"Economic domination" would occur once trade was liberalized and SAARC markets opened to member States. With China as a SAARC member, open markets in SAARC would be much less likely to be dominated by a single State, India.
There is no domination in economically. Were markets to open up with China and India, the result would be slightly different - China would take manufacturing, India would take away the services.
There is zero benefit of China actually joining up. But were China to not join up, other countries like Bangladesh and Pakistan would take up manufacturing - because India is not competitive there.
And Markets are already in the process of being opened up
bilaterally between SAARC countries minus Pakistan. SAARC only expedites the process as a collective. India is already cognizant of the fact that Pakistan will not let it function so we are moving ahead individually.
We
already opened up a group called BIMSTEC(google it) - basically it is SAARC without Pakistan because of realizing the futility of dealing with Pakistan which acts as an outpost for others interests than acting for itself.
Then we moved on and decided that treating bilaterally for trade and economics makes more sense - and that is what we are doing now.
What is the tangible benefit from that kind of relationship?
If increased economic ties are not the goal, then SAARC is useless, and if increased economic ties are the goal, then the inclusion of China in SAARC makes perfect sense.
If
just increased economic ties
are the goal - then it makes more sense to have Japan, France and US along with China in SAARC as well. They have as much economic justification - as key investors, donors, developmental assistance providers as China and infact larger than China in these assistance's .
And yes - all these nations are keen to join SAARC, US in particular is very keen.
Then what is the point of having SAARC if we are to involve China and these nations? We can deal directly with WTO if that is the case.
Now the fact is that just economic ties are
not the only goal of SAARC - it is also a platform for South Asian countries to sit together politically. Including China, US, Japan and a host of other nations defeats the other part of the goal of SAARC.