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China Faces Barriers in the Indian Ocean

John Lee & Charles Horner

Even as the world’s attention is focused on the East China Sea and the South China Sea as focal points of China’s strategic outreach onto the high seas, the East Indian Ocean has become another critical body of water. In the United States, where the word “pivot” is now prominent in the discussion of America’s strategic future in Asia, the Indian Ocean is itself seen as a kind of a pivot all its own, a place where the interactions among the land-based and sea-based interests of important countries are already salient and and will become more so.

Indeed, there is no other place where the bedrock concerns of the United States, India, China, Japan, and Australia all converge, making the Indian Ocean strategically integral to the balance of power in the Western Pacific.

In particular, the East Indian Ocean is a major building block in China’s grand project to transform itself into a great world power, and it is already playing a distinct role in China’s development as both a naval and as a continental power. The map below illustrates Beijing’s sense of what is required to secure the country’s naval frontier and its “sea lines of communication” to the West.

But the map is also instructive because it highlights the fact that coastal facilities are also envisioned by China as ways of aiding inland development by opening up regions of the country previously cut off from access to the sea.

This interest is well-placed. The Indian Ocean is now the world’s busiest trade route. More than 80 percent of the world’s seaborne trade in oil (equivalent to about one-fifth of global energy supply)—oil which fuels the economies of Southeast Asia, South Korea, Japan, and China—transits it.

In particular, some 40 percent of the world’s seaborne oil trade passes through the Strait of Hormuz, with almost all of that oil then traveling across the Indian Ocean, thence through the Strait of Malacca. Even though China can meet 90 percent of its energy needs from domestic sources, it currently imports around half of its oil.

Hudson Institute has been studying China’s growing involvement in Central Asia as part of a new March West. China has already invested heavily, and will invest considerably more, in developing sources of energy that can be delivered to the China solely overland. Even so, it will remain unavoidably reliant on seaborne imports for the foreseeable future.

Today, China’s imports run to around 5 million barrels per day and will reach about 13 million barrels per day by 2030. As part of its March West, China has completed a pipeline which begins on Burma’s coast and runs into Yunnan province. At full capacity, this pipeline will move about 440,000 barrels per day. China also plans to construct a pipeline from Siberia designed to pump about 620,000 barrels per day into North China. Another pipeline linking the Caspian Sea oil fields of Kazakhstan to west China is planned to deliver of about 400,000 barrels per day.

Even if these massive transcontinental projects proceed as planned, petroleum delivered by sea will become even more important than it is today as China-bound petroleum passes through the Strait of Hormuz in ever-growing quantities. China is now the major investor in developing Iraqi oil fields, as it is in Sudan and Angola.

These Mid-East, Africa to China connections are well-expressed in monetary terms. From negligible levels in the 1990s, trade between China and the Middle East will rise to more than $500 billion by 2020. China is now a major investor in Africa and about a million Chinese nationals live and work there and, for the past decade, China’s trade with Africa has been growing at more than 20 percent per annum.

But the Indian Ocean-Pacific Ocean corridor is about more than just energy. A new kind of “triangular trade” has sprung up that links India, the Middle East, and the Asia-Pacific. India’s “Look East” policy has already produced trade between itself and the 10-member Association of Southeast Asian Nations of about $70 billion and turnover is expected to reach $100 billion by 2015. Even as the strategic competition between India and China intensifies, China has become India’s largest trading partner, at about $75 billion per annum.

Overall, the trade routes connecting the Middle East, South Asia, and the Asia-Pacific have already made of the Indian Ocean one vast “choke point”. Accordingly, China cannot move closer to actual strategic autonomy if it gains ascendancy in the South China Sea while the Indian Ocean still remains beyond the reach of its naval capabilities.

Understanding China’s sense of its future not only as a maritime power but also as a naval power requires that we broaden even this angle of vision. In the first place, the strategic importance of the East Indian Ocean as a point entree—a backdoor, if you will—into China needs to be appreciated once again.

We say “once again” because the region played a critical role in sustaining an otherwise isolated China during World War II. During the Pacific War of 1940-1945, the then Republic of China (RoC) was cut off from the sea; its government was based deep inland in Chongqing and the RoC came to rely on a southwest corridor, which enabled assistance across the Southeast Asian mainland from the United States and Britain, and on access by air to northwest India which enabled additional assistance from the United States.

The wartime experience of the RoC showed that, if China’s “backdoors” could be kept open, a regime based deep inside the country could be kept alive—even if an enemy had managed to occupy China’s coastal ports. The new People’s Republic of China (PRC) learned lessons from this experience. Because the maritime power of the United States could wreak enormous havoc on the new regime if ever the American government so decided, Mao’s early PRC was immediately interested in establishing its strategic presence in regions where the RoC had also sought positions.

In particular, the new People’s Republic assertively backed “wars of national liberation” on the Southeast Asian mainland, hoping that the regimes installed thereby would be strategic allies.

From the time France consolidated its control over Indochina, one of China’s main backdoors had been the French-built railroad that ran from Vietnam’s port of Haiphong to Kunming, the capital of Yunnan Province. France closed it under Japanese pressure. The RoC sought to control it by backing its own friends in Vietnam in the immediate post-World War II period.

Thus, whatever the new ideological gloss PRC gave to its own “revolutionary” outreach into Southeast Asia, it had a venerable strategic genealogy. It remained a sensitive area. In l971, for example, a crisis occasioned by the breakup of East from West Pakistan on the Indian subcontinent almost immediately engaged the interests of major powers—the then-USSR, India, US, and the United States.

Today, the USSR has disappeared, but India, the PRC, Japan, Indonesia, and the United States all have important interests that converge in the East Indian Ocean. We should therefore expect jostling and bumping of the sort that is now commonplace in the waters farther east.

The Indian Ocean is also implicated in China’s future in another important, though less visible, way. Earlier, we alluded to the China’s new March West which is, in fact, a three-pronged advance.

The first route pushes due west from Chinese-ruled Central Asia, that is, Xinjiang, to the energy-rich lands of Kazakhstan, Turkmenistan and the shores of the Caspian. A second route moves west-by-southwest via Pakistan and also Afghanistan to Balochistan’s borders with Iran and the threshold waters of the Persian Gulf.

But it is the third route that is highly relevant to our discussion here. This route begins in Yunnan province, moves by rail and by highway further into Southeast Asia and is following a modernized version of the old south-westerly branch of the Silk Road, also into Bangladesh and then toward northeast India and across into Persia. Yunnan, which also borders Tibet, may yet emerge as the most important strategic pivot of this effort.

Yunnan, and other heartland provinces in China which still lag behind the more prosperous coastal regions, wish to assert themselves directly into the emerging Indo-Pacific economic corridor. Southeast Asia is a major target of opportunity, for it is part of a natural economic region—the Greater Mekong Sub-Region (a term coined by the Asian Development Bank.)

The sub-region includes Yunnan province, the Guangxi Autonomous Region, Vietnam, Cambodia, Laos, and Myanmar. As this area toward the southwest beckons, parts of land-locked China are coming increasingly to see their economic future as diverging from that of the coastal provinces.

Indeed, it is already apparent that officials not only in Yunnan but in provinces further afield such as Sichuan, are betting heavily on an increasingly prosperous Greater Mekong Sub-region. Yunnan alone has a population of almost 50 million; the Guangxi Autonomous Region has a population of over 50 million. Together, they are more populous than any European country save Russia and their interest and energy in orienting their economies toward the Greater Mekong Sub-region is starting to tell.

In an inspection tour of Yunnan in July, 2009, then Chinese president Hu Jintao urged the Yunnan provincial government to take the lead in deepening economic cooperation with the Greater Mekong Sub-region.

As a result, Yunnan is now China’s main economic bridge into South and Southeast Asia and is starting to playing a larger political there, not least in promoting a blizzard of coordination and cooperation agreements that cuts across all major economic sectors. For strategically significant parts of west and southwest China which have begun to look outward in a new and different direction, the Bay of Bengal and Andaman Sea now loom at least as large as does the South China Sea for other parts of the country.

Seen from this larger perspective, the naval and maritime competition in the East and South China Seas cannot help but move west of the Straits of Malacca into what is still, militarily, relatively unoccupied space. Though the interests of many nations converge there, the Indian Ocean is still comparatively uncontested and the waters there are unburdened by old animosities of the sort one finds east of Malacca or by the complexity of overlapping exclusive economic zones.

The Indian Ocean is thus a space where small advantages can be leveraged to great advantage. Recent PRC “assertiveness” has alarmed and antagonized Japan, South Korea, the Philippines, Indonesia, and Vietnam—and of course the United States—making the Indian Ocean more attractive as a point of counter-pressure, even as the economic attractiveness of the region to the China’s southwest will, at the same time, help to strengthen the centrifugal forces inside the country.

So far as the United States is concerned, co-operation with partners like India and treaty allies such as Australia is, compared to the Pacific proper, relatively uncomplicated. Indeed, such cooperation fits naturally into the strategic traditions of both India and Australia, where the situation in the Indian Ocean has long been of practical, not merely theoretical, concern.

The growth in the PRC’s naval power is now another of those practical concerns but, if China’s naval power is in fact to prove world transforming, it will somehow have to figure out a way to reach from the South China Sea far to the west of Malacca and all the way to the core Middle East. China’s costs of doing that will rise as it attempts to reach across the Indian Ocean, a region where it has no real allies and no partners, save for an increasingly dysfunctional Pakistan, but a region where the United States has both.

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