Bhutan’s Growing Significance in Sino-Indian Relations:

Since the Doklam standoff in 2017, Bhutan has become a key player in Sino-Indian relations. On one hand, China has had a convoluted relationship with the small mountain kingdom for many years. For the most part, the estrangement between both countries was a result of Beijing’s annexation of Tibet in 1951 and a long unresolved border dispute. On the other hand, India has fostered a close relationship with Bhutan as a way of preventing China from encircling them. Two years ago, India jumped to Bhutan’s defense when Chinese troops started building a road in Doklam, a territory claimed by both China and Bhutan. After seventy-two days, both the Indian and Chinese armies pulled back and allowed tranquility to temporarily reign over Doklam.

Even with their long unresolved border dispute, Beijing is now seeking to amend relations with the tiny Himalayan kingdom as President Xi understands the geopolitical value of Bhutan as a tool to aid the “Middle Kingdom” in their crusade for Asian hegemony. While Beijing and Thimphu have no established diplomatic ties, Chinese shipments have shot up in the past decade, with goods from machinery and cement to electrical appliances and toys making Beijing the third largest source of foreign products to heavily import-dependent Bhutan. 

Bhutan’s strategic location is the main reason behind Beijing’s renewed interest in establishing a working relationship with the small mountain kingdom. Stuck between two competing regional powers, Bhutan has been struggling to assert its sovereignty and stray away from the decades of heavy dependence on India. In recent years, calls for the Bhutanese government to diversify and loosen up their dependence on India have intensified as many believe establishing a working relationship with other nations could serve to further grow the small Himalayan Kingdom’s economy. Many believe that because of China’s economic prominence in Asia, they are better equipped to offer Bhutan more economic support and tourism exchanges than India. 

For the most part of the 20th century Bhutan was completely isolated, and it was not until 1962 when its first highway was built. However, the small Himalayan kingdom has become increasingly dependent on its immediate neighbors. Such dependence could be clearly seen in 2013 when New Delhi was accused of triggering a fuel crisis by cutting Thimphu’s subsidies on kerosene and cooking gas. Some pundits believe New Delhi took such corse of action as a way to punish the Bhutanese government for fostering closer ties with Beijing. 

Even though many still see India in a more positive light than China, Bhutan’s high youth unemployment rate (10.6% last year) has made young Bhutanese view Chinese investment and aid as a force for greater good as such capital could increase the number of jobs available to the younger demographics. While India has always been generous with loans and grants, Bhutan’s fast-growing economy would be well-served with more investment, and as President Xi has demonstrated through his audacious Belt and Road initiative (BRI), the CCP has deep pockets. 

China’s policy of mixing soft power diplomacy with economic aid has yielded great dividends in South Asia, India’s backyard, especially in countries where New Delhi has historically held sway, such as Sri Lanka and the Maldives. In the last few years, Beijing has been reaching out to to Bhutan through sports, religious and cultural visits as well as scholarships to Bhutanese students; and in mid-2018 China’s then Vice Foreign Minister Kong Xuanyou even visited Bhutan to “discuss the bilateral relationship between the two countries.” As the Sino-Bhutanese relationship devolves, more Chinese tourists are visiting the tiny mountain kingdom - according to official figures, the number of Chinese tourists visiting Bhutan surged from fewer than 20 a decade ago to 6,421 in 2017. 

Over the past year, the CCP has called for Bhutan’s “active participation’’ in the BRI and has claimed that the Himalayan Kingdom greatly admires the BRI. However, Bhutan, like India, skipped both the 2017 and 2019 BRI Forums. While Beijing has focused on intensifying engagement with the newly elected government in Thimphu, in an effort to wean it away from New Delhi’s sphere of influence, PM Tshering has followed PM Modi’s steps and declined to engage in China’s notorious infrastructure program. While the amount of Chinese capital poured into Bhutan has recently intensified, the Bhutanese government is wary of China’s revisionist global ambitions and has preferred to retain its strategic friendship with India.

Since the formal establishment of diplomatic ties more than five decades ago, India has been an incredible asset for Bhutan by providing market for over seventy percent of Bhutan’s hydropower while also investing considerable amounts of capital to develop the tiny Himalayan Kingdom’s export capacity. Hydropower is the centerpiece of the Bhutanese economy, accounting for about 14% of its GDP, and access to the Indian energy market has served as one of the driving forces behind Bhutan’s astounding annual growth rate of 7.5% on average between 2006 and 2015. India has placed significant emphasis on expanding Bhutan’s exporting capabilities as a way to further expand their longtime partnership. An example of New Delhi’s efforts would be the first ever use of Indian waterway to transport cargo from Bhutan to Bangladesh via India; the Indian cargo ship carrying 1,000 tonnes of stone aggregates from Bhutan arrived in Bangladesh through India via the Brahmaputra river, and significantly reduced travel time and transportation cost.  

Recently, there has been a increasing number of calls for the establishment of formal diplomatic relations with China. Such calls are a result of steepening youth unemployment and the ultimate necessity of foreign investment to grow the Bhutanese economy. The question of establishing ties with Beijing has now become a part of the public debate throughout Bhutan and while the private sector is pressuring the newly elected government to develop economic relations with Beijing, PM Tshering does not appear to be fully giving in to such calls and is more focused in extending and improving Bhutan’s historical partnership with India. 

Bhutan has, for the last few years, and will for the unforeseeable future continue to play a significant role in Sino-Indian relations. Especially at times where Beijing’s economic and military might have sharply increased, Bhutan will prove to serve as an invaluable buffer zone between China and India. Having Thimphu as a close ally will greatly assist PM Modi’s plans to prevent the Chinese from implementing their “string of pearls” strategy and furthering President Xi’s dystopian new world order. As we have seen throughout South and Central Asia, the promise of Chinese aid and FDI is too good to be true, and PM Tshering must not give into calls for greater economic intertwinement with the “Middle Kingdom” as the developing Bhutanese economy would not survive a Chinese “debt-trap.”

Photo Credit: PTI