China in South Asia: October 2026 

New Delhi Reads the Trump–Xi Summit 

In India’s first senior-level public assessment of the September Trump–Xi Washington, DC, meeting, External Affairs Minister S. Jaishankar said the United States and China remain fundamentally in a “competitive mode.” That said, as the United States and China find areas of convergence, India and other countries will be forced to de-risk and diversify their relationships. Jaishankar also cautioned that there are limits to what Washington and Beijing can agree to on behalf of the rest of the international system. That formulation is important because India’s reaction has been less about an imminent U.S.-China Group of Two moment and more about the uncertainty created when competition and accommodation coexist. Analysis after the summit has accordingly focused on preserving room for maneuver. Washington and Beijing can negotiate over trade, technology, or strategic stability without ending their broader rivalry. Meanwhile, third countries cannot assume that either power will consistently protect their interests. India’s response to the summit has therefore been a renewed emphasis on diversification rather than a sharp move toward or away from either power. 

The summit came amid a complicated period in U.S.-India relations. Tensions have grown over U.S. tariffs on Indian goods, closer U.S. ties with Pakistan, and Trump’s repeated claims to have mediated the 2025 India-Pakistan conflict. As CFR Senior Fellow Sadanand Dhume argues, those disputes have been compounded by growing uncertainty in New Delhi about Washington’s commitment to countering Beijing. Against that backdrop, renewed U.S.-China engagement raised further concerns about the reliability of U.S. strategic commitments.  

Chinese Export Restrictions Expose Indian Economic Vulnerabilities 

On October 16, China released a new set of draft export curbs that allow it to ban or restrict the export of twenty-three artificial intelligence (AI)-related technologies, including large language models, AI agents, and AI-chip design technology. Those restrictions could harm Indian companies that have increasingly benefited from accessible Chinese open weight models and rely on Chinese technology that China can now restrict at will. Although access to Chinese AI services through application processing interfaces and cloud platforms will remain available. India is still unable to obtain the underlying technology.  

Those export restrictions extend to specialized infrastructure equipment, including curbs on tunnel boring machines. That technology is vital to India’s underground metro systems and rail corridors, which could create further uncertainty around procuring specialized infrastructure equipment. Indian Commerce and Industry Minister Piyush Goyal announced on November 3 that India will domestically produce such machines if China blocks exports, while simultaneously insisting that ties with China are “good and will improve.” Together, those curbs have exposed India’s reliance on foreign suppliers for many categories of specialized equipment as both the United States and China increasingly restrict critical AI exports. 

Economic Normalization Remains Open—but Conditional 

Goyal said on October 14 that the “last word” on India’s relationship with China had not been written. His remarks were an important signal that New Delhi remains open to further economic normalization, even as it deepens trade ties with Washington. A day earlier, Jaishankar expressed the other half. of the policy: peace and stability along the border remain necessary for a normal bilateral relationship. When both comments are taken together, the gist is that economic restrictions will continue to be reviewed and potentially scaled back, but the border remains a principal political constraint to normalization. 

Border Tensions Persist Despite Normalization Efforts 

The gradual stabilization of China-India relations has not moved the territorial border dispute from the center of the relationship. On October 13, New Delhi rejected Beijing’s objections to New Delhi’s standardization of names for twenty-eight locations in Ladakh, after Beijing reiterated that it does not recognize the union territory. India responded that Ladakh remains an “integral and inalienable” part of the country. On October 22, a senior Indian border official confirmed several “face-off” situations occurred with China in eastern Arunachal Pradesh. Those border tensions are paired with rising Indian investment in the region in response to China’s dual-use villages that host military infrastructure alongside civilian settlements. Indian infrastructure projects in Arunachal Pradesh, particularly dam construction, could push the state’s growth rate above last year’s 10 percent. Those border exchanges highlight the limits of the recent diplomatic thaw. Despite renewed engagement and tentative progress in bilateral relations, the two governments remain fundamentally at odds over their competing sovereignty claims. 

Karakoram-2026 Joint Army Exercise in Korla, Xinjiang 

On October 10, China’s Ministry of National Defense announced that the Chinese and Pakistani armies would hold their first joint army training in Korla, beginning on October 15. The exercise will focus on high-altitude counterterrorism and include unmanned-aerial-vehicle operations, mobile target acquisition and firing, long-range sniping, joint command, and live-fire training.  

The exercise reflects the growing depth of China-Pakistan military cooperation, particularly in joint operations and battlefield coordination. For China, strengthening Pakistan’s counterterrorism capabilities is also important for protecting Chinese personnel and China-Pakistan Economic Corridor (CPEC) investments from militant threats. The drills follow the two countries’ Sea Guardian IV naval exercise in the Arabian Sea earlier this year. Together, those activities highlight Beijing’s expanding military partnerships across South Asia and the western Indian Ocean. For India, closer China-Pakistan military coordination adds another challenge to an already complex regional security environment. 

CPEC 2.0 Continues Its Shift Toward Industry and Technology 

Pakistan’s CPEC Secretariat held its ninety-third progress review meeting on October 7. Planning Minister Ahsan Iqbal outlined priorities for the corridor’s second phase, including science, technology, engineering, and mathematics education; agricultural modernization; and joint research laboratories focused on AI and disaster management. On October 27, China and Pakistan launched the China-Pakistan Information Corridor (CPIC), which, according to the official CPEC portal, primarily aims to “strengthen cooperation in media engagement, strategic communication, information sharing, public diplomacy and cultural exchanges.” CPIC’s creation marks the seventy-fifth anniversary of China-Pakistan ties, with Chinese Foreign Ministry Spokesperson Mao Ning and Chinese Ambassador Jiang Zaidong attending the launch in Pakistan’s capital, Islamabad. 

CPIC’s establishment and agenda illustrate how the original idea of the corridor is changing. The first phase was dominated by power plants, highways, and other capital-intensive infrastructure. Now Islamabad sees and describes CPEC 2.0 in terms of human capital and business-to-business ties. That does not displace the corridor’s unfinished infrastructure agenda, but it broadens the mechanisms through which Pakistan is incorporating China into its development strategy.   

China’s First Foreign Astronaut Will Be Pakistani  

On October 9, China’s first astronaut, Yang Liwei, said that the two Pakistani candidates training alongside Chinese astronauts had performed well and that China’s Tiangong space station is expected to receive its first foreign astronaut in the second half of 2026. One of the two Pakistani pilots, Muhammad Zeeshan Ali or Khurram Daud, is expected to fly as a payload specialist on a short-duration mission. The program is one of the more visible examples of China-Pakistan cooperation moving into high-technology sectors. China-Pakistan space cooperation already includes Chinese launches of Pakistani satellites and plans for a Pakistani-built rover to participate in China’s Chang’e-8 lunar mission.  

Mongla Port Financing 

Bangladesh and the Export-Import Bank of China signed a $335.78 million concessional loan agreement on October 10. The agreement would expand and modernize Mongla, the country’s second-largest seaport. The project will add two container terminals, a container yard, a delivery yard, and new cargo-handling facilities. The financing agreement stipulates a 2 percent interest rate over twenty years, including a five-year grace period. 

The agreement gives renewed momentum to one of China’s most consequential infrastructure roles in Bangladesh. The loan establishes financing terms for physical expansion of an operating Bay of Bengal port. That makes Mongla one of the more concrete additions to China’s current South Asian connectivity portfolio.  

Trade Hits a New High 

China’s embassy in Dhaka said on October 1 that bilateral trade reached a record $12.8 billion during the first half of 2026, increasing trade by 10.6 percent in the last year. China remained Bangladesh’s largest trading partner for the sixteenth consecutive year.  

That said, the headline growth continues to mask a central structural problem in the economic relationship. Bangladesh imports far more from China than it exports there. Bangladeshi business groups have advocated for deeper Chinese investment with calls for greater market access and joint production that could narrow that imbalance. October’s trade figures show both the scale of China’s commercial position in Bangladesh, and the reason Bangladesh continues to press for a change in the status quo. 

Dhaka Proposes a Chattogram–Kunming Corridor 

On September 27, Bangladeshi Commerce Minister Khandaker Abdul Muktadir proposed a roughly 1,200-kilometer (746-mile) road connection linking Chattogram, Bangladesh, to Kunming, China, through Myanmar. Dhaka argues that the corridor can shorten cargo transit between Bangladesh and southwestern China, reviving aspirations of overland Bay of Bengal-Yunnan connectivity. Myanmar’s continued political instability presents a challenge to the project’s implementation, however.  

Bangladesh Wants Investment to Replace More Sovereign Lending 

Finance Minister Amir Khosru Mahmud Chowdhury said Dhaka wants its future financing relationship with Beijing to move “from loans to investment” and from a state-to-state model toward direct and joint ventures. He made those comments after discussions with discussions with China Exim Bank of the International Monetary Fund-World Bank meetings.  

China Proposes a New Himalayan Gateway 

After devastating August floods destroyed the Rasuwagadhi-Kerung crossing, Chinese officials proposed upgrading the Korala crossing into an international border point. Nepali officials, however, have continued to press China to reopen the important Tatopani crossing, arguing that Korala is more expensive, geographically difficult, and vulnerable to winter snowfall. 

From Rescue to Reconstruction  

Nepal formally ended search-and-rescue operations on October 5 following the August 26 border disaster, shifting its focus to rehabilitation. Authorities reported at least 1,455 deaths and 5,285 people still missing. The floods destroyed roads, bridges, settlements, and 12 hydropower projects. Recovery and reconstruction costs are estimated at nearly $5 billion. 

The disaster has made cross-border infrastructure resilience an urgent issue in China-Nepal relations. The flood originated near the Tibetan frontier and severed the route that had carried much of Nepal’s overland China trade. China has already provided rescue teams, relief supplies, and hydrological data. On October 1, Chinese Ambassador Zhang Maoming proposed a joint disaster early-warning and emergency-response mechanism. Beijing’s separate proposal to upgrade the Korala border crossing also reflects efforts to reduce dependence on vulnerable trade routes. 

The Chengdu Mission Returns 

On October 9, Sri Lanka announced that it will reopen its diplomatic mission in Chengdu, China. The mission has been closed since 2016. Deputy Foreign Minister Arun Hemachandra told parliament that the cabinet had approved the move as part of an effort to expand economic opportunities, attract investment, and strengthen bilateral ties. 

The decision gives Sri Lanka an additional permanent diplomatic presence inside China outside of Beijing and reconnects the Sri Lankan city of Colombo directly with China’s Sichuan Province. It also comes as China and Sri Lanka prepare to mark seventy years of diplomatic relations in 2027. 

Chinese Tourism Push  

Sri Lanka is participating in the China Outbound and Inbound Travel Market in Beijing beginning October 14. The event is part of Colombo’s strategy to expand a recovering Chinese tourism market. More than 163,000 Chinese travelers visited Sri Lanka in the first 7 months of 2026, making China the country’s third-largest tourism source. Sri Lanka has also extended free thirty-day electronic travel authorization to Chinese visitors and added direct air connectivity. The tourism push shows Colombo using easier travel access to build a broader economic relationship with China. It also moves the relationship beyond the large infrastructure projects toward soft diplomacy development. 

China Pulls Investments From Sri Lanka  

On October 19, state-owned China Merchants Port Holdings withdrew from a $392 million joint venture for a logistics hub in Colombo port. It was originally promoted as the “first major Foreign Direct Investment” after Sri Lanka’s debt default. The announcement in 2023 had China Merchants holding a 70 percent stake. In a filing to the Hong Kong Stock Exchange, China Merchants cited “adjustments to the [project’s] implementation environment and timetable as well as the respective commercial considerations of the parties.” Meanwhile, the Sri Lanka Ports Authority said it would pursue an “alternative development strategy” under a public-private partnership model. That marks the second such major investment withdrawal in Sri Lanka. The first was Indian-owned Adani Green pulling out of a $442 million renewable energy project in early 2025. 

Maldives: Chinese Tourism and Business Presence 

China remained the Maldives’ largest tourism source through early October. Out of roughly 1.64 million total arrivals, 311, 485 were Chinese visitors. On October 14, Maldivian officials also announced that fifteen Chinese businesses would participate in Maldives Expo 2026 later in the month, displaying technology and equipment alongside fifteen Indian participants. 

Seychelles: Zero-Tariff Trade Becomes Tangible 

Seychelles shipped its first batch of dried sea cucumber to China under Beijing’s zero-tariff treatment on October 9. Chinese diplomats and trade officials attended the ceremony. The shipment is small in absolute terms but more important as a test of a new economic channel. China extended zero-tariff treatment across tariff lines for Seychelles and other African diplomatic partners beginning in May 2026. October’s shipment is the first visible conversion of that preferential access into a Seychellois export. 

Mauritius: Beijing Renews Its BRI Courtship 

China used its National Day diplomacy on October 1 to publicly encourage a deeper economic relationship with Mauritius. Chinese Ambassador to Mauritius Huang Shifang called for closer alignment between the two countries’ development strategies and reiterated China’s interest in Mauritius participating in the Belt and Road Initiative. Mauritius is a distinct case among the Indian Ocean islands because it already has a free trade agreement with China and positions itself as a commercial bridge to Africa. The diplomatic push is worth watching because Mauritius has extensive relationships with India and Western partners. That makes Chinese engagement there a test of how island states can deepen economic and people-to-people ties with China without organizing their foreign policy around a single external power.