China has always been interested in enlarging its economic and political influence in South Asian geopolitics. Several factors are responsible for China’s long-lasting interest in the region. China’s policy towards South Asia has been a combination of unique bilateral relationships, characterised by economic opportunities, territorial disputes, security challenges, containing Indian power and resisting American influence. China is containing India’s influence and power by strengthening Pakistan’s strategic and military capabilities. While solidifying the traditional bond with Pakistan, China remains focused on enhancing its influence with Bangladesh, Nepal, Bhutan and Sri Lanka. The article argues that Chinese diplomacy in the Xi Jinping era shrewdly blends strategic objectives with economic incentives. Under his watch, China’s strategic challenges to India have thus increased in recent years. This threat intensification has been accompanied by a growing gap between India and China in terms of strategic capabilities, which has serious implications for India’s national security.