China’s entry into SAARC: Gateway to South Asian prosperity

A SAARC revitalised by Chinese membership would cease to be a peripheral talking shop and become a formidable actor on the world stage

“China as a full member of SAARC? At first, the idea may sound bold, even strange. But it could be the spark the region needs to move forward. For years, SAARC has carried a huge promise; a platform to connect markets, people, and ideas across South Asia. Yet political tensions have often slowed its progress. Bringing China into the fold could give SAARC fresh energy, new opportunities, and a stronger voice in the world.” 

China’s entry could change that. With its huge economy, global influence, and experience in building connections, China can inject new life into SAARC. It could open bigger trade opportunities, boost regional projects, and make SAARC more visible on the world stage.

The economic argument for China’s full membership in SAARC is not merely compelling; it is an undeniable reflection of the present-day reality. China is no longer a peripheral trading partner; it has fundamentally rewired the economic circuitry of South Asia, becoming the single largest or one of the top two trading partners for every single nation in the bloc. SAARC represents a market of over 1.9 billion people, but intra-regional trade languishes at a dismal 5% of its total trade, compared to 35% in ASEAN. China, as the world’s second-largest economy and the largest trading partner of most SAARC nations, can fundamentally alter this equation. 

Despite geopolitical tensions, China remains one of India’s largest goods trading partners, with bilateral trade hitting a staggering $ 130 billion in 2024. This figure dwarfs India’s trade with any SAARC nation. China is Pakistan’s largest trading partner and its largest source of imports. The China-Pakistan Free Trade Agreement has solidified this relationship, which is the cornerstone of the $ 65 billion China-Pakistan Economic Corridor (CPEC).

Sino Bangla bilateral trade exceeds $ 25 billion. It is the primary source of imports, particularly of machinery, textiles, and electronics, crucial for Bangladesh’s booming manufacturing sector. Similarly Nepal’s economic dependency on China has grown exponentially. China is its second-largest trading partner and a vital source of foreign investment. Trade, heavily skewed towards Chinese imports, is valued at over $ 2 billion, and Nepal actively seeks to reduce its trade deficit through greater market access for its goods.

China is one of Sri Lanka’s largest trading partners

China is one of Sri Lanka’s largest trading partners and, critically, its largest source of foreign direct investment and infrastructure financing over the past decade, funding iconic projects like the Hambantota Port and Colombo Port City. The Maldives’ “China In” policy shift underscores its economic reorientation. China is its largest source of imports and a key partner for tourism infrastructure and development projects.

The aggregate value of China’s trade with SAARC nations is well over $ 200 billion, utterly dwarfing the intra-SAARC trade volume, which struggles to reach $ 23 billion. This disparity is not just a number; it is a symptom of SAARC’s failure to create a viable internal market and a testament to the irresistible pull of the Chinese economy.

China’s economic influence in South Asia extends far beyond trade, where it is the top partner for every SAARC nation with flows surpassing $180 billion. It is also the region’s foremost investor and builder, directing billions in foreign direct investment especially in energy, telecoms, and manufacturing and financing major infrastructure via the Belt and Road Initiative (BRI), the AIIB, and Silk Road Fund. These funds develop critical assets: hydropower in Nepal and Pakistan, ports like Gwadar and Hambantota, and digital networks across the region. 

Yet, this largely bilateral approach risks fragmented outcomes and debt concerns. Granting China full SAARC membership would shift this dynamic toward multilateral planning, enabling coordinated projects like a regional energy grid or integrated transport corridors that leverage Chinese resources for collective benefit turning standalone investments into a strategy for region-wide integration and resilience.

China’s Belt and Road Initiative BRI, particularly the CPEC and potential linkages with Bangladesh, Nepal, and Sri Lanka, offers a blueprint for regional connectivity. Imagine these national projects evolving into a seamless, SAARC-wide infrastructure network. China’s expertise and investment capacity could accelerate the integration of energy grids, road and rail networks, and digital infrastructure, directly addressing the critical physical barriers to trade within South Asia. 

China’s presence could act as a stabilising force

Politically, China’s presence could act as a stabilising force. The current India-Pakistan deadlock has rendered the SAARC summit process inert since 2014. While no single nation can resolve this bilateral complex issue, China’s unique position enjoying a strategic partnership with Pakistan and a simultaneously complex but major economic relationship with India allows it to play a facilitative role. Within the SAARC framework, China could act as a neutral arbiter of dialogue, encouraging a shift from bilateral disputes to multilateral cooperation on shared challenges like climate change, terrorism, and water security.

Furthermore, for smaller SAARC nations like Nepal, Bhutan, Bangladesh, and Sri Lanka, China offers an additional avenue for economic engagement and a counterbalance that can empower them within the bloc. This can lead to a more balanced and equitable SAARC where decisions are driven by collective consensus on development, rather than overshadowed by a single bilateral rift.

A SAARC revitalised by Chinese membership would be a more significant actor on the global stage. On issues ranging from climate change to pandemic response and UN peacekeeping, a united South Asia-plus-China bloc would command greater attention and negotiate from a position of strength. This aligns perfectly with the modern global movement towards multi-polarity and regional solutions to global problems.

Economically integrated regions are also more peaceful. The profound economic interdependence that would result from China’s inclusion creates powerful incentives for all members to resolve conflicts through diplomacy and maintain regional stability. A prosperous and connected South Asia is a vital interest not only for its inhabitants but for global economic stability and security.

Primary obstacle to SAARC’s functionality

The primary obstacle to SAARC’s functionality is the deep-seated political rift between India and Pakistan. This has rendered the organisation’s consensus-based model ineffective. While no external power can magically resolve this complex bilateral issue, China’s unique position allows it to play a transformative role as a facilitator of dialogue rather than a source of friction.

China maintains an “all-weather” strategic partnership with Pakistan while simultaneously being one of India’s most significant economic partners and a key player in forums like the SCO and BRICS. This gives Beijing a stake in stability and a channel of communication with both capitals. Within a multilateral SAARC-plus-China framework, the focus could strategically shift from intractable bilateral disputes to collaborative, multilateral problem-solving on urgent shared challenges: climate change, glacial melt, transboundary river management, food security, and counter-terrorism.

For the smaller nations of SAARC Afghanistan, Nepal, Bhutan, Bangladesh, Sri Lanka, and the Maldives engagement with China provides crucial economic opportunities and strategic options. Their support for greater regional connectivity, often through Chinese investment, is a clear signal of their priorities. Their empowerment within a larger, more balanced SAARC would ensure the bloc’s agenda is driven by collective developmental needs rather than held hostage by a single bilateral dispute. 

An active and functional SAARC, with China inside the tent, is ultimately in India’s long-term interest as well, as it would provide a structured, multilateral setting to manage its relationship with China and resolve disputes through diplomacy.

A SAARC revitalised by Chinese membership would cease to be a peripheral talking shop and become a formidable actor on the world stage. On critical global issues from climate justice and vaccine diplomacy to sustainable development and UN peacekeeping a cohesive bloc representing over a third of humanity would wield incredible influence and negotiate from a position of strength. This aligns with the reality of a multipolar world where regional organisations are becoming the primary building blocks of global governance.

Furthermore, extensive academic and historical evidence supports the theory that deep economic interdependence is a powerful deterrent to conflict. The complex web of supply chains, investments, and infrastructure that would bind SAARC and China would create overwhelming incentives for peaceful dispute resolution and diplomatic engagement. 

A stable, prosperous, and interconnected South Asia is not just a regional good; it is a vital interest for global economic stability and international security, preventing the region from becoming an arena for great power proxy conflicts.

China has been an Observer state in SAARC since 2007, and its officials have consistently expressed interest in deeper engagement. Observer status, however, is a half-measure that allows for dialogue but excludes contribution to decision-making. The logical and necessary progression is to full membership, where China can assume the responsibilities and obligations that come with shaping the region’s future.

The objections to this proposal are known, primarily rooted in strategic concerns from New Delhi. But exclusion has not solved these concerns; it has only contributed to regional stagnation. Engagement within a transparent, rules-based multilateral framework is the most proven method to manage differences, build trust, and create mutual gains.

Recent engagement between Prime Minister Narendra Modi and President Xi Jinping at the SCO summit in Tianjin has underscored the enduring value of dialogue and multilateralism. After years of strategic mistrust, both leaders emphasised that India and China are development partners, not rivals, signalling a willingness to reframe their relationship around stability and mutual growth.

Practical steps such as the resumption of direct flights, eased travel and pilgrimage arrangements, and renewed trade discussions illustrate how transparent, rules-based cooperation delivers tangible benefits to both societies. These developments highlight a broader lesson: exclusion only perpetuates stagnation, while structured engagement within inclusive multilateral frameworks creates pathways to manage differences, build trust, and unlock shared regional prosperity.

The nations of South Asia stand at a historic crossroads. One path leads to continued fragmentation, economic underperformance, and geopolitical vulnerability. The other, more courageous path, leads to an integrated, prosperous, and influential region capable of shaping its own destiny. Inviting China as a full member of SAARC is the key that can unlock this brighter future. It is time for the leaders of South Asia to choose ambition over inertia, and integration over isolation. The future of two billion people awaits this bold decision.

(The writer is President of the Federation of Chambers of Commerce and Industry of Sri Lanka.)