India and Japan have been on a new mission lately: to tame China’s ambitions to take control of the trade routes in the Indian Ocean, encircling India in the process.
But they have difficulty in executing this mission—preventing Chinese expansion in the Indian Ocean. It may be too late, and they lack the resources.
The two countries have been holding annual meetings to boost economic and military ties, with one under way this week between Japan’s Prime Minister Shinzō Abe and India’s Prime Minister Narendra Modi. Japan, for instance, has been helping India improve its infrastructure, and boost its nuclear capabilities. And they have been holding joint naval exercises in the Indian Ocean. Like the one in Malabar in the Bay of Bengal last year.
The Indian Ocean has always been a strategic waterway for trade between Africa and the Middle East on the one side, and Asian countries on the other. But it has grown in significance in recent years with the rise of China — as a major trade competitor of Japan, and a challenger to America’s dominance in both the Indian Ocean and the South China Sea.
In fact, China cannot secure its dominance in the South China Sea without expanding its presence in the Indian Ocean. For a simple reason. A blockade of the Strait of Malacca by the US and its alliance will cut China off from Middle East oil supplies and from its “Second Continent” Africa.
But India and Japan have been too late in executing their mission. China already owns a key sea outpost in the Indian Ocean: Sri Lanka’s Hambantota port, which is officially belongs to China for 99 years, following the landmark agreement, which was signed recently.
And it is working feverishly with Pakistan to build an alternative route to Middle East and Africa—the China-Pakistan Economic Corridor (CPEC), encircling India in the process.
Besides being late, the two countries do not have the economic resources to stop China. While India’s economy grows in tandem with China, its per capita GDP is roughly one-third that of China. Japan’s per capita GDP is five times higher than China’s but its economy barely grows, floundering in the swamp of debt.
Unless, they devise a smart strategy to tame China’s expansionary ambitions.
Meanwhile, international investors should pay close attention to these developments, as they place their bets in the financial markets of the region.
Index/Fund 12-month Performance IShares China (FXI) 16.50% Global X MSCI Pakistan (PAK) 12.61 iShares S&P India 50 (INDY) -5.30
Source: Finance.yahoo.com 9/14/2017
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