering and manufacturing jobs that would allow host countries to build genuine domestic industrial capacity.

A parallel set of concerns centres on data and security. Contemporary Chinese EVs are highly connected vehicles, generating continuous streams of location data, driving-pattern telemetry and camera feeds that are stored on cloud servers, often equipped with facial recognition, onboard AI and the ability to receive software updates remotely. China’s National Intelligence Law obliges domestic companies and citizens to cooperate with state intelligence requests, raising the possibility that data generated by these vehicles could become accessible to Chinese authorities. In sensitive settings, this raises the theoretical prospect of vehicle movements being tracked near ports, diplomatic facilities or military installations, or of vehicle fleets being subject to remote interference — concerns serious enough to have already been raised by governments in Norway and Denmark regarding Chinese-made vehicles and infrastructure elsewhere.

These vehicle-level concerns sit within a broader financing architecture. China’s Belt and Road Initiative has directed close to US$12 billion into renewable-energy infrastructure globally, and its EV push in South Asia increasingly draws on this same financing logic. Pakistan’s BYD facility, tied directly to the China-Pakistan Economic Corridor, illustrates how EV investment is being woven into wider geopolitical infrastructure projects rather than treated as a standalone commercial venture. Future Belt and Road transport corridors in the region are likely to be designed with Chinese EV integration in mind from the outset — meaning the entangling of transport, energy and data infrastructure across South Asia is likely to deepen rather than plateau.

What This Means for India

For India, the stakes are directly commercial as well as strategic. India has historically been South Asia’s principal supplier of automobiles and petroleum products, a position built over decades through the market presence of firms such as Tata, Mahindra, Ashok Leyland, Maruti Suzuki and TVS, whose dealer networks, joint ventures and established service ecosystems have long given Indian vehicles a natural advantage across the region. The growing regional preference for Chinese EVs threatens to erode this position meaningfully: estimates suggest India’s combined automobile and petroleum trade with most South Asian neighbours could decline by roughly 14 to 33 percent as Chinese EV adoption accelerates, with Pakistan and the Maldives the principal exceptions to this trend.

India is not standing still in response. It is accelerating its own EV transition, expanding domestic manufacturing capacity, and increasingly treating electric mobility as an instrument of foreign policy in its own right. Yet the scale of this response remains modest set against China’s. Between 2020 and 2025, India’s EV sector attracted around US$25 billion in investment — a substantial sum in absolute terms, but well short of the country’s own stated targets, and a fraction of the capital China has directed into the sector over a longer period. This gap matters most in exactly the markets where India has the greatest geographic and historical advantage: its immediate neighbourhood.

The risks extend beyond trade figures. India is simultaneously investing heavily in energy connectivity and easing transit arrangements with its neighbours, several of which run through strategically sensitive regions, including India’s Northeast. The prospect of a growing volume of internet-connected Chinese vehicles moving through or operating near these corridors adds a security dimension to what might otherwise be viewed as a purely commercial competition, compounding the economic risk with a layer of infrastructure and data vulnerability that will be harder to reverse the longer it goes unaddressed.

Conclusion

China’s EV expansion into South Asia is best understood not as a story about vehicles, but about systems. By exporting an integrated package of vehicles, batteries, charging infrastructure, financing and digital connectivity, Beijing is building leverage over its smaller neighbours without needing to rely on overt coercion — leverage that compounds with every subsidised bus donation, every assembly plant tied to Belt and Road financing, and every charging network built to Chinese specifications. For South Asian governments, the appeal is straightforward: affordable vehicles, faster progress toward climate commitments, and reduced exposure to volatile fuel-import bills. For India, the challenge is more complex. Geography, historical trade ties and established service networks remain real advantages, but they are unlikely to be sufficient on their own if China continues to out-invest, out-subsidise and out-bundle Indian offerings across the region. The contest over South Asia’s clean-transport future, in other words, is unfolding as much in the realm of geopolitics and industrial strategy as in showrooms and charging stations — and how India responds over the next few years will shape not just its trade position, but its broader strategic standing in its own neighbourhood.

By: Khushbu Ahlawat, Consulting Editor, GSDN

Introduction

Agriculture sits at the heart of the India-Africa relationship, yet for decades it has been treated as a secondary theme within a broader story about trade, energy and infrastructure. That is beginning to change. As food insecurity, climate volatility and rural unemployment intensify across the Global South, India and Africa are increasingly recognising agriculture not merely as a sector to be developed, but as the connective tissue of a genuinely strategic partnership — one capable of delivering food security, nutrition security and livelihood security simultaneously. The India-Africa relationship, in this sense, has reached an important inflexion point: political commitment to South-South cooperation is well established, but the real test now is whether that commitment can be institutionalised and translated into outcomes that farmers can actually feel.

This article examines the foundations of that emerging partnership — the complementarities that make it logical, the mechanisms through which it currently operates, the institutional momentum created by BRICS expansion, and the structural challenges that must be addressed if the relationship is to move convincingly beyond trade and aid into durable, co-owned agrifood systems.

Why India and Africa Need Each Other

The rationale for deeper cooperation begins with a shared paradox. Agriculture employs a large share of the workforce in both regions yet contributes disproportionately little to national income, leaving millions of farming households trapped in low productivity and precarious livelihoods. In Sub-Saharan Africa, agriculture employs close to two-thirds of the workforce but generates only around 15 percent of GDP — a gap that reflects low mechanisation, weak infrastructure, limited access to credit and insurance, and chronic vulnerability to erratic rainfall. Since 2000, food imports into the region have risen sharply relative to domestic production; the continent’s annual food import bill, once estimated at around US$50 billion, has been projected to climb toward US$90–110 billion amid successive global shocks — from the pandemic-era disruption of supply chains to the Russia-Ukraine war’s impact on global wheat and fertiliser exports, which pushed food prices in Sub-Saharan Africa up by close to a quarter between 2020 and 2022.

India, meanwhile, has spent seven decades building precisely the kind of institutional and technical capacity that addresses these constraints: a Green Revolution that transformed grain self-sufficiency, one of the world’s largest dairy cooperative movements, an expanding digital public infrastructure for agriculture, and hard-won experience managing food security at a scale and level of resource constraint that mirrors African realities far more closely than the experience of wealthier industrial economies. Africa, in turn, offers what India increasingly needs: vast underutilised arable land, a young and growing labour force, and an agribusiness market projected to be worth close to US$1 trillion by 2030 as food demand across the continent is expected to roughly double by mid-century.

This complementarity is not simply resource-based; it is also methodological. Indian agricultural innovation has often prized what might be called the “3A” principle — technologies and institutions that are affordable, appropriate and adaptable to resource-constrained environments — rather than capital-intensive solutions transplanted from industrialised agriculture. That orientation matters enormously for African smallholders, most of whom farm plots too small and too undercapitalised to absorb expensive, import-dependent technology.

How the Partnership Currently Works

India’s agricultural engagement with Africa operates through several parallel channels, each with a distinct rationale and reach.

Government-to-government cooperation remains the backbone of the relationship. India’s Export-Import Bank has extended concessional Lines of Credit for agricultural mechanisation and infrastructure across the continent — Angola, for instance, received a US$23 million credit line to purchase tractors and farm machinery alongside support for a food-processing business incubation centre, while Lesotho secured a smaller credit facility for agricultural equipment and Malawi received support to establish a business incubation centre offering short-term training in crop processing and composting. Zimbabwe has benefited from Indian-supported rural technology parks, food testing laboratories and vocational training centres. These interventions are modest individually but cumulatively significant, reflecting a development-financing model built around capacity-building rather than large, debt-heavy infrastructure projects.

Private-sector investment has grown into an equally important pillar. Indian agribusiness conglomerates such as the Export Trading Group now operate integrated agricultural value chains across Tanzania, Kenya, Malawi, Mozambique, Nigeria and South Africa, while beverage and food-processing firms have committed hundreds of millions of dollars to bottling, edible-oil and processing facilities in markets like Zimbabwe. One joint venture near Harare grew into Southern Africa’s largest cooking-oil manufacturer from an initial investment of under US$2 million — an illustration of how comparatively modest Indian capital, paired with local partnership, can scale quickly in underserved African food-processing markets. Development finance institutions have also begun backing inclusion-focused private initiatives, including grant support for women-led agribusiness ventures across several East and Southern African markets.

Humanitarian and capacity-building assistance forms a third channel, less visible but consequential during periods of acute stress. India has periodically supplied emergency food aid — rice shipments to Zimbabwe during drought years, agricultural equipment and grain to Malawi following crop failures, tractors to the Democratic Republic of Congo — while training programmes under India’s technical cooperation schemes have brought thousands of African agricultural officials, extension workers and scientists through Indian institutions. Grassroots organisations such as India’s Self-Employed Women’s Association have also exported women-centred rural empowerment models directly to African communities, outside formal government channels altogether.

Institutional and cooperative knowledge exchange may ultimately prove the most transformative channel, precisely because it moves beyond aid and investment into genuine two-way learning. The clearest example lies in dairy. When Kenya’s Dairy Farmer Foundation approached India’s National Dairy Development Board roughly a decade ago to explore replicating India’s cooperative “Anand model,” the resulting East African dairy hubs went on to reach more than 200,000 smallholder farmers and generate well over US$100 million in additional farmer revenue. Tellingly, the learning has not flowed in only one direction: milk-quality certification practices developed within Kenya’s informal dairy sector were later adapted for use in Assam, generating millions of dollars in estimated benefits for Indian producers. This reciprocity — rather than a one-way transfer of Indian expertise to African beneficiaries — is precisely the model that a mature partnership should aspire to replicate across other value chains, from digital agriculture platforms to agricultural risk insurance.

The BRICS Opening

If bilateral cooperation has historically defined the India-Africa agrifood relationship, a new institutional layer is now emerging through BRICS, and it arrives at a genuinely useful moment. With Egypt and Ethiopia now full BRICS members, and South Africa a founding member, African voices carry more direct weight within the bloc’s agenda-setting than at any point previously. India’s chairship of BRICS through 2026 has been used to push agriculture higher up the grouping’s priorities, most visibly through the Indore Declaration, which centres farmer welfare, food security, climate resilience and technology cooperation, and through new mechanisms including a BRICS agricultural research network, a digital agriculture initiative, and a proposed centre of excellence on agroecology and regenerative farming. The BRICS Action Plan for Agricultural Cooperation running through 2028 similarly foregrounds family farming, food security and agricultural trade as shared priorities across the expanded bloc.

The significance of this shift lies less in any single new institution and more in what it enables structurally: a platform through which India and multiple African economies can pursue joint research, pooled financing and shared standards, rather than negotiating each relationship bilaterally from scratch. Paired with the African Continental Free Trade Area, which is gradually reducing the tariff and regulatory fragmentation that has long constrained intra-African and India-Africa agricultural trade, BRICS offers a genuine opportunity to convert scattered bilateral goodwill into a more coherent regional architecture.

What Still Needs to Change

For all this momentum, the partnership carries structural weaknesses that cannot be wished away by new declarations or summit communiqués.

The first is a persistent gender gap that undercuts productivity gains on both sides. Women make up a substantial share of the agricultural workforce in India and across Africa alike, yet in India women operate only a small fraction of landholdings despite comprising close to three-quarters of the rural agricultural workforce, while African women farmers own, on average, roughly one-eighth of agricultural land despite comparable workforce participation. Without secure land tenure, women in both regions continue to face restricted access to formal credit, crop insurance and extension services — meaning that cooperation focused narrowly on technology transfer, without addressing land rights and financial inclusion, will continue to bypass the demographic that does much of the actual farming.

The second weakness is a bias toward announcement over implementation. Political summits have produced no shortage of memoranda of understanding and framework agreements over the past two decades, but many initiatives lose momentum once they move from ministerial signing ceremonies to district-level execution. India’s own domestic experience offers a partial template here: its network of Krishi Vigyan Kendras — district-level centres that integrate agricultural research, extension services and farmer outreach — demonstrates how national policy can be translated into local practice. Replicating an equivalent subnational layer through partnerships between Indian districts and comparable African agroecological regions could create exactly the kind of implementation architecture that has so far been missing, enabling farmer exchanges, joint field demonstrations and locally adapted innovation rather than one-off pilot projects that quietly wind down once initial funding lapses.

The third weakness concerns which innovations actually reach smallholders. Cooperation should be judged by relevance to resource-constrained farmers rather than by technological sophistication — affordable irrigation, climate-resilient seed varieties, village-level storage and processing, and accessible micro-insurance are far more likely to move the needle on rural incomes than capital-intensive technologies poorly suited to local conditions or difficult to maintain once donor support ends.

A Path Forward

Bringing these threads together suggests a fairly clear set of priorities for the next phase of India-Africa agrifood cooperation. Value chains need to be strengthened in ways that retain more processing and value-addition within African rural economies, rather than exporting raw commodities for processing elsewhere — an area where India’s own experience in food processing and agro-industry offers directly transferable lessons. Climate resilience needs sustained joint investment given that both regions remain heavily dependent on rain-fed agriculture and face intensifying weather volatility. Cooperation needs to be localised through subnational partnerships that connect institutions rather than only governments. And existing institutional innovations — cooperative dairy models, digital agriculture platforms, crop insurance systems — need to be scaled through joint pilots and co-financing rather than reinvented in each new bilateral relationship.

Conclusion

India and Africa already possess most of the ingredients required for a transformative agrifood partnership: complementary resource endowments, decades of accumulated institutional experience, an expanding private-sector appetite for investment, and now a strengthened multilateral platform through BRICS to coordinate at scale. What has been missing is not political will but sustained follow-through — the unglamorous work of building implementation layers between national commitments and farm-level practice. The measure of success for this partnership will not be the number of agreements signed at summits, but whether smallholder farmers, and particularly the women who form the backbone of both regions’ agricultural workforces, see tangible improvements in productivity, income and resilience. If India and Africa can convert their shared ambition into that kind of localised, institutionally grounded cooperation, the agrifood partnership has the potential to become one of the more consequential — if least discussed — pillars of Global South solidarity in the years ahead.

By : Jaiwant Singh Jhala, Research Analyst, GSDN

The ceasefire that followed the recent Iran-Israel conflict has offered the Middle East a much-needed pause after weeks of escalating military confrontation. The fighting, which witnessed missile exchanges, airstrikes, cyber operations, and direct attacks on strategic military installations, marked one of the most dangerous phases in the long-standing rivalry between the two regional powers. Unlike previous proxy confrontations fought through allied militant groups, the recent conflict involved direct military engagement, raising fears of a broader regional war that could have drawn in the United States, Gulf Arab states and other global powers. The ceasefire has temporarily reduced the intensity of hostilities; history demonstrates that ceasefires in the Middle East are often fragile, influenced by military calculations, domestic politics, ideological rivalries, and external intervention. While the current agreement has prevented further immediate escalation, it has not resolved the fundamental disputes that led to the conflict. The durability of the ceasefire depends upon several interrelated factors such as the strategic objectives of Iran and Israel, the involvement of the United States, the role of regional actors, domestic political pressures, the activities of proxy militias, economic considerations and the effectiveness of international diplomacy.  

What Is the Conflict?  

The Iran-Israel rivalry has evolved over four decades. Before the 1979 Iranian Revolution, Iran maintained close diplomatic and military ties with Israel. The establishment of the Islamic Republic transformed Iran into one of Israel’s strongest regional adversaries. Iran rejected Israel’s legitimacy and positioned itself as the principal supporter of anti-Israel resistance movements such as Hezbollah in Lebanon and Hamas in Gaza. Meanwhile, Israel has viewed Iran’s expanding regional influence and nuclear programme as existential security threats. Over the years, both countries have engaged in covert operations, cyber warfare, assassinations of military officials and nuclear scientists, and attacks on each other’s strategic assets. The latest conflict represented a dangerous departure from the shadow war. Direct missile and drone attacks demonstrated both countries’ willingness to openly challenge one another. The intervention of the United States in support of Israel and diplomatic efforts by regional and international actors eventually led to a ceasefire before the conflict escalated into a prolonged regional war.  

The Ceasefire

Both Iran and Israel suffered considerable military and economic costs during the conflict. Israel faced repeated missile attacks that strained its missile defence systems and disrupted civilian life. Iran experienced significant damage to military infrastructure and faced increasing international pressure. Neither side appeared prepared for a prolonged war involving sustained military operations. Accepting a ceasefire allowed both governments to regroup while claiming strategic success before their domestic audiences. The United States played a central role in preventing wider escalation. US has consistently supported Israel’s security while simultaneously seeking to avoid another major military conflict in the Middle East that could divert resources from strategic competition with China and Russia. American diplomatic engagement reportedly encouragedrestraint from both sides. Regional allies also feared that continued fighting would threaten energy infrastructure and maritime trade. There were economic aspects to it. War is expensive. Iran continues to face sanctions, inflation, and economic hardship. Israel also experienced significant financial costs associated with mobilization, missile interception, infrastructure damage, and disruptions to tourism and investment. Both governments therefore had economic incentives to pause military operations. One important reason the ceasefire could survive is mutual deterrence. Both Iran and Israel demonstrated that they possess the capability to inflict substantial damage upon each other. Israel retains qualitative military superiority, advanced intelligence capabilities, and sophisticated air defence systems. Iran has expanded its missile arsenal, drone technology, and regional proxy network. Because both countries understand the destructive consequences of renewed war, deterrence may encourage continued restraint. International diplomacy remains actively engaged in preserving the ceasefire. Countries including Qatar, Oman, Turkey and European powers have maintained communication channels between opposing parties. Although Iran and Israel lack direct diplomatic relations, intermediaries continue to facilitate indirect dialogue. These diplomatic mechanisms reduce the risk of misunderstandings that could unintentionally trigger renewed conflict. The Middle East has experienced years of instability. From Syria and Iraq to Yemen and Gaza. Most regional governments now prioritize economic development, infrastructure investment, tourism, and foreign investment. Countries across the Gulf increasingly seek stability rather than confrontation. Their preference for de-escalation creates additional pressure on Iran and Israel to avoid another large-scale conflict. Neither Iran nor Israel achieved decisive strategic victory during the conflict. Israel weakened certain Iranian capabilities but did not eliminate Iran’s military potential or nuclear expertise. Iran demonstrated its ability to strike Israeli territory but failed to significantly alter Israel’s strategic position. Since further military operations may not fundamentally change the strategic balance, both sides may prefer maintaining the ceasefire. 

Challenges To the Ceasefire

Numerous risks continue to threaten the agreement. Iran’s nuclear programme remains perhaps the greatest long-term source of tension. Israel insists that Iran must never acquire nuclear weapons capability. Iran maintainsthat its nuclear programme serves peaceful civilian purposes while asserting its sovereign right to uranium enrichment. If intelligence suggests significant progress toward weaponization, or if negotiations collapse, Israel could again consider military action. Perhaps the greatest weakness of the ceasefire is that numerous armed non-state actors remain active throughout the region. These include Hezbollah in Lebanon, Various Iraqi militia groups, Houthi forces in Yemen and Palestinian militant organizations. Even if Iran and Israel avoid direct confrontation, actions by these groups could provoke retaliation and rapidly escalate into wider conflict. Proxy warfare has historically allowed regional powers to compete while avoiding full-scale conventional war. Political leaders often face domestic pressures that influence foreign policy. Israeli governments frequently prioritize national security and may adopt tougher military responses following attacks. Iranian leaders must also satisfy influential political, military, and ideological constituencies that oppose compromise with Israel. Changes in leadership or internal political crises could therefore weaken support for the ceasefire. Miscalculation is another problem. Military confrontations frequently result from accidents rather than deliberate policy such as misidentified missile launches, drone incursions, border incidents, intelligence failures and cyber-attacks attributed to the opposing side. Given the absence of direct communication between Iran and Israel, even small incidents could escalate rapidly. Unlike conventional territorial disputes, the Iran-Israel conflict contains strong ideological dimensions. Iran portrays itself as a leader of resistance against Israel and Western influence in the Middle East. Israel views Iran’s regional ambitions and support for militant organizations as existential threats. These ideological narratives make lasting reconciliation extremely difficult.  

Role of External Powers

The United States remains the most influential external actor. US provides Israel with military assistance, intelligence cooperation, and diplomatic backing. At the same time, successive American administrations have sought to prevent regional wars that threaten global stability. Future US policy will significantly influence whether deterrence remains effective. Saudi Arabia, the United Arab Emirates, Qatar and other Gulf countries increasingly prioritise regional economic transformation. Large development projects, foreign investment, and economic diversification require stability. Consequently, Gulf states have strong incentives to encourage continued ceasefire arrangements and mediation efforts. Russia and China have expanded their diplomatic influence in the Middle East. China has strengthened economic ties with both Iran and Gulf states while presenting itself as a potential mediator. Russia maintains strategic relationships with Iran but also coordinates with Israel on regional security issues. Although neither power possesses the same influence as the United States, both can contribute to diplomatic efforts that discourage renewed conflict.  

Economic Significance

The ceasefire carries major economic consequences beyond the Middle East. The Middle East remains central to global oil production. Conflict involving Iran raises concerns about shipping through the Strait of Hormuz, a vital maritime chokepoint. Even temporary disruptions can increase oil prices and contribute to global inflation. A durable ceasefire would stabilize energy markets and reduce uncertainty for consumers and investors. Regional instability threatens shipping routes connecting Europe, Asia, and Africa. Insurance premiums rise during periods of conflict, increasing transportation costs, and disrupting global supply chains. Continued peace therefore benefits international commerce. Both Iran and Israel require economic stability. Iran seeks sanctions relief, investment, and inflation control. Israel aims to restore tourism, technology investment, and economic confidence. These domestic priorities encourage both governments to avoid renewed warfare.  

The coming months will be critical. If diplomatic engagement continues and both sides exercise restraint, the ceasefire may evolve into a more stable framework for managing competition. If not, the Middle East could once again witness a cycle of escalation with consequences extending far beyond the region. Ultimately, whether the ceasefire holds will depend less on the agreement itself than on the willingness of Iran, Israel, regional states, and global powers to transform a temporary cessation of hostilities into a broader process of conflict management. While cautious optimism is justified in the short term, lasting peace will require sustained diplomacy, confidence-building measures, and political compromise.  

By : Andey Vivaan, Research Analyst, GSDN

China-Bangladesh Relations : Source Internet

Introduction 

India and Bangladesh have shared close ties for several decades because of their common history, geography and economic links. In recent years however, Bangladesh’s growing engagement with China has attracted increasing attention in India. While Dhaka describes these ties as part of its development strategy, they have also raised important strategic questions for New Delhi.  

China’s involvement in Bangladesh now extends beyond trade and investment to infrastructure, defence cooperation, technology, and connectivity projects. Prime Minister Tarique Rahman’s visit to China in June 2026 further strengthened bilateral ties through agreements on infrastructure, industrial investment, the proposed China-Myanmar-Bangladesh Economic Corridor (CMBC), the Teesta River project, and broader economic cooperation. 

These developments have drawn close attention to New Delhi. While Bangladesh maintains that its cooperation with China is based on economic interests rather than alignment against any country, India’s strategic community remains concerned about China’s expanding influence near its eastern borders, growing defence cooperation with Dhaka, and increased presence in the Bay of Bengal. 

This article examines the evolution of China-Bangladesh relations and analyses why China’s expanding role in Bangladesh is increasingly viewed as a strategic challenge for India’s security and regional interests. 

Historical Background 

China-Bangladesh relations have changed considerably over the past few decades. Immediately after Bangladesh’s independence in 1971, political relations remained limited due to the Cold War dynamics and China’s close ties with Pakistan. Over the years, both countries gradually expanded their diplomatic and economic relations. 

One major change came during the early 2000s when China became Bangladesh’s largest trading partner replacing India. Bangladesh’s rapidly growing textile industry increasingly depended on Chinese raw materials, machinery, and industrial products. Economic cooperation soon expanded beyond trade into infrastructure development, manufacturing, and energy projects. 

Another important development came in 2016 when Chinese President Xi Jinping visited Bangladesh. During the visit, the two countries upgraded their relationship to a Strategic Cooperative Partnership, opening the door for greater Chinese investments in transport, ports, industrial zones, and energy infrastructure. Bangladesh also became the first South Asian country to formally join China’s Belt and Road Initiative (BRI), reflecting Dhaka’s interest in attracting large-scale infrastructure financing. 

Despite strengthening ties with Beijing, Bangladesh under former Prime Minister Sheikh Hasina largely maintained a careful balance between India and China. While China became Bangladesh’s largest trading partner and defence supplier, Dhaka continued close political and security cooperation with New Delhi. 

The political changes that followed the fall of Sheikh Hasina’s government in August 2024 introduced new dynamics into regional politics. The interim administration under Muhammad Yunus adopted a more China-friendly foreign policy, while the election of Prime Minister Tarique Rahman in 2026 further accelerated high-level engagement with Beijing. Rahman’s first major state visit to China signaled Bangladesh’s willingness to diversify its strategic partnerships while pursuing greater economic opportunities. 

Although Bangladeshi leaders continue to emphasize that their foreign policy is based on national interest rather than alignment with any power, the growing frequency of high-level exchanges with China has naturally generated strategic debate within India. 

Growing Economic Partnership 

Economic ties are now the most important aspect of relationships. China is now Bangladesh’s largest trading partner and one of its most important sources of foreign investment. Chinese companies are actively involved in sectors such as transport, manufacturing, telecommunications, renewable energy, power generation, and industrial development. 

During Prime Minister Tarique Rahman’s visit to Beijing in June 2026, Bangladesh secured fresh Chinese commitments for infrastructure financing and industrial investment. Several memoranda of understanding were signed covering industrial zones, renewable energy, electric vehicles, logistics, and manufacturing. Reports also suggested that Dhaka sought nearly US$6 billion in Chinese financial support for various development projects. 

One of the most notable agreements involved the China-Bangladesh Mongla Port Economic Zone, which will be developed with the participation of the China Civil Engineering Construction Corporation. The project replaced an earlier proposal involving an Indian developer that had failed to progress within the agreed timeframe. The agreement highlighted China’s growing role in Bangladesh’s port infrastructure and industrial development. 

Chinese companies have also invested in roads, bridges, railways, power plants, and special economic zones across Bangladesh. Industrial parks supported by Chinese financing aim to increase Bangladesh’s manufacturing capacity while attracting foreign investment and creating employment opportunities. 

For Bangladesh, Chinese investment offers access to large-scale capital, technology, and infrastructure development at a time when the country seeks to sustain rapid economic growth. Chinese financing is often accompanied by relatively quick implementation compared to some traditional development partners. 

China also benefits from these investments because Bangladesh occupies an important location between South Asia and Southeast Asia. Strong economic relations with Dhaka complement China’s wider objective of improving connectivity under the Belt and Road Initiative while expanding access to the Bay of Bengal. 

However, China’s expanding economic presence has also generated debate regarding long-term strategic dependence, debt sustainability, and the geopolitical implications of major infrastructure investments. 

Infrastructure, Connectivity and the Belt and Road Initiative 

Infrastructure projects have become an important part of China-Bangladesh relations. China views improved connectivity as essential for expanding regional trade while simultaneously increasing its strategic access to the Indian Ocean. 

One of the most closely watched proposals is the revival of the China-Myanmar-Bangladesh Economic Corridor (CMBC). During Prime Minister Tarique Rahman’s June 2026 visit to China, Chinese officials proposed extending the existing China-Myanmar Economic Corridor westward into Bangladesh. The proposed route would connect China’s Yunnan Province with Bangladeshi ports through Myanmar. 

Although Bangladesh has not formally approved the proposal and has stated that further examination is required, the initiative has attracted significant attention in New Delhi. Indian officials have acknowledged that they are closely monitoring developments while assessing their strategic implications. 

If this project is completed in the future, it could improve regional connectivity and give China easier access to the Bay of Bengal. This is one reason why Indian analysts are watching the proposal carefully. 

Such connectivity could strengthen China’s commercial presence while also increasing its long-term strategic influence in the region. 

The security situation in Myanmar, particularly in Rakhine State, remains one of the largest obstacles to the corridor’s implementation. Continued instability has delayed several Chinese infrastructure projects, including the Kyaukphyu deep-sea port, highlighting the practical challenges associated with regional connectivity initiatives. 

Another important area of cooperation involves the Teesta River Comprehensive Management and Restoration Project. China has agreed to provide technical assistance and feasibility studies for the project while repeatedly emphasizing that the initiative is not directed against any third country. Nevertheless, because the Teesta River originates in India and remains central to long-standing water-sharing negotiations between India and Bangladesh, Chinese involvement has generated considerable strategic discussion in New Delhi. 

China’s role in Bangladesh is no longer limited to trade and investment. Its involvement now includes ports, transport networks, industrial zones, and river management projects. This shows how broad the relationship has become over the past decade. It increasingly reflects Beijing’s broader geopolitical objective of expanding connectivity, strengthening regional influence, and integrating South Asia into its wider economic network 

Defence and Security Cooperation 

Defence cooperation has also grown over the last two decades. China has become Bangladesh’s largest supplier of military equipment, accounting for a significant share of the country’s defence imports. Chinese-made fighter aircraft, tanks, naval vessels, missile systems, air defence platforms and surveillance equipment now form an important part of Bangladesh’s military inventory. 

An important development took place in December 2016, when Bangladesh inducted two Chinese-built Type 035G Ming-class submarines into its navy. The acquisition marked Bangladesh’s entry into submarine operations and highlighted the growing depth of defence ties between the two countries. Since then, cooperation has expanded through military training, technical assistance, and defence exchanges. 

Recent reports indicate that Bangladesh is also considering the acquisition of 24 Chinese J-10CE multirole fighter aircraft along with advanced drone technology. Although no final agreement has been announced, these discussions demonstrate the increasing level of trust between Beijing and Dhaka in defence matters. 

China’s involvement goes beyond supplying military equipment. Chinese military institutions have also increased training opportunities for Bangladeshi officers, while cooperation has expanded in areas such as maintenance, logistics and military education. As Bangladesh continues to modernize its armed forces under the “Forces Goal 2030” programme, China remains one of its most important defence partners. 

In my view, both countries benefit from this cooperation. Bangladesh receives relatively affordable military equipment, while China strengthens its long-term presence in South Asia.  

Why It Raises Concerns for India 

India’s concerns regarding China-Bangladesh relations extend far beyond normal diplomatic engagement. The issue is not whether Bangladesh should maintain relations with China, but whether China’s growing strategic presence could alter the regional balance of powe 

One of the biggest concerns is the Siliguri Corridor, commonly known as the Chicken’s Neck. This narrow strip of land, measuring roughly 20–22 kilometres at its narrowest point, connects mainland India with its eight northeastern states. Any increase in Chinese infrastructure or military presence near Bangladesh’s northern districts naturally attracts the attention of Indian security planners. 

The proposed Chinese involvement in the Teesta River Comprehensive Management and Restoration Project has therefore generated considerable debate. While China describes the project as technical cooperation aimed at river management, several Indian analysts argue that the presence of Chinese state-owned companies close to India’s sensitive eastern frontier could create long-term strategic implications. 

Another area of concern is the development of Mongla Port and the continued Chinese interest in Chattogram Port. These projects are frequently discussed within the broader context of China’s String of Pearls strategy, under which Beijing has invested in ports and maritime infrastructure across the Indian Ocean. Although China insists these investments are commercial, Indian strategic analysts remain cautious about their possible futuremilitary utility. 

At present there is no evidence that these ports will be used for military purposes, but many Indian analysts believe their future strategic value cannot be ignored.  

Reports regarding possible Chinese interest in the Lalmonirhat airbase, located near India’s border, have further intensified security discussions. Even though no formal military agreement has been announced, any Chinese role in upgrading infrastructure close to India’s eastern frontier would inevitably attract close monitoring from New Delhi. 

The proposed China-Myanmar-Bangladesh Economic Corridor (CMBC) also carries strategic significance. If eventually completed, it would provide China with improved overland access to the Bay of Bengal through Bangladesh. Such connectivity would reduce Beijing’s dependence on the Strait of Malacca, one of the world’s busiest maritime trade routes, while simultaneously increasing Chinese logistical access to the Indian Ocean. 

Taken together, these developments explain why India increasingly views China-Bangladesh relations through both economic and security lenses. 

India’s Strategic Response 

India has largely responded by strengthening its own relationship with Bangladesh instead of directly opposing China’s growing presence.  

The Ministry of External Affairs has repeatedly stated that India is closely monitoring developments in Bangladesh and will take appropriate measures whenever necessary. At the same time, New Delhi has emphasizedthat its relationship with Bangladesh remains based on mutual trust, shared interests and long-term cooperation. 

Rather than asking Bangladesh to choose between India and China, New Delhi has continued to strengthen bilateral cooperation in connectivity, trade, energy, border management and cultural exchanges. The reopening of tourist visas for Bangladeshi citizens and continued operation of projects such as the Bangladesh–India Friendship Pipeline demonstrate India’s effort to preserve positive relations despite occasional political differences. 

India has also accelerated infrastructure development in its eastern region while strengthening military preparedness near the Siliguri Corridor. Enhanced border infrastructure, improved logistics and closer coordination among security agencies reflect New Delhi’s determination to safeguard its strategic interests. 

India also needs to address unresolved bilateral issues, particularly water sharing. The long-pending Teesta Water Sharing Agreement remains one of the most sensitive aspects of India-Bangladesh relations. Many analysts argue that timely progress on this issue would reduce opportunities for external powers to expand their influence. 

Ultimately, India’s strategy appears to focus on remaining Bangladesh’s most reliable long-term partner while avoiding unnecessary escalation with either Dhaka or Beijing. 

Future Outlook 

China-Bangladesh relations are expected to continue expanding over the coming years. Bangladesh requires substantial investment to sustain economic growth, improve infrastructure and modernise its industrial base. China has the financial resources and technical expertise to support many of Bangladesh’s development goals.  

However, geography ensures that Bangladesh cannot ignore India. The two countries share a border of more than 4,000 kilometers, dozens of transboundary rivers, extensive trade links, and deep historical and cultural connections. Border management, water sharing, migration, and regional security require constant cooperation between New Delhi and Dhaka regardless of their relations with other countries. 

In my opinion, Bangladesh is unlikely to choose either India or China completely. It is more likely to continue balancing its relations with both countries because each offers different advantages. While China provides investment and infrastructure, India remains Bangladesh’s closest neighbour with deep historical, cultural and economic ties.  

Conclusion 

In recent years, China-Bangladesh relations have entered a new phase with growing cooperation in trade, infrastructure, defence and connectivity. High-level political exchanges, growing Chinese investments and discussions surrounding projects such as the China-Myanmar-Bangladesh Economic Corridor, the Mongla Port Economic Zone and the Teesta River Comprehensive Management and Restoration Project demonstrateBeijing’s increasing strategic interest in Bangladesh. 

For India, these developments represent more than ordinary diplomatic engagement. Chinese involvement near the Bay of Bengal, expanding defence cooperation, investments close to the Siliguri Corridor, and growing influence in Bangladesh’s infrastructure sector collectively raise important strategic questions. While none of these developments individually threatens India’s security, together they indicate a gradual shift in the regional geopolitical landscape. 

At the same time, it would be inaccurate to view Bangladesh as choosing China over India. Bangladesh continues to maintain strong economic, cultural and geographical ties with India, while repeatedly emphasizing that its cooperation with China is not directed against any third country. As several analysts have noted, Bangladesh’s long-term interests are best served by maintaining productive relations with both Asian powers. 

In my view, India’s response should focus less on viewing every Chinese investment as a strategic setback and more on strengthening its own partnership with Bangladesh through timely project implementation, enhanced connectivity, economic cooperation and diplomatic engagement. Geography ensures that India and Bangladesh will remain indispensable partners regardless of changing regional dynamics. 

To conclude, China-Bangladesh relations are likely to continue expanding in the coming years. This does not necessarily mean that India is losing its influence, but it does mean that regional competition is becoming more complex. In my opinion, India should focus on strengthening its own partnership with Bangladesh by delivering projects on time, increasing economic cooperation and maintaining regular diplomatic dialogue. As a student of diplomacy, I believe strong regional relationships are built not only through strategic competition but also through trust and consistent engagement.