It was a piece of intelligence worthy of what the Russians call the tournament of shadows, when the great powers of the era London and St Petersburg vied over central Asia more than a century ago. Then, maps and mavericks determined who held sway over a North-West Frontier that today has mutated into a battleground between ebbing US and surging Chinese influence. And the claim came from the top of the Indian military establishment. Speaking in April, Lieutenant General K.T. Patnaik, the head of Indias northern command, maintained that Chinese soldiers were stationed on the highly volatile line of control that divides the disputed territory of Kashmir between India and Pakistan, the nuclear-armed rivals. Many people today are concerned about the fact that if there were to be hostilities between us and Pakistan what would be the complicity of the Chinese? Lt Gen Patnaik told his audience in Indian Held Kashmir. Not only because they are in the neighbourhood but [because] they are actually stationed and present on the LoC. Pakistan quickly denied the presence of Chinese troops, as it had done earlier claims that the Peoples Liberation Army was milling about further north in Gilgit when Pakistan was beset last year by floods. But the generals fears reflect a widespread unease in the worlds largest democracy about what is seen as a stealthy Chinese annexation of neighbouring Pakistan, which is now front and centre of an intensifying strategic rivalry across the Himalayas. Supposed sightings of Chinese military personnel serve as evidence of Indias encirclement by the PLA on land borders and out at sea in the Indian Ocean. They also signal a realignment where the US may retreat from Pakistan and seek more common cause with India. One former senior Indian commander claims that Pakistans intelligence agency, the Inter-Service Intelligence, has closer ties with its Chinese counterparts than it does the US Central Intelligence Agency. New Delhis politicians and military command frequently voice their concerns about Chinas assistance to Pakistan. They point to dams on sensitive river systems, a port built by China Harbour Engineering Company at Gwadar on the Arabian Sea, the sale of military hardware, including jet fighters, frigates and helicopters, and civilian nuclear assistance. The US, by its own admission, does not have so much to show for its $20b worth of help over the past 10 years and is increasingly stepping back into the bunker. The interference of the Chinese in Azad Kashmir as Delhi considers it Indian territory conjures in the minds of Indias security establishment bitter memories of a brief Chinese invasion of its Arunachal Pradesh state in 1962. Some political analysts go so far as to refer to Pakistan as a client state of China and predict that the US will be displaced as the countrys long-term ally. They consider Pakistan as a test-bed for Chinese exports of sophisticated arms such as submarines as well as nuclear reactors and, in time, finance. The pattern of trade and investment between Pakistan and China suggests that the US has little chance of retaining its status as Pakistans major ally, says James Brazier, an analyst at IHS, a US-based political risk consultancy. Pakistan has made little secret about its fondness for Beijing. Aware that its stance irks India and the US, its leaders call China an all-weather friend, striking a deliberate contrast with others they consider less dependable. Wen Jiabao, Chinas premier, has returned the compliment with his own rhetorical flourish. No matter what changes might take place in the international landscape, China and Pakistan will remain forever good neighbours, good friends, good partners and good brothers, he said in the days following Osama bin Ladens killing by American forces on Pakistani soil in May. Marika Vicziany, a professor at Australias Monash university and expert in Sino-Pakistani ties, nonetheless describes China as taking a cautious approach. China is winning over the US as the main ally of Pakistan, she says. Pakistan is now faced with a balancing act between a new China which is emerging and the new US with its power in decline. Take Pakistans officials at their word and China is building a Himalayan equivalent of the vast Three Gorges Dam and stands ready to seal a civil nuclear deal similar to the one struck between Washington and New Delhi three years ago. Nowhere are the plans, on paper at least, more ambitious than in defence. In May, Pakistan asked China to build a naval anchorage at Gwadar. Earlier, its officials said they had begun negotiations to buy up to six submarines, which would help Pakistan project a naval power. China has a long history of helping Pakistan gain military hardware, notably of the kind it was denied by the west under sanctions imposed from 1990 in response to Islamabads nuclear weapons tests. Collaboration with China on the JF-17 Thunder fighter at Kamra air base near Islamabad followed a memorandum of understanding signed in 1995. Even though US sanctions were lifted about a decade ago, the Pakistan Air Force plans to acquire up to 250 JF-17s over the next 10 years. These purchases, driven by bargain prices, are likely to be simultaneous to the acquisition of old and new F-16s from the US. Bilateral trade between Pakistan and China is about $8.7b a year. Although Beijing says this can rise to $15b in three years, the figure is dwarfed by faster-growing Sino-Indian trade, which stood last year at $60b. Like most of Pakistans allies, Chinese officials worry about the fragility of the government in Islamabad and the prospects for long-term stability in a country wracked by extremism. The unpredictable environment leaves a friendship centre as the only high-profile Chinese presence in Islamabad. Hasan Askari Rizvi, a Pakistani scholar on strategic and security affairs, says Chinas interest is in the geography that links coastal Gwadar to Himalayan Kashgar on the Chinese border, and the resources and market of 180m people along the way. Also important, he says, is whether Pakistan can surmount its security problems, particularly regarding militants. China thinks in the long term. The question is: how far will China go along with a Pakistan which shows no signs of dealing with its challenges, he says. Unlike Indian generals, Pakistans western allies are sanguine, some even enthusiastic, about the expanding Chinese footprint in Pakistan. US officials in Islamabad say Beijing does not do assistance in the same way as Washington and that Pakistan is made to pay for the help that it receives from China. Generous credit helps, however, and the visibility of Chinese projects including dams and power stations has won public opinion over in the way that more diffuse US aid has not. Washington views Chinas approach as businesslike and transactional, a criticism often levelled at the US own strategy of giving more aid in return for progress in fighting Taliban and Al-Qaeda militants on the border with Afghanistan. Its not assistance. They are buying the Chinese goods, says one US official of the welter of Chinese commercial activity. In return for contracts, China offers protection. It gives diplomatic cover in multilateral forums to Pakistans nuclear programme and bats away fears about a possible proliferation of nuclear technologies. William Milam, a former US ambassador to Pakistan, says: I am not worried about China being a counterbalance [to the US]. I dont think it will ever be a counterbalance. It can be a long-term friend [to Pakistan] but it wont give the level of assistance we have. Stephen Cohen at the Washington-based Brookings Institution says it is too early to judge what he describes as Chinas tremendously fast-growing involvement in Pakistan. The rest of the world has yet to work out what kind of power China will be and whether it will use its might responsibly in the region, he says, but it is clear China would win from any stand-offs between India and its neighbours. The country that benefits the most from intra-South Asian hostility is China. There are those pessimists, however, who see even rising China as unable to turn the tide of the inevitable. India is being encircled by something that is crumbling, says one western diplomat in Islamabad. If [Chinese engagement helps to] delay an implosion for a while, then all to the good. Financial Times