Pearls or Diamonds?

A New Outlook on India and China's Race for the Indian Ocean

The 21st-century Asian economic and political landscape continually highlights the rivalry and growing economic prowess of China and India. As 2026 progresses, these two nations are more strategically distrustful yet economically intertwined than ever, with changing sentiments and a multitude of factors affecting their ambitions across Asia and the world at large. Few regions reflect this more clearly than the Indian Ocean, a vital economic trade corridor connecting markets across Asia, Africa, and beyond. As a key artery of global trade, with maritime shipping accounting for over 80% of world merchandise trade, the Indian Ocean connects two of the most strategically important chokepoints in the world, the Strait of Hormuz and the Malacca Strait. This corridor has global significance, with the economic security of stakeholders worldwide tied to stability and access in this region. Maritime security in this region is inseparable from global trade and economic resilience, making the growing competition between India and China in the Indian Ocean a critical global issue, with stakeholders across both private and public sectors impacted by its outcomes.

Alongside countries’ economic reliance, the Indian Ocean is also critical to safeguarding the security interests of India, China, and other Indo-Pacific stakeholders. While not overtly confrontational, the Indian Ocean is an increasingly active military/economic theater, with China and India expanding their presence across the region. This can be seen through examples such as China’s naval base in Djibouti and India’s expansion in the Andaman and Nicobar Islands alongside partnerships in Mauritius. Cooperation agreements, such as the QUAD, and infrastructure projects, such as the Belt and Road Initiative (BRI), also take center stage in the region’s politics, economics, and military activity. Whilst protecting the economic interests of both countries, this expanding presence also plays a key role in posturing and limiting the other’s influence in the region. In political circles, these economic and security strategies are broadly referred to as China’s String of Pearls (SoP) and India’s Necklace of Diamonds (NoD).

Map of the SoP and NoD - Credits: Drishtikone

The SoP originated with American political analysts in 2004, who hypothesized China’s expanding presence across the Indian Ocean. The ‘pearls’ refer to China's investments and infrastructure development across the region. These include, among others, commercial ports such as Gwadar and Hambantota in Pakistan and Sri Lanka, as well as military developments such as China’s base in Djibouti. The BRI links many of these nodes through railways and roads. The SoP and BRI thus contribute to a broader system that strengthens connectivity across the region and reduces vulnerability to chokepoints such as the Malacca Strait, thereby supporting Chinese interests in the Indian Ocean.

India’s NoD strategy was first coined in 2011 by then Foreign Secretary Lalit Mansingh. In contrast to China’s more infrastructure-driven SoP, the NoD comprises a mix of diplomatic, economic, and security partnerships that enable India to access key ‘diamonds’. These include the Sabang and Chabahar ports in Indonesia and Iran, as well as logistical access in locations such as Duqm, Oman, and Singapore. Furthermore, India relies heavily on partnerships for coastal surveillance networks, such as those built in collaboration with Sri Lanka, Seychelles, and Mauritius, aiming to reinforce its maritime presence and economic interests in the Indian Ocean while countering expanding Chinese influence across vital trade routes and chokepoints.

Despite the apparent political and economic rivalry between the two countries and the rapid development of the SoP and NoD, with over $155.62 billion in bilateral trade in 2025, China and India remain immensely economically intertwined. Interdependence in this case does not oppose rivalry, but rather adds a further dimension of complexity. Both countries continually rely on the Indian Ocean for economic viability, whilst simultaneously expanding influence in a competitive manner. In 2026, India’s NoD and China’s SoP remain highly relevant, but have evolved from narrow, counter-encirclement strategies into broader economic and political growth strategies designed to deny one another uncontested influence over the region’s chokepoints, infrastructure, and security architecture, while advancing their own global ambitions.

Drivers of Strategic Competition

Despite changing political and economic dynamics in the region, Indian and Chinese trade security and development have continually relied on a few key nodes. These nodes include the chokepoints of the Malacca Strait and the Strait of Hormuz, and the key nodes around them linking the eastern parts of the Indian Ocean with the west, such as Gwadar, Changi, and the Andaman and Nicobar Islands. Naval and logistical positions spanning the eastern coast of Africa and South Asia also play key roles in shaping India and China’s intentions regarding these straits and the region at large. While the SoP and NoD have evolved over time, they remain centered on access to and influence over these nodes across the Indian Ocean, creating a structural geographic asymmetry that fuels strategic competition between India and China.

India has significant geographic advantages, including proximity to these nodes across the Indian Ocean and direct coastal access. Further, control of the Andaman and Nicobar Islands allows Indian naval and commercial activity to project presence deep into the eastern Indian Ocean without reliance on third-country involvement. This geographic advantage is especially significant when considering the Malacca Strait. India can monitor and potentially influence key trade flows without extending far beyond its coastal waters or sphere of operations. As such, this proximity plays a central role in the outlooks and goals of the NoD, with consolidation of partnerships and trade-route access with nations such as Singapore, Seychelles, and others coming to the fore.

China, on the other hand, faces relative geographic disadvantages. Much of its trade is dependent on extended maritime routes passing through chokepoints such as the Malacca Strait. This reliance creates a structural vulnerability in Chinese trade security, particularly when considering the presence of other major naval actors in the region. The SoP is thus centered around mitigating this vulnerability through strengthening maritime pathways that diversify access routes, alongside working in tandem with the BRI to expand overland corridors linking western China to ports such as Gwadar and onward to the Middle East and Europe.

These geographic factors, converging around economic and trade security for both countries, create structural rather than temporary competition. Despite shifting allegiances and evolving strategies around the globe, the SoP and NoD remain focused on securing trade access and preventing the other from gaining uncontested influence over critical maritime routes.

Infrastructure as a tool of influence

Due to the race between both countries to secure economic pipelines in the region, infrastructure projects ranging from ports to underwater fiber-optic cables no longer serve solely economic goals. Instead, they act as strategic nodes through which influence can be expanded, creating a system in which both countries not only compete economically but also seek to expand strategic influence across the region.

China’s push for influence through infrastructure is characterized by a more direct, capital-intensive approach than India's. The SoP and BRI operate in tandem by building, maintaining, or leasing ports in key locations. The BRI further provides China with rail and highway links that diversify access routes and reduce exposure to chokepoints. While primarily commercial in nature, these developments also create long-term political leverage. This allows China to translate economic investment into a sustained regional presence. This is particularly evident in cases such as Sri Lanka, Pakistan, and Djibouti, where economic investment has translated into long-term operational control of key infrastructure.

India's NoD strategy presents a contrasting approach. Rather than relying on ownership-led infrastructure expansion, India has focused on securing strategic partnerships across the region, gaining access, as part of broader regional diplomacy, to key nodes such as Chabahar near the Strait of Hormuz and Sabang near the Malacca Strait. These are further complemented by logistics and access arrangements in locations such as Duqm, Oman, and Changi, Singapore. The NoD operates in tandem with India’s broader diplomatic strategy and aspirations, embedding maritime access within wider political and economic relationships. India’s geographic advantage, alongside alignment with ASEAN states and cooperation frameworks such as the QUAD, enables this strategy to remain effective without requiring large-scale financial commitments or deep involvement in foreign political and economic systems.

Security Dilemma and Militarization

With the ‘diamonds’ and ‘pearls’, that is, the aforementioned strategic nodes, underpinning economic and trade viability in the Indian Ocean, naturally, militarization of the region has emerged. While the SoP and NoD originated primarily as economic strategies, over the past few decades, they have developed a strong military component. This includes naval bases, coastal surveillance networks, and joint military exercises across the region.

For China, this is reflected in the establishment of its naval base in Djibouti, alongside a broader push toward naval modernization and expanded maritime capabilities far from its own shores. India has mirrored this through continued modernization of its navy, with particular emphasis on the militarization of the Andaman and Nicobar Islands, as well as through joint surveillance initiatives and military exercises with regional partners in the broader Indo-Pacific.

This dynamic reflects a classic security dilemma, where actions taken by one state to secure its economic and strategic interests are perceived as threatening by the other. As a result, both India and China have expanded their military presence not necessarily as a precursor to conflict, but rather as a means of safeguarding critical trade routes, maintaining strategic autonomy, and reinforcing their broader strategic positioning. What emerges is a competitive strategic buildup driven by economic necessity, with the SoP and NoD sitting at the center of both countries’ broader regional security calculations.

Regional Power Dynamics

Regarding security calculations, inter-state competition between India and China is not the only thing driving the continued evolution of the NoD and SoP. Regional power politics also play a key role, with foreign states acting as balancers between India's and China's strategic and trade-security-based expansions. Key regions for these balancing dynamics include South Asia, the Middle East, and Southeast Asia. States within these regions are critical to securing trade in the Indian Ocean, and their alignment plays a central role in shaping the direction of their respective Indo-Chinese strategies.

In South Asia, states surrounding India and China play a vital role in shaping the SoP and NoD. Bangladesh has, in recent times, moved towards a more China-centric foreign policy following domestic political shifts. Sri Lanka, on the other hand, plays a balancing role, gaining economic and strategic benefits from both China and India. Pakistan is critical to China’s BRI, as it serves as the bridge linking China to Gwadar Port and thereby provides an alternative corridor that reduces reliance on maritime routes. This contested regional environment is important to the NoD, as seen in its continued focus on the Andamans and in partnerships with countries farther into the Indo-Pacific, reflecting India’s attempt to secure trade routes beyond its immediate neighborhood.

Southeast Asia presents a contrasting story when it comes to alignment, with Indian diplomatic efforts showing relatively higher success. Access arrangements linked to ports such as Sabang and Singapore provide India with a stronger strategic position in the Malacca Strait, offering greater visibility and influence over trade flows through the region. China, rather than directly countering this through similar partnerships in the immediate region, employs broader BRI strategies through Pakistan and Myanmar to diversify routes and reduce dependence on chokepoints where India holds geographic advantages.

The Middle East presents a more complex picture. Alignment with India is evident through nodes such as Duqm in Oman and Chabahar in Iran, while China’s presence is reflected in Djibouti and in growing ties with Gulf states. However, due to the importance of oil and gas trade, external powers such as the United States, the European Union, and Russia also play a major role in shaping the region. As a result, these nodes are embedded within broader global trade and security dynamics, rather than being solely driven by Indo-Chinese competition. In periods of heightened tension in the Gulf region, both Indian and Chinese vessels rely on similar stability mechanisms, highlighting moments where their interests converge despite broader rivalry. Across all three regions, particularly in the Middle East, shifting political and economic conditions create a fluid environment in which alignment can vary with wider global developments.

A Multifaceted Interdependence

Indo-Chinese bilateral trade in FY24 and FY25 - Credits: Atlas Institute of International Affairs

Speaking of instances where Indo-Chinese aspirations align rather than diverge, economic interdependence takes center stage. As mentioned previously, with over $155.62 billion in bilateral trade, Asia’s two largest economies are among the most intertwined. India depends heavily on China for imports of key products such as electronics and APIs, while frameworks such as BRICS facilitate cooperation on broader economic and geopolitical issues.

In recent times, both countries have taken steps to stabilize economic engagement, creating stronger business connections and further reinforcing interdependence between their economies. This presents a clear juxtaposition to the traditional understanding of the SoP and NoD, where rivalry was often assumed to limit cooperation. Instead, interdependence has persisted alongside competition, as broader global political shifts, particularly those moving away from a strictly US-centric economic order, have strengthened the need for continued engagement between the two powers.

Another by-product of shifting global economic dynamics is the shared Indo-Chinese need for stability in the Indian Ocean, particularly in the Strait of Hormuz. Both countries are heavily dependent on oil and gas imports from the region and require free-flowing, relatively cost-effective supplies to sustain economic growth and broader strategic ambitions. As a result, the pearls and diamonds in the region have evolved to operate, rather than purely compete for influence, at times within a shared framework that supports trade security for both countries. Disruptions harm both economies in similar ways, reinforcing a mutual interest in maintaining regional stability. This creates a dynamic in which the SoP and NoD do not simply function in opposition but, in certain contexts, also act as stabilizing mechanisms within the Indian Ocean, protecting Indo-Chinese trade from global shifts in sentiment and conflict.

Beyond direct economic and maritime interdependence, institutional frameworks also play a subtle but increasingly important role in shaping Indo-Chinese competition. These institutions do not eliminate rivalry. Instead, they embed it within a broader system of cooperation that both countries continue to rely on. Platforms such as the BRICS, the G20, and the Shanghai Cooperation Organization (SCO) provide regular avenues for engagement between India and China, even during periods of heightened political tension. These forums require coordination on issues such as trade, energy security, and financial stability, creating a baseline level of interaction that prevents complete strategic divergence. While these institutions are often seen as vehicles for expanding influence, they also act as stabilizing mechanisms, ensuring that competition does not entirely disrupt cooperation. This duality reflects a broader shift in global politics. India and China are not operating in isolation, but within a shared institutional order that constrains escalation and incentivizes engagement. As a result, the SoP and NoD operate not in a vacuum, but within a system where economic and diplomatic interdependence continues to shape strategic decision-making.

Closely linked to institutional interdependence is the reality of global supply chains. Despite efforts to diversify and reduce reliance on one another, India and China remain deeply embedded within the same production networks. These networks are not easily replaceable. Nor can they be quickly restructured without a high economic cost. India’s growing push toward a “China+1” strategy reflects an attempt to reduce dependency, particularly in sectors such as electronics and manufacturing. However, this shift does not represent a full decoupling. Instead, it highlights the difficulty of disentangling two economies that have developed in parallel over decades of globalization. China continues to play a central role in regional and global supply chains, while India remains both a key market and an emerging manufacturing hub. This interconnectedness limits the extent to which geopolitical rivalry can translate into economic separation. Even as both countries expand their strategic presence in the Indian Ocean, they remain tied to the same global economic system. The SoP and NoD, therefore, operate within constraints imposed not only by geography but also by the structure of global trade itself.

Managed Competition, Strategic Blocs and External Shocks

Looking ahead, the most likely trajectory for Indo-Chinese relations in the Indian Ocean is one of managed competition. Rivalry will persist. It will likely intensify in certain areas. But it will remain bound by shared economic interests and structural constraints. By building new infrastructure, forming partnerships, and modernizing their militaries, both India and China are likely to continue expanding their presence in the region. But this growth is unlikely to lead to a direct conflict. Instead, it will be incremental positioning, where influence is slowly spread out without causing a big escalation. In this case, the Indian Ocean will remain a contested area, but also a working system. Trade continues, partnerships change, and competition gets tougher, but only to a point. The SoP and NoD will continue to evolve, not as a means to control, but as ways to protect long-term economic and strategic interests.

A second, less stable path involves strengthening strategic blocs. In this situation, geopolitical polarization grows, partly due to tensions worldwide, especially between the US and its allies. The QUAD could become more formalized and better align with India's long-term plans. China's BRI and the partnerships that accompany it may also become more closely linked to geopolitical interests, thereby strengthening China's sphere of influence. This would further divide the Indian Ocean, with countries feeling increasingly pressured to take sides. This kind of fragmentation doesn't have to lead to conflict. But it would make things more tense. Trade routes might become more political, and access to infrastructure might depend on political will instead of pure economic logic. In this environment, the SoP and NoD would shift from flexible strategies into more rigid frameworks tied to competing blocs.

A third possible trajectory is driven by external shocks. These shocks may not originate within the Indo-Chinese rivalry itself, but can have significant spillover effects on the Indian Ocean. Events such as instability in the Middle East, disruptions to shipping routes, or escalation in other geopolitical flashpoints can quickly alter the balance between competition and cooperation. The Strait of Hormuz remains particularly vulnerable. Any disruption here would have immediate consequences for both India and China, forcing rapid strategic adjustments. In such scenarios, the priorities of both countries may temporarily converge. Securing trade flows becomes more important than competing for influence, particularly during periods of disruption in key maritime corridors. This creates moments of alignment within an otherwise competitive relationship. The SoP and NoD, in this context, act less as opposing strategies and more as parallel systems responding to shared external pressures.

Emerging Dimensions

Beyond traditional infrastructure and military presence, competition in the Indian Ocean is expanding into new domains. These domains are less visible, but increasingly important. Undersea cables, for example, now carry the vast majority of global data flows. Control, security, and maintenance of these networks are becoming critical strategic concerns. Similarly, digital port infrastructure and logistics systems are transforming how trade is managed, introducing new layers of technological competition. Climate change also plays an increasingly important role. Extreme weather events, rising sea levels, and shifting maritime routes introduce new uncertainties into the region. These factors affect not just trade, but also infrastructure resilience and long-term planning. As a result, the SoP and NoD are no longer confined to physical ports and naval bases. They are evolving into broader systems that incorporate digital, environmental, and technological dimensions. This expansion reflects a shift in the nature of strategic competition, where influence is exercised not only through geography but through control over increasingly interconnected networks.

The Present and the Future:

The changes in China's String of Pearls and India's Necklace of Diamonds reveal a broader shift in how power is displayed and contested in the 21st century. What started as fairly simple plans to fight off what was thought to be an encirclement has become much more complicated. Both frameworks are now used as tools of competition and to maintain economic security, political power, and strategic positioning on the world stage. At first glance, the Indian Ocean appears to be headed toward a future marked by greater division and conflict. There is competition, more military presence, stronger partnerships, and deeper infrastructure networks across the region. Yet beneath this surface-level rivalry lies a more nuanced one: both India and China remain bound to the same systems they are attempting to shape. Trade flows and energy dependencies continue to connect the two. Institutional frameworks and supply chains strengthen this interdependence, ensuring that competition doesn't lead to complete separation.

This creates a situation that is neither completely confrontational nor completely cooperative. Instead, it is defined by a constant balancing act. Both countries want to prevent the other from gaining uncontested control over key chokepoints and infrastructure, but neither can afford to upset the system that keeps them growing. In this way, the Indian Ocean is not a battlefield to be fought over, but a shared space to be traveled through, contested, yet ultimately maintained. The future of the SoP and NoD will depend less on which country grows faster and more on how well each country keeps this balance. The region will continue to change due to external shocks, shifting alliances, and emerging technologies. But the truth is that things are unlikely to favor one or the other: competition will continue, and interdependence will last.

In 2026, the Indo-Chinese strategy in the Indian Ocean is not a zero-sum game of dominance but a reflection of a broader global transition. One where power is exercised through influence, constrained by interconnection, and defined as much by cooperation as it is by rivalry.

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