Separating China and India are the Himalayan Mountains. From India's perspective, Nepal and Bhutan are buffer states situated between the northeastern and northwestern sections of the Indian-Chinese border. The mountainous state of Sikkim was a third buffer, located between the other two, and former Indian Prime Minister Indira Gandhi's government sought to fully absorb this state into India. When anti-monarchy riots broke out in Sikkim in 1973, India, fearful that China would step in and claim the area as part of Tibet, used a mixture of political and military maneuvers to persuade Sikkim's last monarch to accept Sikkim as India's 23rd state. This allowed New Delhi to increase its leverage over China through its support for Tibetan separatists living in Sikkim.
There are numerous territorial disputes along the mountainous Indian-Chinese border. China possesses extensive territory in northwestern India's Kashmir region in three areas: the Shaksgam Valley, Aksai Chin and Demchok. Beijing also claims a considerable amount of territory that forms the northern rim of the northeast Indian state of Arunachal Pradesh.
Tensions, But Little Action, Along the Border
The Himalayas effectively prevent India and China from making any significant military advances against each other. However, this has not eliminated tensions altogether. Over the past six decades, there has been frequent clamor in India about potential threats from the Chinese People's Liberation Army (PLA) in various areas along India's northern flank. (The Indian states of Himachal Pradesh and Uttarakhand, located between Nepal and Kashmir along the border with China, are also considered vulnerable to Chinese military incursions.) In recent years, this perceived threat has led New Delhi to enhance its military defenses in relation to Beijing.
Officials in the Indian state of Arunachal Pradesh occasionally will claim that the Chinese are building up their military on their side of the border. These claims typically are followed by statements highlighting India's efforts to increase security on its side, which the Chinese construe as hostility. However, such statements form the Chinese are largely rhetorical. Chinese sources have told Stratfor that what is happening in these instances is periodic construction work with defensive purposes by China's army corps of engineers, which the Indians consider offensive moves. Aggravating these tensions are accusations that each country is assisting the other's rebel forces, with India claiming that China backs various ethnic insurgent groups in India's northeastern states (Assam, Nagaland, Mizoram, Tripura and Meghalaya) while China criticizes India for providing havens for Tibetan separatists.
Aside from these accusations and military preparedness measures, India's border with China has remained calm for the last 50 years — except for rare and minor incidents. This is not likely to change in the foreseeable future.
The Pakistani Factor in Indian-Chinese Relations
India's fear of a Chinese encirclement drives the thinking of Indian strategists and policymakers. A key part of this thinking has to do with the historical alliance between China and Pakistan, India's archrival and western neighbor. China has used the rivalry between India and Pakistan as a significant lever against New Delhi.
Beijing's military cooperation with and economic assistance to Islamabad has allowed the Chinese to establish a considerable presence in Pakistan. From New Delhi's perspective, Chinese involvement in developing transportation corridors in Pakistan's northern Gilgit-Baltistan region, which the Pakistanis seized in the 1948 war in the Kashmir region, enhances Pakistan's position in the disputed territory. In recent years, New Delhi has alleged that Pakistan allowed up to 11,000 PLA troops to be stationed in Gilgit-Baltistan.
China would like to use the full length of Pakistan's territory as a land bridge for exports and, far more important, imports. This ability would allow China to bypass the shipping lanes between its eastern and southern seaboard that run through the Strait of Malacca and the Indian Ocean — an important step in making China's energy imports from the Middle East more secure.
Beijing can do just that if it can establish a robust and secure transportation corridor between the Khunjerab Pass border crossing on the Pakistani-Chinese border and the port of Gwadar on the Arabian Sea (which the Chinese have helped develop). However, technological and financial obstacles, as well as security, climate and terrain-related issues, have prevented the Chinese from developing road and rail infrastructure along the full length of Pakistan's territory. Given Pakistan's domestic convulsions and the coming withdrawal of NATO forces from Afghanistan, only meager progress on this front can be expected for a long time to come. However, the port at Gwadar holds immense maritime value for Beijing and can serve as a key Chinese naval outpost in the northwestern end of the Indian Ocean.
Despite China's involvement in Pakistan, there are problems with using that involvement as leverage against India. Instability within Pakistan and the transnational Islamist militants headquartered there are turning Pakistan into more of a liability than an asset. Pakistani-Chinese relations are also affected by the United States' role in South Asia, and Beijing has to balance its commitments to Islamabad with its relationship with Washington. China also is neither willing nor able to play a role in Pakistan — financially or politically — similar to the United States. More important, China's geopolitical needs extend far beyond Pakistan.
The shifts in China's political economy in recent decades have forced Beijing to transform from a land power to a maritime one. Its growing need for energy and other resources to feed its industrial engine and thus its export sector require that the shipping lanes from its coasts to Africa and the Middle East remain open. China has had to establish and enhance its presence in the Indian Ocean Basin accordingly.
Though it will be a while before China develops considerable blue-water naval capabilities, the Chinese reportedly have started developing outposts of influence across the Indian Ocean in the form of port development plans. While in many cases China has financed construction operations of those ports, these projects in Myanmar, Bangladesh, Sri Lanka, the Maldives and elsewhere are also potential sources of revenue for Chinese construction companies. However, this intrusion into India's southern flank has exacerbated India's security concerns regarding China.
Because China is a larger economic power and has much more substantial long-range naval capabilities than India, New Delhi feels pressured to work against Chinese encroachment on what the Indians consider their territorial waters. Although India has not been able to use the Indian Ocean for power projection beyond the basin, it has established significant influence there. Furthermore, as India's own need for resources, especially energy resources, grows, it will need to ensure the security of its shipping lanes from Africa and the Middle East and from Southeast Asia. Along with India's desire to protect its ownership of the Andaman and Nicobar Islands in the Bay of Bengal and the Lakshadweep Islands near the Arabian Sea, this need makes friction between China and India in the Indian Ocean Basin inevitable. Since India is incapable of countering China's advances in the Indian Ocean on its own, New Delhi cooperates with Washington, which has its own interest in containing China's influence in the region.
From India's standpoint, the southern reaches of the Bay of Bengal are critical because of their proximity to the Strait of Malacca. The strait is important to India's 20-year-old "Look East" policy, driven by energy and trade needs and a strong interest in countering China that has stagnated after several attempts at reinvigoration. The policy involves New Delhi's developing close relations with Myanmar and the other countries in the region formerly known as Indochina.
In the past two decades, India has re-established close relations with the ruling junta in Myanmar, a longtime Chinese ally. By taking advantage of Myanmar's need for international partners, given the country's pariah status, India has not only developed another source of natural gas but has also begun offering China competition. Additionally, energy cooperation deals with Vietnam have allowed India to establish a presence in the South China Sea region — an area China considers its exclusive sphere of influence.
India has also developed close economic ties with other key Southeast Asian states including Thailand, Singapore and Malaysia. This has allowed India to establish a free trade agreement with the Association of Southeast Asian Nations (ASEAN). Southeast Asian countries share India's desire to counter China's growing influence.
Beyond Southeast Asia, India is working with Japan, which also has a strong interest in counterbalancing China. Both countries are working with the United States to create a foothold in the South China Sea — a trilateral arrangement that could help India. However, India's own ability to counter China on its southern flank is limited by New Delhi's domestic, political and economic situation.
The Role of Bilateral Trade
In the past decade or so, India's general outlook toward China has changed so that enhanced trade relations and economic cooperation have complemented the strategic competition between the two. The strengthened Indian-Chinese economic ties have also increased India's importance to the point where China feels it is necessary to balance its historical ties with Pakistan with the need to work with India. Further, China's concern about a strategic encirclement by the United States, of which New Delhi is a single but significant part, has been working in India's favor. This has given New Delhi the ability to deal with Islamabad, India's main security threat.
However, there is a long-term trend in which China has become India's largest trade partner while India's relevance to China has remained static. From 2001 to 2010, India's trade with China steadily increased from around 3 percent of overall trade to around 10 percent. However, China's trade with India as a percentage of its overall trade stayed almost flat, increasing from about 1 to 2 percent over the same period. In 2010, total trade between the two was approximately $50 billion.
Much of this trend can be attributed to increased Indian consumption of Chinese electronics and machinery (a full 42 percent of imports in 2010). In 2001, Indian imports of Chinese goods totaled $1.8 billion, including about $200 million of electronic goods and $200 million of machinery. By 2010, Indian imports of Chinese goods totaled $33 billion, including $9 billion of electronic goods and $5.6 billion of machinery.
This means China has been able to sell its low-cost manufactured goods to India, in part displacing domestic manufacturers, while India has been unable to sell China its major goods, such as refined petroleum products, diamonds, jewelry, cars and electronics, and its higher value-added services, such as software development, engineering and information technology development. This imbalance has implications for the countries' broader rivalry.
Ultimately India depends more on China economically and thus is in the weaker position in the countries' larger strategic competition, which will continue playing out in the Indian Ocean rather than along their shared border.