China’s development finance in south Asia: Geopolitical and strategic implications for India

China is the largest bilateral lender in the world and its financial influence has grown significantly over the recent years. In the past decade, China expanded its footprint in the South Asian countries namely Pakistan, Afghanistan, Sri Lanka, Nepal and the Maldives through substantial investments in infrastructural projects under Belt and Road Initiative (BRI), and foreign aids leading to shifts in the political and regional dynamics of the nations. In many cases, the recipient nations struggled with an increase in external debt to China, as the initial planned economic benefits were overshadowed by long-term financial instability. The paper identifies that a large section of China’s foreign aid has been invested in development sectors like energy and transportation in the recipient countries. Additionally, majority of the China’s funds have been extended on a loan basis to these developing nations. The paper further analyses the indirect impact of China’s lending in the South Asian region on India.