Hedging in South Asia

International Relations of the Asia-Pacific Volume 19, (2019) 493–522
doi: 10.1093/irap/lcz006 Advance Access Publication 14 May 2019
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Hedging in South Asia:
balancing economic and
security interests amid
Sino-Indian competition
1, 2
Darren J. Lim * and Rohan Mukherjee
1
School of Politics and International Relations, College of
Arts and Social Sciences, Australian National University,
0200, Canberra, Australia and 2Division of Social Science,
Yale-NUS College, Singapore
*Email to: darren.lim@anu.edu.au
Accepted 2 April 2019
Abstract
The literature on hedging as a secondary state strategy – built largely
on evidence from United States-China competition in East and
Southeast Asia – focuses on conditions where a major power presents
both an economic opportunity and a security threat. In South Asia, in
contrast, secondary states facing strategic competition between India
and China have pursued hedging strategies in the absence of a security
threat. We develop a theoretical reconciliation of these two phenom-
ena. Hedging at its core involves a trade-off between the material
benefits and autonomy costs of cooperating with a major power in a
competitive environment. States are likely to hedge when these benefits
and costs are simultaneously rising. We test the plausibility of this the-
ory in the cases of the Maldives and Sri Lanka. The autonomy trade-off
International Relations of the Asia-Pacific Vol. 19 No. 3

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494 Darren J. Lim and Rohan Mukherjee
operates both in the absence and in the presence of a security threat,

thus offering a theoretical advancement with greater empirical scope.

1. Introduction
The extant literature on the ‘hedging’ strategy pursued by secondary
states is focused almost exclusively on Southeast and Northeast Asia
(Haacke, this issue). This makes sense since the original concept was
intended to capture the dynamic facing states ‘caught’ between two re-
gional major powers but for whom the traditional security strategies of
balancing and bandwagoning were neither theoretically optimal nor
empirically observed. Most East Asian states have broadly faced such a
dilemma in the 21st century in their relations with the United States
and China.
This dynamic, which persists to the present, is theorized to arise
from two motivations that anchor two alternative concepts of hedging.
The narrower concept arises out of uncertainty regarding the scale of
current and future military threats and states’ capabilities (and those of
their partners) to meet them. Hedging behavior is defined as an align-
ment choice – by avoiding tight alignment with any single major power
and signaling ambiguity regarding the extent of shared security inter-
ests, states retain the flexibility to shift their alignment vis-à-vis each
major power in the future, while continuously trying to reduce the
source of the risk (Lim and Cooper, 2015). The broader concept sees
hedging behavior as a mix of often contradictory or counteracting pol-
icy choices pursued in response to competing national interests given,
like in the narrower version, an environment of uncertainty and risk
(Kuik, 2008, 2016). The source of threat is also a lucrative economic
partner, and secondary states seek to locate a policy equilibrium that
allows them to reap the benefits of economic relations without
compromising fundamental security interests (Goh, 2005; Chen and
Yang, 2013). Common to both logics is the notion that hedging is an
effort to navigate the strategic trade-offs states face (Goh, 2006).
Hedging as a narrow alignment choice is in many ways a subclass of
the broader hedging concept, given that alignment choice can be part
of a suite of contradictory or counteracting risk-management policies.
Both narrow and broad hedging concepts depend upon the existence
of an actual or, in most cases, potential threat – in East Asian cases
Hedging in South Asia 495
coming from a rising China – that creates an environment of strategic

uncertainty, making the traditional responses to military threats bal-
ancing and bandwagoning unacceptably costly or risky. But what if a

secondary state faces two competing major powers, but itself does not
face an actual or potential security threat from either? In that case, the
expectation ought to be that without the need to balance or band-
wagon, a state would enjoy far greater policy flexibility and not face an
incentive to hedge. Such behavior, both signaling alignment ambiguity
and/or the adoption of a contradictory policy mix, would be puzzling.
Yet, this theoretical and empirical possibility is given minimal attention
in the secondary state hedging literature, which assumes that most if
not all East Asian states have some degree of concern regarding China
one day dominating the region (Roy, 2005).
In this article, we interrogate the theoretical logic of a mechanism
that could conceivably result in hedging behavior in the absence of a
current or future security threat. Our logic is grounded in the fact that
secondary states must often sacrifice policy autonomy in order to co-
operate with (and receive benefits from) major powers in both the
security and economic domains. In the trade-off between major power
cooperation and individual autonomy, sometimes the loss of autonomy
becomes unacceptable, and the secondary state must act to reassert it-
self, which manifests as hedging behavior – in most cases, in the form
of a contradictory or counteracting policy, and which may include the
sending of an ambiguous alignment signal.
We posit conditions under which the costs of sacrificing policy au-
tonomy become too great or the benefits received from doing so be-
come too small, in both cases making hedging behavior more likely.
We explore this logic empirically by drawing upon a new pool of case
studies: the experience of South Asian secondary states navigating
between India and China over the past decade. In South Asia, the geo-
politics of China’s rise – and, as we shall see, its vigorous economic
(albeit predominantly financial) engagement with the region – are argu-
ably as consequential for global and regional order as they are in
East Asia. Vital sea lines of communication pass through the Indian
Ocean, and the presence of India as the dominant regional power with
deep historical, political, and cultural ties to the states in the region
presents a source of countervailing and conflicting influence. The ques-
tion is whether and how this dynamic causes secondary states to face
equivalent trade-offs that might cause them to hedge notwithstanding

the relative lack of security threat.
The remainder of this article proceeds as follows. First, we outline

the theoretical logic of the hedging concept under a broader scope con-
dition in which a state may, but need not, be facing a direct security
threat and the conditions under which hedging behavior may neverthe-
less be pursued. We then present descriptive evidence of two cases of
China’s economic engagement with the region (the Maldives and Sri
Lanka) and an analysis of the factors that may be curtailing each
state’s policy autonomy to examine the plausibility of our theoretical
model. This study might thus be considered a hybrid of what George
and Bennett (2005, p. 75–77) would term a ‘plausibility probe’ of a
new theoretical framework and a ‘building block’ study of hedging the-
ories insofar as it presents evidence from an underexplored set of
observations (in the context of hedging). The goal is to leverage this
different empirical context to extend our understanding of the hedging
phenomenon – is hedging pursued, notwithstanding the absence of a
clearly definable threat? If so, why? More specifically, under what con-
ditions does China’s economic engagement in the region, and India’s
response, potentially create policy trade-offs and thus incentives to
hedge?
Our research yields two core conclusions. First, in a descriptive
sense, China’s economic engagement in these two South Asian states is
characterized by the dominance of capital flows, in particular via in-
vestment in large infrastructure projects. Recipient governments have in
turn made certain policy choices that are relatively more accommodat-
ing of Beijing’s interests. Second, both cases confirm the plausibility of
an identifiable version of hedging. The fact that South Asian states do
not have core security interests sitting in opposition to China indeed
permits them to embrace Chinese investment without clearly
compromising national security. Nevertheless, within both states, issues
of compromised policy autonomy have arisen, stemming both from do-
mestic political factors and the countervailing influence of India, which
alter the decision-making calculus of governments regarding the auton-
omy trade-off and strengthen the incentives to hedge. As such, to the
extent that these cases are representative of South Asia more broadly,
secondary states must navigate a trade-off between maximizing the ma-
terial benefits of economic relations with China without disrupting the
delicate political and security equilibrium both domestically and re-

gionally in what is India’s natural sphere of influence.

2. Theoretical framework: hedging in the absence
of security threats
The concept of hedging remains contested within security scholarship,
even among that subset of the literature focused on the strategic
choices of secondary states. The dominant approach characterizes
hedging as a security strategy that bundles mixed or conflicting policy
choices within and across policy domains (Goh, 2005; Kuik, 2008,
2016; Chen and Yang, 2013) as a way of avoiding pure balancing or
bandwagoning behavior. A narrower perspective depicts hedging as a
form of security alignment, either limited or ambiguous in degree, with
(and between) regional great powers (Ciorciari, 2010; Lim and Cooper,
2015). In both conceptualizations, however, the motivation for hedging
is an actual or potential threat of uncertain dimensions that renders
traditional balancing or bandwagoning unacceptably costly or risky in
their finality.
We allow hedging to be conceptualized using either of these logics,
but consider a broader set of scope conditions, in which a state facing
two competing regional major powers need not be substantially moti-
vated by an actual or potential military threat from either. However,
even in the absence of a security threat competition between the major
powers means that cooperation with either may be viewed through a
zero-sum lens and thus potentially seen as harmful to the interests of
the other. In such a hypothetical scenario, the optimal strategy would
be one of two possibilities: first, to develop to the fullest possible ex-
tent positive relations with both powers such that neither views the sec-
ondary state’s actions as concerning (Walt, 1988) or second, to seek
maximum policy autonomy via neutrality and limited cooperation with
both. We ask under what conditions a state might choose otherwise;
that is, to pursue a strategy of mixed policy choices and/or one of am-
biguous security alignment, as is associated with hedging behavior.
We anchor our theory in the assumption that all states hold core
interests in maintaining sovereign independence and autonomy of ac-
tion (Wolfers, 1962). For secondary states, close relations with a power-
ful or dominant state are an obvious source of both security (via
alliances and other security cooperation) and material benefit (via

trade, foreign investment, and other forms of economic interaction).
Such benefits may, however, come at the cost of policy autonomy –

what we term the autonomy trade-off. In the security domain, sacrific-
ing policy autonomy is the standard quid pro quo for receiving the
military protection of a powerful ally (Morrow, 1991; Lim and Cooper,
2015). In the economic domain, autonomy can be compromised under
conditions of asymmetric interdependence that allows the powerful
state to deploy the economic relationship as bargaining leverage over a
broader spectrum of policy domains (Hirschman, 1945; Keohane and
Nye, 1977).
The potential existence of these types of trade-offs is insufficient
by itself to cause hedging behavior; policy adjustments are an inherent
requirement for most types of international cooperation. This is espe-
cially true for secondary states to partner with a friendly power,
especially in the security domain, where the secondary state is faced
with a military capability deficit that would otherwise leave it vulnera-
ble to its adversaries. Moreover, asymmetric interdependence is also
often unavoidable when a smaller economy seeks to reap the gains
from trade with a larger one. Economic cooperation inevitably creates,
at a minimum, a certain degree of vulnerability and thus potential loss
of policy autonomy.
We theorize hedging behavior to become more likely as the terms of
the autonomy trade-off become ambiguous. In the abstract, this means
the benefit received in return for sacrificing policy autonomy and the
cost of sacrificing policy autonomy are both rising. This logic is similar
to the logic of alliance termination (Morrow, 1994; Leeds and Savun,
2007) – if the security benefits of an alliance rise (for example, by de-
terring an external threat) and the costs of maintaining the alliance
and thus sacrificing policy autonomy also rise (for example, by restrict-
ing the operability of the state’s military), then contradictory policies
or ambiguous alignment signals toward the ally, i.e., hedging (con-
ceived broadly or narrowly), are more likely. Our theory broadens this
basic logic to include the realm of economic cooperation, thereby cap-
turing the breadth and complexity of modern relationships between
secondary states and major powers and the fact that major power rela-
tionships are more consequential for secondary states, given the dyadic
asymmetry in capabilities. Our next task is to theorize the causes of
changes over time to the benefits and costs of cooperating with major
powers.
Consider a secondary state S engaged in a cooperative relationship

with major power P. We measure the benefits to S along both security
and economic dimensions. The security benefits of cooperation remain
anchored in the balance-of-power logic of alliances and alignment –
that is, capability aggregation and deterrence against threats (Walt,
1987). S’s benefits from cooperating with P will therefore rise as S’s ex-
ternal security environment deteriorates and S feels increasingly under
threat, and they will fall as the external environment becomes more be-
nign. In the economic domain, cooperation gains will rise as trade, in-
vestment, and other linkages between S and P broaden and deepen,
bringing greater material wealth to S. Equally, as these linkages decline
for whatever reason, the benefits of cooperation will fall.
We measure costs in terms of S’s lost policy autonomy and theorize
two conditions under which such costs from cooperating with a major
power may change. The first relates to P’s specific behavior, namely,
how the political concessions P actually demands in return for cooper-
ation vary. For example, P may require S to support foreign military
adventurism as a condition of alliance cooperation, or P might
threaten to disrupt economic ties if S does not grant concessions on
some political question (such as S’s domestic human rights or voting
within an international organization). The more concessions demanded
– that is, the closer P requires S to align its policies and statements
with P’s preferences – the greater the loss of S’s autonomy and thus
the greater the costs of major power cooperation. Conversely, if P were
to lessen its demands and/or make more concessions to S’s interests,
the cost of cooperation to S would fall and make the relationship more
attractive.
The second condition relates to the domestic politics within S of
cooperating with P. Even if P’s demands for policy alignment do not
change (the first condition is held constant), maintaining an existing re-
lationship of cooperation in which some policy concessions have been
made to P can become more or less politically unpopular, especially
given P’s status as a major power. This mechanism rests on the incen-
tives facing S’s leaders and their policy choices regarding the bilateral
relationship. From P’s perspective, a political backlash within S is only
indirectly related to P’s own behavior and policies, yet from the smaller
state’s perspective, the policy autonomy in its relationship with the

dominant state is diminished and the costs of cooperation are conse-
quently higher. In the security domain, for example, friction regarding

deployments and basing of P’s troops on S’s territory may reduce pub-
lic support for a security alliance. In the economic domain, corruption
scandals emerging from investments financed by P may similarly invite
popular backlash. Conversely, the cost of cooperation to S would fall
if either S or P were able to successfully manage S’s domestic politics,
for example, by providing side payments to interest groups or by tak-
ing steps to increase transparency around the bilateral relationship.
Changes in benefits (security and economic) will interact with
changes in costs to create reinforcing or countervailing effects on the
autonomy trade-off and, accordingly, how S responds. What is the
logic of hedging in this model? We argue that hedging behavior arises
when S faces rising benefits and rising costs, i.e. strengthening incen-
tives and disincentives to cooperate. Under these circumstances, S is
pulled in opposite directions over time, the result being a suite of
mixed policies, at times deepening cooperation with P to capture these
benefits and at times looking to distance itself, reduce the costs of co-
operation, and preserve its autonomy. It is this situation that we argue
represents a dynamic similar to the two existing logics of hedging dis-
cussed earlier. Empirically, we identify a hedging policy disposition
through the one or both of two types of state policy behavior: first,
where the cultivation of positive relations with a major power is ac-
companied by contradictory responses that would normally reflect a
perceived threat from that same power, and second, where the state
emits an overall signal of ambiguity regarding S’s alignment choice be-
tween two competing major powers.
While our model can accommodate a strategic setting in which a
major power does pose a substantial security threat, what distinguishes
our approach from existing understandings of hedging is that such a
threat is not necessary for the model to operate. The model is designed
to capture the dynamics of any major power-secondary state relation-
ship. Where S perceives P to be a threat, aligning with P’s policy pref-
erences is likely to involve a meaningful loss of autonomy (such as con-
ceding a territorial dispute). Where S experiences significant
asymmetric vulnerability in its economic relationship with P, the sec-
ondary state still stands to benefit from the trade and investment the
major power can provide, but if P leverages S’s dependence to demand

policy concessions, the autonomy cost is high. The model is also suffi-
ciently flexible to incorporate how the behavior of another (rival) major

power, R, may affect the secondary state’s calculus. R may view policy
choices by S that are consistent with P’s interests as a zero-sum threat
to R’s own interests and use whatever leverage it has to influence S’s
behavior. Such pressure also erodes S’s policymaking autonomy, as S’s
decision-making calculus is now shaped by the possibility of both ma-
jor powers reacting to those policy choices each deems to be against its
interests. We consider this situation in-depth in our case studies.
Our model differs from existing approaches to hedging by secondary
states in two additional ways. First, our conceptualization of the trade-
off faced by potentially hedging states is broader than the uncertainty
and risk created by a potential military-based security threat. By focus-
ing on policy autonomy, we are able to capture a broader scope of in-
terstate relations and to cover instances where armed conflict is not a
significant concern and where hedging is not only a question of manag-
ing risk. Second, we allow economic interdependence to be not simply
a uniformly positive phenomenon but a source of potentially significant
costs in terms of lost policy autonomy. Seen this way, hedging becomes
more than simply a category of response secondary states might have
toward great-power competition but a nuanced reconciliation of the in-
herent trade-offs in bilateral cooperation with a major power.
Our research design has features of both a building block study and
a plausibility probe. The building block component comprises descrip-
tive inference from cases drawn from the contemporary South Asian
context viewed through the lens of hedging as a contribution to the
existing research program. This is combined with analysis that seeks to
confirm sufficient plausibility of our theoretical model to warrant fur-
ther research.
What is the universe of cases in this subclass? South Asia, as distinct
from East Asia, Southeast Asia, West Asia, and Central Asia, is com-
posed of eight states—Afghanistan, Bangladesh, Bhutan, the Maldives,
Nepal, India, Pakistan, and Sri Lanka—together forming the member-
ship of the South Asian Association for Regional Cooperation
(SAARC), an intergovernmental organization. Of these eight countries,
we exclude India as the competing rising power and major strategic ac-
tor in the region and Afghanistan because of its long-term internal
security instability. Mindful that a single article cannot study all other
six states, we select two – the Maldives and Sri Lanka – that we deem
‘most likely’ cases given, as we will document further, the significant

levels and high profile of Chinese investment in recent years and both
states’ similar strategic value, given their maritime location in the
Indian Ocean. This makes them ideal candidates to probe the plausibil-
ity of our theory of hedging in the absence of a direct security threat.
3. Evidence: navigating great power relations in

South Asia
At the heart of our theoretical framework is the idea that engagement
with major powers brings not only security and economic benefits for
secondary states but costs in terms of lost autonomy. In this empirical
section, we consider the benefits of increased engagement by the
Maldives and Sri Lanka with China in the past decade and whether
and how these benefits have been accompanied by threats to policy-
making autonomy.
For almost all countries globally, increased engagement with China
has been founded upon rapidly growing economic ties, and South Asia
is no exception. However, whereas merchandise trade has been the pri-
mary mode of engagement for OECD and East Asian countries,
China’s merchandise trade relations with South Asian states are not
characterized by the same degree of asymmetry compared to East
Asian countries. It is the domain of capital – whether in the form of
foreign direct investment (FDI), foreign aid (official development assis-
tance), or the issuance of foreign debt – through which China is pri-
marily expanding its bilateral economic engagement with the region.
The Chinese government has consistently increased its development fi-
nancing, in the first instance bilaterally through its policy banks, and
more recently through its signature Asian Infrastructure Investment
Bank and Belt and Road initiatives (Snell, 2015). And throughout, var-
ious governments have accumulated billions of dollars of foreign debt
to Chinese interests, whether on concessional or commercial terms
(Kynge and Wildau, 2015). Seen through a strategic lens, Beijing is us-
ing its considerable financial resources in support of its quest to play a
greater leadership role in shaping both the regional order and interna-
tional system, in service of commercial motivations but also an interest
in promoting economic integration, cultivating political influence, and

enhancing its geostrategic position in the broader region (Yu, 2016).
The question is the extent to which these economic benefits curtail

each state’s policymaking autonomy.
3.1 The Maldives

A string of 1,200 coral islands with a population of under 450,000 situ-
ated on key Indian Ocean shipping lanes (over 80% of trade to and
from Asia passes through its territory), the Maldives is best known for
its major industry, high-end tourism, and it is largely through the lens
of tourism that China’s economic engagement operates. However, for a
tiny nation, the Maldives exhibits strikingly complex political dynamics
that inevitably color analysis of China’s engagement and the counter-
weight influence of India and thus how Malé approaches the autonomy
trade-off.
The Maldivian approach represents a bundle of mixed or conflicting
policy choices and thus fits comfortably within the definition of hedg-
ing notwithstanding the absence of security threat. China provides the
largest proportion (between 25 and 35%) of tourist arrivals – the tiny
island nation’s most important industry – with tourism accounting for
about a quarter of GDP and the bulk of foreign exchange receipts.1
China’s dominance of the island’s most important industry represents
a clear case of asymmetric interdependence. In trade, the Maldives
enjoys the status of ‘approved destination’ granted by the Chinese
Communist Party, and the island’s popularity has been cultivated by
positive coverage in Chinese state-run media (Plowright, 2013; Xinhua,
2015). This kind of assistance can only help arrival numbers and could
easily be withdrawn or indeed reversed.2
The strong growth in tourist arrivals has in turn created openings
for Chinese capital. The Maldives does not itself possess the resources
to undertake large construction projects to meet its dual needs of
1 See Hull, 2011 (which states that tourism earns 28% of GDP and 90% of foreign exchange);
Ministry of Tourism, 2016. On arrivals, see data provided by the Maldives Ministry of
Tourism: Ministry of Tourism, 2018.
2 One author notes that ‘so profuse is the Chinese tourist footprint today that seasonal highs
and lows emanating from the calendar of Chinese festivals and vacations have swing effects
on the Maldives economy’: Chaulia, 2015. See also Lim et al. (2019).
upgrading tourism infrastructure and promoting economic develop-

ment. Capital has thus played an increasingly prominent role in bilat-
eral economic relations in recent years, starting with an initial aid

grant of $8 million in May 2010. An illustrative and controversial ex-
ample is the Velana International Airport (earlier known as the
Ibrahim Nasir International Airport) located in the capital, Malé.
In 2009–10, the Maldives government, led by then-President
Mohamed Nasheed, conducted a competitive tendering process in part-
nership with the World Bank to attract private investors to modernize
the Malé airport. The successful bidder was a consortium composed of
Indian firm GMR and Malaysia Airports Holdings. Representing the
largest foreign direct investment in the country’s history – at around
$500 million – the consortium would expand, upgrade, and operate the
airport for 25 years (Seth, 2010). However, in the aftermath of an ex-
tended political crisis in early 2012 in which Nasheed resigned the pres-
idency and was replaced by Vice-President Mohammed Waheed
Hassan, the airport contract was cancelled in November 2012. There
had been ongoing tensions regarding the proposed levying of a per-
passenger $25 airport development charge (Phadnis, 2011; Ramana,
2012), and the Waheed government claimed that ‘technical, financial
and legal’ issues forced their hand. However, the opposition claimed
the cancelation occurred to appease extremist Islamic and anti-India
fringe elements of Waheed’s political coalition (BBC Monitoring,
2012),3 and the President’s outreach to China since taking the job
from Nasheed only added to the perceived anti-India tilt (Indo Asian
News Service, 2012).4 In India, the decision was viewed as signaling a
decisive shift in the Maldives’ alignment away from India toward
China (Bagchi, 2012).
Amid the controversy over the cancelation, the Maldives government
dismissed suggestions that China would be involved in future plans for
the airport, even as its Defense Minister traveled to Beijing to deepen
3 Indeed, tensions had flared just prior to the cancelation after the Indian High
Commissioner had been personally criticized by government officials: PTI, 2012.
4 Coincidentally, prior to departing for China a few months prior, Waheed claimed agree-
ments for economic assistance worth $500m would be signed—the same value as the
canceled contract—$150m for housing and infrastructure and $350 from China’s Exim
Bank: Aneez, 2012. Reporting after the trip suggests that $150m housing loan indeed pro-
ceeded, but it seems the Exim loan would not be concluded until late 2015 as discussed
earlier.
military ties (BBC Monitoring, 2012; Krishnan, 2012). Nevertheless, in

September 2014, the Maldives government (now led by President
Abdulla Yameen) awarded a new contract to Beijing Urban

Construction Group Company Limited to expand (but not operate)
the airport. In December 2015, the Maldives entered into an agreement
with China’s Exim bank for a new runway and other facilities, with
construction beginning on the now $800 million (and not yet fully
funded) project in April 2016 (Naafiz, 2015b).5
The airport contract portended a significant expansion of Chinese fi-
nancing. Following further political crises surrounding the 2013 presi-
dential elections, newly elected President Abdulla Yameen visited
China in August 2014, securing an aid grant of $16 million and prom-
ises to build a 1.39 km ‘China-Maldives Friendship Bridge’ between
the capital Malé and the nearby island of Hulhumalé – the location of
the international airport (BBC Monitoring, 2014) – as well as an invi-
tation to join China’s Maritime Silk Road (MSR, part of the Belt and
Road Initiative). The following month, Chinese President Xi Jinping
made a historic visit to the Maldives, during which the two sides for-
malized the airport contract (Bosley, 2014). A few months later, the
MOU for the bridge was signed and the Maldives formally joined the
MSR (Aneja, 2014).
Chinese capital is thus now a significant presence in the Maldives’ fi-
nancial accounts. While a small percentage has come via outright
grants, the majority came via soft loans for the two headline infrastruc-
ture projects – the airport redevelopment and friendship bridge –
placing the island nation in increasingly large amounts of foreign debt.
Foreign Minister Ahmed Naseem acknowledged in an interview in
April 2016 that by the end of the year, Maldives could owe 70% of its
external debt to China (Parashar, 2016). The following month, the
International Monetary Fund issued a statement of concern regarding
debt sustainability during its regular Article IV consultations, stating
that ‘the planned infrastructure scale up in the 2016 budget is
unprecedented’ (2016, p. 5). Government officials have been forced to
respond to concern that the Maldives may become the ‘next Sri Lanka’
and be unable to escape or significantly renegotiate its debt obligations
(Mitra, 2017).
5 On the airport funding, see: Junayd, 2016.

Are Beijing’s steadily growing tourism and financial links with Malé
encroaching on the government’s policymaking autonomy? The cost-
benefit calculus facing the Maldives government cannot be calculated

without first accounting for the turmoil and controversy that has over-
shadowed Maldivian politics for the majority of the period. The 2008
elections were the first democratic presidential polls in the country, in
which Mohamed Nasheed, leader of the Maldivian Democratic Party
(MDP), defeated Maumoon Abdul Gayoom, who had been in power
for 30 years – at the time South Asia’s longest serving leader. However,
Nasheed’s resignation in early 2012, allegedly under duress, sparked a
political crisis that, in some ways, has waxed and waned continuously
to the present (Burke, 2012).6 Nasheed’s replacement, Mohammed
Waheed Hassan, denied international calls for early elections and
praised China for noninterference while criticizing ‘other influential
countries’ for interfering in Maldivian internal affairs (Ganapathy,
2012). In February 2013, a year after his resignation, Nasheed sought
political refuge at the Indian High Commission to evade arrest (Revi,
2013). Elections were finally held in September 2013, only to see the
Supreme Court suspend the run-off election and annul the first round
of voting, alleging polling irregularities (Kasturi, 2013). When the two-
round process was finally concluded in November, Nasheed lost (de-
spite winning over 45% of the first round votes) when anti-Nasheed
groups coalesced around Abdulla Yameen, the nephew of longtime
leader Gayoom, who won 51.3% of the final vote as leader of the
Progressive Party of Maldives (PPM).
Yet a return to turmoil was not far away. In February 2015, a new
crisis emerged with the arrest of the Defense Minister on charges of
treason, the sacking of the Chief Justice of the Supreme Court, and
the removal of the Auditor-General (Pubby, 2015). Nasheed, now the
central opposition leader, was also arrested, convicted, and sentenced
under antiterrorism laws for 13 years in a trial that attracted wide-
spread international condemnation (Editorial Board, 2015). In
September of that year, a bomb blast aboard the President’s speedboat
apparently targeted Yameen, and Vice President Ahmed Adeeb – who
had only been in the job three months following the impeachment of
his predecessor – was arrested the following month. Other senior
6 See a subsequent interview with Nasheed: Malhotra, 2012.

officials and ministers were sacked, including the new defense minister
(Visham, 2015). In 2016, a high-profile documentary by Al-Jazeera al-
leging high-level corruption was followed by government crackdowns,

the Maldives’ withdrawal from the Commonwealth (it had been facing
suspension following the crackdowns), and, in November, the former
leader Gayoom publicly splitting from Yameen’s PPM party
(Praddock, 2016; Mitra, 2016).
Amid these tumultuous domestic politics is an additional factor, the
increasing prominence of hard-line conservative Islam and the decline
of traditional worshipping practices (Guardian, 2011). A 2007 bombing
in Malé was carried out by suspected fundamentalists, and a pillar of
the opposition against the Nasheed government in the lead-up to his
2012 resignation was his alleged ‘anti-Islamic’ policies (Burke and
Milton, 2013). The country is also a recruiting ground for Jihadists
fighting in the Middle East (Bosley, 2015). Saudi Arabia is a major
source of finance, most recently in September 2016 when it granted the
Maldives a $150 million loan to cover other debt obligations, as well as
investing in the upgrading of the international airport.7 A few months
after this loan, it was announced that the Maldives government paid
over $270 million in damages to the GMR consortium to resolve the
dispute over the 2012 airport contract cancelation (Junayd, 2016).
Further complicating the autonomy trade-off is the counterweight
influence of India. The island nation is part of India’s natural sphere
of influence and critical to India’s strategic interests in the Indian
Ocean. Delhi has long taken a keen interest in Maldivian affairs, most
notably in 1988 when it dispatched troops at then-President Gayoom’s
invitation to put down an attempted coup against him. India has also
long been the nation’s largest investor and provider of foreign aid.
Unsurprisingly, any action that brings Malé and Beijing closer together
causes consternation among Indian officials, and since at least 2009,
both the press and strategic analysts have consistently characterized the
island nation as a venue for Sino-Indian strategic rivalry.8 However, the
Indian government has also exhibited reluctance to step in and act de-
cisively to resolve the ongoing political crises that have plagued the na-
tion, especially since Nasheed’s resignation in 2012. This may be
7 Rasheed (2016); Hameed (2016). See also: Chandra (2016).

8 See, e.g. Malhotra (2009); Pandit (2011); Pant (2012); Baruah (2015).
because Delhi is wary of openly taking sides in a messy domestic dis-

pute and is indeed unsure of whose side to take (Roche, 2015)9 or be-
cause it fears antagonizing Malé further into Beijing’s embrace (Pant

2013). India’s position has thus wavered in the middle; for example,
Delhi accepted Waheed’s elevation to the presidency following
Nasheed’s controversial resignation in early 2012, but then also ac-
cepted Nasheed into its High Commission when he faced the prospect
of arrest, to the strong protest of the Waheed government (Revi, 2013).
The above discussion highlights the complexity of the autonomy
trade-off facing the Maldivian government. It is beyond doubt that the
benefits of economic engagement with China are rising for the
Maldives. And while Delhi is increasingly uncomfortable with the deep-
ening of economic links, it is less clear that Beijing has demanded spe-
cific policy concessions in return. The pattern so far suggests Malé will
consistently follow the forging of new ties with Beijing while seeking to
enhance engagement with Delhi and publicly restating the centrality of
India to the Maldives’ foreign policy. In the words of President
Yameen in 2014, China ties are ‘very close’, but those with India are
‘far more precious’ (PTI, 2014). This duality is strikingly consistent:
shortly after Beijing opened its embassy in the capital in November
2011, gifting the construction of two new public buildings, Malé hosted
Indian Prime Minister Manmohan Singh, signing various deals, includ-
ing a new credit line. Following Xi Jinping’s visit in September 2014
and Malé’s embrace of the MSR, India’s foreign minister visited in
November, during which Indian foreign ministry spokesperson Syed
Akbaruddin attempted to downplay the initiative: ‘There was a Silk
Route, but there was also a Spice Route, a Mausam Route, and other
routes’ (Telegraph, 2014). Moreover, throughout this period of steadily
growing economic ties, Malé has consistently looked to cement and en-
hance defense and security cooperation with Delhi.10 Following his vic-
tory in the rerun presidential election in late 2013, Yameen opted to
visit India for his first foreign trip.
Perhaps encapsulating the delicate mix of interests and sensitivities
best was the decision by the Maldives legislature to amend the coun-
try’s constitution in July 2015 to allow foreign ownership of land
9 Nasheed has consistently called for heavier Indian intervention.

10 See, e.g. Ganapthy (2012); Roche (2016).
(provided 70% is reclaimed on investments of $1 billion or more). On

its face, this appeared to validate concerns that the growing Chinese in-
fluence was imposing meaningful strategic costs on India (Burke,

2015). For years prior, rumors had swirled that China was looking to
acquire or control land, for example, on Laamu Atoll, in order to es-
tablish a military base as a key element in its ‘string of pearls’ mari-
time strategy. The constitutional amendment seemed to be a decisive
move to facilitate this process (Parashar, 2016).11 The fact that a pro-
cess that normally takes weeks or months was concluded in 48 hours,
almost completely bypassing orthodox channels of consultation and
deliberation, was highlighted as clear evidence of Beijing’s hand (Roy,
2015).12 An opposition lawmaker asserted, ‘this will make the country
a Chinese colony’ (Kumar, 2015). Nevertheless, in the weeks following,
Malé sought to assuage Delhi’s concerns. In August, Yameen sent a
letter to India saying Maldives would not allow China to set up mili-
tary bases, and the following month, Yameen hailed ‘crucial’ Indian as-
sistance (Pasricha, 2015; Pandey, 2015); defense and economic ties
would strengthen further with the visit of India’s Foreign Minister in
October (BBC Monitoring, 2015). President Yameen even went as far
as to say that the Maldives had a policy of ‘India First’ (Naafiz,
2015a). Meanwhile, the Maldives had on the table a standing offer
from India to exclusively develop a different site (iHavan) as a tran-
shipment port, in which China had reportedly also been interested ear-
lier (Mitra, 2015).13
The constitutional amendment events suggest that while Malé is
comfortable with the prospect of an enhanced Chinese presence, the
government recognizes the constraints on its autonomy in that policy
concessions yielding major strategic benefits to Beijing would invite
countermeasures from Delhi. The Maldivian government has therefore
sought to preserve its autonomy through its frequent gestures to India.
11 The Chinese embassy in Malé had earlier denied this possibility: Miadhu (2015). In
December 2016, a Chinese company would receive a 50-year lease over an island close to
Malé: Chaudhury (2016).
12 As similar process played out in late 2017 when the Maldivian legislature passed a free
trade agreement with China totaling over 1,000 pages with less than an hour of discussion:
Reuters (2017 Reuters. (2017) ‘Maldives Rushes through Trade Pact with China Despite
Opposition’, Reuters News, 9 December.").
13 On China’s interest see: FPJ Bureau (FPJ Bureau. (2012) ‘Shadow Boxing in the
Maldives’, Free Press Journal, 6 December."2012); Xinhua (2014).
In totality, the Maldivian approach represents a bundle of mixed or

conflicting policy choices and thus fits comfortably within the defini-
tion of hedging notwithstanding the absence of security threat. In

2011, then Foreign Minister Ahmed Naseem stated in an interview:
‘We have a simple solution on the India-China rivalry. We never do
anything in secrecy. We keep the Indians informed of what we are plan-
ning with China before anyone tells them anything in private’ (Velloor,
2011). Such a strategy of openness, as well as adroitly managing
Delhi’s sensitivities, appears to have allowed the Maldives to increase
quite substantially its foreign debt to China, and thus potential expo-
sure to Chinese influence, while keeping India from becoming too
dissatisfied with the strategic landscape such that Delhi would be
forced to take stronger action that would sharply raise autonomy costs.
We note that in 2018, the country descended into political crisis once
again, as Yameen responded to a Supreme Court ruling exonerating
jailed opposition lawmakers by arresting the Chief Justice and declar-
ing a state of emergency. However, a contentious election resulted in
the surprising victory of the opposition Democratic Party’s Ibrahim
Mohamed Solih, a colleague of Mohamed Nasheed. Upon assuming
office, the new administration learned that the country owed China al-
most $3 billion, not the widely estimated $1.5 billion (Bengali, 2018) –
potentially representing a significant curtailment on policy autonomy.
It remains to be seen whether this leads to further hedging behavior.
3.2 Sri Lanka

Like the Maldives, Sri Lanka has also pursued a hedging strategy,
though domestic factors have played a greater role in conjunction with
Indian efforts to raise the autonomy costs of cooperating with China.
Sri Lanka is perhaps the furthest along in terms of its economic en-
gagement with China. While China does not dominate the country’s
merchandise trade, Beijing has poured billions of dollars into various
infrastructure projects across the country (Lim and Mukherjee, 2017).
The Sri Lankan government under its immediate past Prime Minister,
Mahinda Rajapaksa (2005–15), found Chinese investment to be a par-
ticularly attractive proposition. Starting in 2009, in the aftermath
of the bloody end of Sri Lanka’s civil war, when a cloud hung
over Colombo’s military tactics and human rights abuses – particularly
in the eyes of the West, and even India for a time – China was the
only country that came to Rajapaksa’s financial aid in the postwar
reconstruction effort.14 The principle of noninterference and the no-

questions-asked approach that undergird much of China’s economic
diplomacy were a welcome source of both finance and legitimacy for
Colombo in a time of need.15 These aspects of Chinese investment
also fit comfortably into Sri Lanka’s political economy. As revealed by
the government that succeeded him in 2015, Rajapaksa and his family
– whom he had placed in positions of power within his government –
were involved in a number of questionable deals and practices, which
ultimately led to full-scale investigations of bribery and corruption
under his regime (Guardian, 2015; Ramakrishnan, 2016; BBC, 2016).
China’s economic engagement in Sri Lanka has mostly taken the
form of loans for large-scale infrastructure projects. Prominent among
these are a major port at Hambantota in Southern Sri Lanka (valued
at US$1.5 billion: Aneez, 2011), an international airport in the same
district (US$209 million: Pattanaik, 2015), Sri Lanka’s first coal-fired
power plant at Norocholai in Puttalam district (US$1.35 billion:
AidData, 2014), and the Colombo Port and Port City project (US$1.4
billion: Dibbert, 2016). These investments broadly follow a similar
pattern. Spearheaded by Chinese state-owned enterprises (SOEs), the
infrastructure projects are launched as responses to both real and per-
ceived demand originating in the Sri Lankan government (Zhu, 2015).
The Hambantota port, for example, was a pet project of President
Rajapaksa in his home district and thus received the due attention of
Chinese SOEs as a major opportunity. The competitiveness of Chinese
firms’ bids for infrastructure projects and their ability to deliver quick
results are an additional factor that has led the Sri Lankan government
to deepen its reliance on them.
However, certain characteristics of these deals tipped them in
Beijing’s favor. First, negotiations over the contracts for these projects
tended to be opaque, with a lack of public information and even intra-
governmental awareness of the terms and interest rates of Chinese
loans – later found to be weighted against the Sri Lankan government
14 Sri Lanka’s emergence from its civil war also occurred amid the global financial crisis,
which also limited the availability of western finance.
15 On the principle of noninterference, see Zheng (2016).
(Bearak, 2015; Gowen, 2015). Worse, the projects funded and con-
structed by Chinese firms in Sri Lanka so far have proved financially
unviable. The Hambantota port was opened in 2010 and by 2014 was

not generating sufficient revenue to meet its debt obligations (Barta,
2014). The Sri Lankan government had to step in to cover the differ-
ence, thus requiring the raising of further debt. The airport at
Hambantota has suffered a similar fate. Not only was the interest rate
on the loan amount raised from 1.3% to 6.3% in 2013 without expla-
nation (though it was reportedly done to give local firms greater equity
stakes while compensating the Chinese investors in the process:
Pattanaik, 2015), the airport itself saw vastly insufficient traffic and
had to be shut down in March 2015.
As a result of adverse terms and poor viability, the main outcome of
big-ticket Chinese investments in Sri Lanka has been the further in-
debtedness of a Sri Lankan government already suffering balance of
payments pressures. In early 2015, the government owed $42.2 billion
to external creditors, around 55% of GDP (increasing to $49.1 billion
and 60%, respectively, by mid-2017).16 Interest payments were consum-
ing 35% of government revenue, by far the highest among other lower-
middle-income countries.17 Notwithstanding the fact that debt to
Chinese interests only represented around 10% of the total burden
(Weerakoon and Jayasuria, 2019), a high level of overall indebtedness
gave Beijing financial leverage as a creditor willing to offer debt relief,
enabling the conversion of these debts into assets with greater strategic
upside. In December 2017, the government effectively handed over the
Hambantota Port to Chinese interests (via a 99-year lease), with the
proceeds primarily being used to pay down debt (Stacey, 2017).
To the extent that Sri Lanka has ostensibly lost control of a large
and strategically located port, its future policy autonomy has clearly
been curtailed. However, this cost arose not through coercion or influ-
ence leveraged through asymmetric interdependence but because of
poor investment decisions that created an unsustainable debt burden
(Lim and Mukherjee, 2018). Nevertheless, the autonomy cost to
16 Data collected from Central Bank of Sri Lanka, ‘Quarterly External Debt Statistics’.
https://www.cbsl.gov.lk/en/statistics/statistical-tables/external-sector (16 April 2019, date
last accessed).
17 Data collected from the World Bank, ‘World Development Indicators’. http://databank.
worldbank.org/data/home.aspx (16 April 2019, date last accessed).
continued engagement with China is significant and exacerbated by the

domestic political backlash against China’s so-called ‘colonization’ of
Sri Lanka. This was most prominently on display during the general

election of early 2015, in which Maithripala Sirisena – Rajapaksa’s for-
mer colleague – came to power on an anti-corruption platform that fo-
cused squarely on the Rajapaksa government and its dealings with
Chinese firms. Subsequently, violent protests erupted in Hambantota
over plans to develop an industrial zone for Chinese firms that would
require resettlement of existing communities (Economist, 2017).
Adding to the rising autonomy costs has been the response of re-
gional power India. Delhi has played a major role in Sri Lanka’s for-
eign policy calculus for decades, their fates tied together by the ethnic
bond between Tamils in both countries. The 1987 Indo-Sri Lanka
Accord emerged out of Indian intervention in the ongoing civil war –
including the dispatch of Indian troops between 1987 and 1990 – and
formally placed Sri Lanka firmly within India’s strategic orbit. The
welfare of Sri Lanka’s minority Tamil population, a highly sensitive is-
sue in Indian domestic politics, adds to the depth of Delhi’s interests
in the country. The two countries possess not just a shared cultural his-
tory but also substantial economic ties, which China has been unable
to match as yet. These include a free-trade agreement, a considerable
volume of transshipment through Colombo Port, and a stock of FDI
in Sri Lanka 1.5 times greater than China’s in 2015, the most recent
year for which data are available. This ratio has likely diminished since
2015, but the broader point about India’s substantial financial presence
in Sri Lanka remains valid (Bhatia, 2016; US State Department, 2017).
Accordingly, all the above rising costs have created the conditions
for hedging behavior by Sri Lanka. Consistent with this theoretical
prediction, Colombo has at times pursued policies adverse to Chinese
interests. In response to Indian pressure, the Rajapaksa government
scrapped plans for a small Chinese aircraft repair base at Trincomalee
(Crabtree, 2015). After Sirisena’s presidential election victory on a plat-
form more skeptical toward Beijing in 2015, the new government ini-
tially announced investigations into a number of the large projects
sanctioned by the previous government, also signaling a desire to re-
duce its financial dependence on China by renegotiating loan terms
(Aneez, 2015).
Of course, the reality of Sri Lanka’s financial position limited the

extent to which the Sirisena government was able to follow through on
its initial China skepticism. Facing such a crushing debt burden, the

government had little choice but to maintain positive relations with its
largest creditor and make deals like the Hambantota Port lease de-
scribed earlier (Lim and Mukherjee, 2017). Nonetheless, the election
and Colombo’s changed attitude under Sirisena demonstrates the au-
tonomy costs attached to the massive financial investments accepted by
Sri Lanka. This leaves the government facing strong incentives to en-
gage with both major powers and thus generating the foundations for
hedging behavior or, in the words of the Sirisena government’s first for-
eign minister, Mangala Samaraweera, an ‘omnidirectional foreign poli-
cy’ (Yamada, 2015).
4. Analysis and conclusions

We aim to extend the literature on secondary state hedging by develop-
ing a theoretical model in which states hedge not in the shadow of a
direct if uncertain security threat but because cooperation with major
powers in both the security and economic domains requires policy con-
cessions that may compromise the secondary state’s policymaking au-
tonomy in unacceptable ways. Our core argument is that such states
will hedge when they face both rising benefits from cooperation and
rising costs from lost autonomy. The autonomy trade-off arises either
because the cooperating major power demands policy concessions, do-
mestic political factors render continued cooperation more difficult for
political leaders, or because a third party major power intervenes to
safeguard its own interests vis-à-vis the cooperating major power.
We employ two case studies, the Maldives and Sri Lanka, in part to
seek descriptive inference regarding the nature of China’s economic en-
gagement with South Asia as a discrete contribution to the hedging lit-
erature and as ‘most likely’ cases to probe the plausibility of our theo-
retical account of hedging as a response to the autonomy trade-off. We
find in both cases policy choices that plausibly constitute hedging. In
the case of the Maldives, despite almost constant domestic political
turmoil, the government of the day has consistently both accepted
Chinese financing (and the resulting debt burden) while respecting
India’s strategic sensitivities. In the case of Sri Lanka, a domestic
political backlash to Chinese money and its ties to the Rajapaksa gov-
ernment brought about a change of government, though the burden of
Colombo’s debts to Chinese interests has yielded strategic upsides for

Beijing.
Although India is geographically more proximate to the Maldives
and Sri Lanka than China, this does not translate into an asymmetry
of interests or capabilities between India and China with regard to
South Asia. In other words, the outcomes we observe are not the result
of any calculation on the part of South Asian secondary states that
India’s proximity implies a greater willingness and ability on New
Delhi’s part – compared to Beijing – to impose costs on them for
straying from India’s sphere of influence.18 The northern Indian Ocean
is of vital importance to China for reasons of trade and geopolitical in-
fluence. Without a secure footing in this region, Beijing’s plans of a
Maritime Silk Road as part of the Belt and Road Initiative are likely
to amount to very little. Therefore, this region can safely be assumed
to be of great strategic value to China, and South Asian states are not
unaware of this reality. As for capabilities, China’s growing naval pres-
ence is increasingly able to impose steep costs on India’s naval domi-
nance in this region. Moreover, while India would need to engage the
riskier and costlier option of military power in order to coerce its
neighbors, China need to only rely on the threat of economic coercion
to do the same. Therefore, it is safe to assume that there is no substan-
tial asymmetry of interests and capabilities between India and China
from the perspective of South Asian secondary states.
Although our goal is not to directly compare the cases with each
other, i.e. our focus is on the qualitative identification of hedging rather
than its quantitative extent, it would seem that Sri Lanka’s autonomy
trade-off is, to date, greater than the Maldives’ via all three mecha-
nisms: China has secured greater policy concessions from Sri Lanka;
Sri Lanka’s relations with China have been more politically contentious
domestically; and India has gone to greater lengths to curtail
18 Our model does not assume India itself as posing a traditional security threat to other
South Asian states (except Pakistan) – such as via a territorial dispute. Instead, it charac-
terizes India’s history of involvement as a key element of each secondary state’s autonomy
trade-off. Even if India was viewed by these states as representing a more traditional secu-
rity threat, the model is sufficiently flexible to incorporate such events as sharpening the
autonomy trade-off faced by the secondary states.
Colombo’s freedom of action with regard to Beijing. The reasons for

this are likely two-fold. First, Sri Lanka is perhaps farther along in
terms of its economic engagement with China; hence, China’s interests

and capabilities for influence are greater than in the Maldives. Second,
Sri Lanka’s policy concessions to China have greater security implica-
tions for India. For example, Indian analysts fear that the Hambantota
port now leased to China can be used to enhance China’s naval pres-
ence in the region, both materially and in terms of maritime domain
awareness and intelligence gathering. Unsurprisingly, Sri Lanka has
hedged on the security issue as well, first allowing a handful of
Chinese submarines to dock at Colombo Port in 2014, then announc-
ing under Sirisena’s new government in March 2015 that submarines
‘from whatever quarter’ would not be allowed to dock at Sri Lankan
ports (Panda, 2015), and finally reversing course a few months later to
announce that ‘ships including submarines from all countries can visit
Sri Lanka’ (Velloor, 2015).
Our empirical contribution of cases not considered earlier by the
hedging research program allows the concept to take on a more expan-
sive and central role in the study of great-power and major-power
contests for influence in secondary states. For example, although many
secondary states during the Cold War did not have to engage in hedg-
ing due to their alliance with one or the other superpower, nonaligned
states likely faced the kinds of autonomy costs we have described in
this article. So far, the hedging literature has overwhelmingly focused
on the post-Cold War world – our analysis suggests an entirely new
universe of cases from the Cold War for future research.
In the post-Cold War world, hedging has typically been studied in
the East Asian context, i.e. as an effort by smaller states to maintain a
delicate equilibrium when various forces, and the associated uncertainty
and risk, are pulling them in opposing directions. Our plausibility probe
has shown that other forces exist in South Asia, which produce similar
results in terms of efforts to maintain equilibrium. In both regions,
hedging describes this balancing act, and its value as a concept stems
from understanding the causal mechanisms that create these opposing
forces, since these will reveal much regarding regional stability and
power transitions as China and India’s growing power and influence
spills over into each other’s strategic backyard.
ACKNOWLEDGEMENTS
This paper emerged from a workshop hosted by the Saw Swee Hock
Southeast Asia Centre at the London School of Economics and Political

Science in September 2017. The authors thank the workshop’s organizers and
participants, as well as Nicolas Blarel, Walter Ladwig, Victor Ferguson, and
the two anonymous reviewers for helpful comments and feedback.
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Hedging in South Asia

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International Relations of the Asia-Pacific Volume 19, (2019) 493–522

doi: 10.1093/irap/lcz006 Advance Access Publication 14 May 2019

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Accepted 2 April 2019

International Relations of the Asia-Pacific Vol. 19 No. 3

operates both in the absence and in the presence of a security threat,

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coming from a rising China – that creates an environment of strategic

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equivalent trade-offs that might cause them to hedge notwithstanding

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delicate political and security equilibrium both domestically and re-

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alliances and other security cooperation) and material beneﬁt (via

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state’s perspective, the policy autonomy in its relationship with the

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major power can provide, but if P leverages S’s dependence to demand

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3. Evidence: navigating great power relations in

in promoting economic integration, cultivating political inﬂuence, and

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3.1 The Maldives

upgrading tourism infrastructure and promoting economic develop-

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military ties (BBC Monitoring, 2012; Krishnan, 2012). Nevertheless, in

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5 On the airport funding, see: Junayd, 2016.

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6 See a subsequent interview with Nasheed: Malhotra, 2012.

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7 Rasheed (2016); Hameed (2016). See also: Chandra (2016).

because Delhi is wary of openly taking sides in a messy domestic dis-

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9 Nasheed has consistently called for heavier Indian intervention.

(provided 70% is reclaimed on investments of $1 billion or more). On

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In totality, the Maldivian approach represents a bundle of mixed or

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3.2 Sri Lanka

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continued engagement with China is signiﬁcant and exacerbated by the

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Of course, the reality of Sri Lanka’s ﬁnancial position limited the

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4. Analysis and conclusions

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Colombo’s freedom of action with regard to Beijing. The reasons for

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Lim, D. J., Ferguson, V. A. and Bishop, R. (2019) ‘Chinese outbound tourism

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Snell, S. (2015) ‘China’s Development Finance: Outbound, Inbound, and

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