Neighbouring 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 from the Maldives Foreign Ministry, this agreement for local currency settlement will provide economic benefits to Maldivian businessmen 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 Maldives government to establish a framework to promote direct investment in the Maldives. A statement from the People’s Bank of China said that the agreement will promote trade and investment between the two countries. This will further strengthen the relations between the two countries.
According to Atoll Times, the Ministry of Economic Development of Maldives has said that this agreement also reflects Maldives’ efforts to increase economic openness between the two countries and strengthen trade relations with major international partners. We want to build strong relations with all countries. This MoU was signed when President Mohammed Muizzu visited China in January this year. During this visit, there was a 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’s government in Maldives, relations between India and Maldives had started to sour. Muizzu’s 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 ruined economically by falling into China’s trap. India would not want another country to be economically 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. India’s Foreign Minister S Jaishankar had recently visited Maldives and made some important agreements between India and Maldives, at that time Muizzu’s attitude towards India had also softened. At present, the threat of sukuk default looms over Maldives. China has to pay the interest on its Islamic bonds next month. For this, Maldives is waiting for India’s help because it has already taken a loan from China. Muizzu is going to visit India in the coming days, in such a situation, 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 potential pressure on India to help Maldives. If India does not help it, then the possibility of it going to China’s side and getting trapped in China’s debt will increase. Maldives is very important for India from a strategic point of view, in such a situation India would not want Maldives to get closer to China.