The 53-point declaration adopted by the 13th South Asian Association for Regional Cooperation (SAARC) Summit in Dhaka on 13 November is significant for several important policy initiatives. But, one of the most important outcomes is the decision to grant Observer status to China, which has significant foreign policy implications for India and the region. It highlights Chinese foreign policy imperatives and its bid to claiming global power status.

The move for inclusion of China in SAARC as an observer came as a rude shock to India. On the eve of the summit, India was all set to grant membership to Afghanistan as SAARC's eighth member. However, Nepal's attempt to link Afghanistan's membership to China's quest for observer status was a corollary to India's move. Though India has been aware of China's intentions to intrude into its backyard, the linkage of Afghanistan's membership to China's entry to SAARC demonstrates China's rising diplomatic and economic clout in the region. India has long believed South Asia to be its sphere of influence and considered SAARC as a South Asian organization with common problems of poverty, unemployment and slow economic development. The region was seen as bound by common culture and common aspirations. China has no role to play in the region. However, given the rapid pace of globalization coupled with the rise of China, India's opposition to China's entry would not have held much longer. China had been long preparing for entry in SAARC and entry was assured when India gained observer status in the Shanghai Cooperation organization (SCO), an organization led by China in October this year. Reluctantly, the Indian External Affairs Ministry issued a statement in Dhaka clarifying India's stand on China's entry into SAARC, saying, "India's position is that China's request along with others can be considered once the criteria and modalities for such association have been worked out. These will be the subject of discussion at the special session of the Standing Committee scheduled to be held in 2006."

The entry of China as an observer country into SAARC has far-reaching foreign policy implications for China and the South Asian region. First, it signifies the success of China's multilateral efforts. A reassessment of the main threats to China's security in the post-Cold War era has led China to discard its initial reluctance to join multilateral institutions and secure its interests through institutional mechanisms based on common security and common prosperity. China has employed multilateralism for greater economic cooperation in the era of rapid globalization. Second, and more importantly, from the 1990s onwards, China has begun to appreciate the political aspects of globalization and emphasize multilateral cooperative mechanisms.

Though China accepted multilateralism initially out of economic necessity, it has realized that apart from advancing Chinese economic interests through greater interdependence, multilateralism would also serve to achieve great power status. Studies on the rise of great powers indicate that previous great powers relied heavily on "material and military power" to achieve their status. However, the presence of the United States and its preponderant influence, coupled with the existence of nuclear weapons, has demonstrated the futility of achieving great power status through the use of force. Instead, China has increasingly relied on multilateral mechanisms to expand its global role and influence. It is also increasingly participating in multilateral diplomacy to create a favourable security environment through interdependence and greater cooperation. China can thereby enhance its national prestige but also restrain US unilateralism. Thus, through multilateralism, China is effectively seeking great power status. Its role in SAARC would certainly enhance its growing influence in international politics and its aspirations for global power.

Given the rise of China and its overwhelming presence, it is difficult to ignore its political, economic, or strategic influence. Moreover, it has strong bilateral ties with most SAARC members. Therefore, it would be wise for India not to block China's entry as an observer country. Keeping China out of SAARC would create distrust between India and China. In addition, blocking China would reveal India to be lacking in confidence. Though globalization has made the territorial factor irrelevant, India should not forget that it can play a leadership role given its sheer size in the middle, bordering on each South Asian country, none of which borders each other. Also, the decision to grant observer status to Japan, along with China, should be taken note of, as it would indirectly counterbalance China's role in SAARC. Instead of considering China as a threat, India needs to accelerate the region's economic integration. The challenge for India is to steer the region's economic growth and prosperity and thereby keep the mantle of South Asian leadership in its hands.