Sino-Bhutan Bilateral Relations
The geostrategic location of Bhutan has given it political importance in the Himalayan region. The country shares around a 470 km border with China. Traditionally, the direct relations between Bhutan and China remained minimal in the past. The two countries interacted through Tibet. For that reason, the Tibetan factor is critically important to comprehending Sino-Bhutan relations. Bhutan has always been connected to Tibet in various ways and the latter had a social, cultural, and religious influence on Bhutan. However, the relations with Tibet were close, often conflicting during the 17th and 18th centuries. The Tibetan government, between 1616 and 1679, waged war against Bhutan and faced defeat on every occasion. Until Tibet intervened in the Bhutanese civil war (1732-35), the relations between the two remained tense because of conflicts over various issues like ‘territory and national prestige’. Nonetheless, the relations stabilized as leaders on both sides took diplomatic initiatives, including appointing ecclesiastic arbitrators with active participation in mediation activities, government-sponsored student exchange program, and cross-border temple restoration projects. Bhutan came into interaction with China after the appointment of Chinese high officials in Lhasa (Tibet) where they began to assert that Tibet, Sikkim, Nepal, and Bhutan all formed parts of the Chinese empire. China intervened in Bhutan in 1830, 1876, 1885, 1889, and 1905 respectively. With China’s annexation of Tibet, the territory-related issues between Bhutan and Tibet were highlighted yet unsettled to date. In the 1950s, China released its map claiming sovereignty over central and western Bhutanese territories. In South Asia, Bhutan is China’s only neighbour with which does not have direct diplomatic relations but the two countries are connected via their embassies in Delhi, India. So far, they have held a total of 24 rounds of talks and 10 Expert group meetings (since 1984) and recently signed a Memorandum of Understanding (MoU) on the ‘Three- Step Roadmap’. Bhutan, albeit did not join the Belt and Road Initiative (BRI), has strongly adhered to the ‘One-China policy’ and supported China’s seat in the United Nations (UN).
http: //bhutan.ims.tuwien.ac.at/ahtcde00/c-viex /j-02-02-02/start.html
https : //www.bhutanstudies.org.bt /publicationFiles/JBS/JBS1 Vol1 No1/3.Des i13.pdf
http: //www.jstor.org/s table/43300374
Bhutan’s stance on BRI
Although China and Bhutan have not formally established diplomatic relations, China has expressed its willingness to expand practical cooperation to achieve common development based on mutual respect and shared benefits. While stressing the boundary negotiations for regional peace and stability, China has invited Bhutan to actively participate in the BRI and share its development dividends. Bhutan welcomed the positive outcomes of this mega initiative and hailed China’s contributions to world peace and prosperity. However, it skipped the second Belt and Road Forum for International Cooperation (BRF) held in Beijing in April 2019.
Sino-Bhutan trade relations & Foreign Direct Investment (FDI)
According to the World Bank (WB), China is among the top five countries from which Bhutan imported goods in 2012. Its imports from China remained worth USD 25 million, with a partner share of 2.51%. Its major trading partners for exports were India, Bangladesh, Italy, Japan, and Nepal, while for imports, they were India, Korea, China, Japan, and Austria. Another report said that China’s export to Bhutan has increased at an annualized rate of 18.3%, from n 1995 to USD 13.4 million in 2020, whereas Bhutan’s export to China has increased at an annualized rate of 0.98%, from USD 20, 700 in 1995 to USD  26,400 during the same period. It reported that China offered a USD 10 billion assistance
package of grants, direct investment, and low-interest loans to Bhutan in 2016.
More so, the WB noted that the narrow and limited FDI in Bhutan is due to a controlled system and an inadequate policy regime in fields like industrial license, trade, equity, immigration, and finance.
Despite the absence of Chinese direct investment in Bhutan and formal economic relations, a Chinese company, Aerosun Corporation, got a contract worth USD 20 million to construct Buddha’s statue in Thimphu. The cultural exchanges were initiated with the Chinese cultural troupe’s visit to Bhutan in 2005. China also came forward to expedite Bhutan’s modernization process via exporting, farming, and in telecommunication equipment. here as well
http://www.idsa.in/s i tes /default /files /countrybrief_Bhutan.pdf
Regional dynamics and Foreign Policy of Bhutan
Traditionally, the country followed a policy of isolation until the 1950s when strategic developments in the region made it reevaluate its foreign policy. The policy shift brought it closer to India on security issues. It introduced a policy of modernization and expanded its relations with the outside world. It established diplomatic ties with all the member states of the South Asian Association for Regional Cooperation (SAARC). The most critical development i.e. refugee crisis has effectively put a halt on Bhutan-Nepal relations. Amidst the regional dynamics of South Asia, China’s growing territorial claims in the region have aggravated the situation. However, since geography is a critical determinant of the foreign policy of any state, the geostrategic location of Bhutan, being placed between two giant nations i.e. India and China, has been a key factor in its foreign policy. Moreover, the ‘Indo-Bhutan treaty of friendship 1949’ (revised in 2007), asserting Bhutan’s autonomy in internal affairs while the external matters are heavily influenced by India, shows India’s pivotal role in the foreign policy of Bhutan. The triangular relationship between Bhutan-China-India is extremely complex due to the border disputes. India has been wary of China’s territorial claims in Bhutan. Despite signing a MoU on boundary negotiation, China continued territorial intrusion in Bhutan by building settlement buildings along the disputed border.