Neighboring country Maldives has signed a new local currency settlement agreement with China. This will make it easier for China to invest in Maldives. According to a report citing a report by the Ministry of Foreign Affairs of Maldives, this agreement for local currency settlement will provide economic benefits to Maldivian traders doing business with China and will also increase Chinese investment in Maldives.
According to news agency Reuters, China’s central bank on Friday signed a memorandum of understanding with the government of Maldives to establish a framework to promote direct investment in the Maldives. A statement from the People’s Bank of China was quoted as saying that this agreement will promote trade and investment between the two countries. This will strengthen the relations between the two countries even more.
According to Atoll Times, the Ministry of Economic Development of Maldives said that this agreement also reflects Maldives’ efforts to increase economic openness between the two countries and strengthen trade relations with key international partners. We want to build strong relations with all countries. This MoU was signed when President Mohammad Muizzu visited China in January this year. During this visit, there was discussion on increasing the important strategic partnership between the two countries.
What is the impact of Maldives’ deepening friendship with China on India?
After the coming of Muizzu government in Maldives, the relations between India and Maldives had started turning sour. Muizzu government is known for its anti-India stance. This growing friendship between China and Maldives is a matter of concern for India because Sri Lanka has already been financially ruined by being trapped in China’s trap. India would not want another country to be financially dependent on China’s loan. However, after the visit of the President of Maldives to India, there has been a new warmth in the relations between India and this island country. Indian Foreign Minister S Jaishankar recently visited Maldives and signed some important agreements between India and Maldives, at that time Muizzu’s attitude towards India also softened. Maldives is currently under threat of Sukuk default. China has to pay the interest on its Islamic bonds next month. For this, Maldives is looking for help from India because it has already taken a loan from China. Muizzu is going to visit India in the coming days, so during his meeting with Prime Minister Modi, he can talk about giving loan on Line of Credit.
This agreement of Maldives with China creates a possible pressure on India to help Maldives. If India does not help it, the chances of it going to China’s side and getting trapped in China’s debt will increase. Maldives is very important from strategic point of view for India, hence India would not want Maldives to get closer to China.