For China-India Ties, the Status Quo Will Do

7 MINS READOct 11, 2019 | 10:00 GMT
Indian students form the Chinese character for the name of Chinese President Xi Jinping, in Chennai on Oct. 10, 2019, ahead of a summit between Xi and his Indian counterpart, Narendra Modi.

Indian students form the Chinese character for the name of Chinese President Xi Jinping, in Chennai on Oct. 10, 2019, ahead of a summit between Xi and his Indian counterpart, Narendra Modi. The two leaders will look to keep their disputes off the front burner.

(ARUN SANKAR/AFP via Getty Images)

For two of Asia's most enduring military rivals, the search for harmony is taking center stage in a relationship rooted in decades of mistrust. Chinese President Xi Jinping was set to arrive in India on Oct. 11 for an informal summit with Prime Minister Narendra Modi in Mamallapuram. Xi hosted Modi last year after bilateral ties deteriorated during the 2017 Doklam standoff, in which thousands of Indian and Chinese troops nearly came to blows. For Xi, a preoccupation with U.S. President Donald Trump's trade war as part of Beijing's broader strategic competition with Washington explains why he wants calm with neighbors like New Delhi. And for Modi, a desire to avoid confrontation with China — the superior military and economic power — explains why he wishes to sustain high-level dialogue with Xi. Ultimately, however, any dialogue will strive purely to manage tensions, which will only grow in the long run because of their competing strategic aims along their shared border.

The Big Picture

India counts China as its principal strategic rival in Asia, yet the two will strive to prevent their disagreements from hurting relations. Still, both countries' competing aspirations mean any working agreements will only aim to manage, rather than eliminate, tensions that could lead to border confrontations in the long run.

A Trio of Issues

There are three key areas of the relationship to watch for in the aftermath of the summit:  

The Sino-Indian border dispute will continue driving tension. India and China's dispute over their boundary and their competing claims over territory will remain a fundamental source of tension in their relationship. Because the countries have never demarcated vast stretches of their 4,057-kilometer (2,535-mile) border, known as the Line of Actual Control, altercations occasionally occur. Last month, Indian and Chinese troops faced each other down in a day-long standoff along the banks of the Pangong lake, which straddles India's Ladakh region and Aksai Chin, a disputed territory under Chinese administration that New Delhi claims. Both militaries swiftly resolved the issue, the first such incident this year, without resorting to hostilities. But given the high political costs that Modi would face if he formally renounces India's claim to Aksai Chin, an agreement that would confirm the Line of Actual Control as the border is unlikely in the near future. As a result, the two leaders are likely to maintain a holding pattern by just managing the current de facto border. 

This map shows disputed areas on the India-China border.

For India, bolstering its military's ease of transport along the Line of Actual Control remains key to matching China's own infrastructural buildup. New Delhi has finished construction on around 70 percent of around 60 strategic roads identified in the border regions. The endeavors aim to reverse decades of intentional infrastructure neglect in the region, as past governments in New Delhi sought to leave the area barren to blunt a potential Chinese advance into Indian territory after China beat India in a 1962 border war, conquering Aksai Chin and Arunachal Pradesh (Beijing later relinquished control over the latter, but it upholds its claim to the area). In the long run, however, Beijing's own regional infrastructure push in the region suggests the two countries will eventually butt heads once more. 

One area that will remain a flashpoint is Bhutan. Squeezed between India and China, the remote Himalayan kingdom harbors its own territorial dispute with China involving the Doklam plateau, the site of a 73-day standoff in 2017 when Indian troops intervened to halt a Chinese road extension project that would have given China a military advantage against India. Modi is seeking to prevent Bhutan from ceding any territory to China that would hurt India's military position in the region — something the Bhutanese government could consider in exchange for Chinese economic aid.

In the long run, Beijing's own regional infrastructure push in the region suggests the two countries will eventually butt heads once more. 

Finalizing the Regional Comprehensive Economic Partnership (RCEP) will be India and China's major trade goal. Trade is sure to figure prominently in the talks between Modi and Xi. As China battles its protracted trade war with the United States, India is locked in its own skirmish with Washington centered on tariffs, medical devices and data localization. Protectionist sentiments in the United States have heightened India and China's desire to finalize the RCEP by next month. The export opportunities that the RCEP offers is enticing to India, but New Delhi has remained the main outlier in talks over concerns that a free trade bloc that involves China will widen the bilateral trade deficit. A key sticking point thus hinges on the tariff liberalization schedule: India will continue pushing for a phased withdrawal of tariffs on 80 percent of Chinese imports — which amounts to a softening stance — over the next two decades. 

For China, the RCEP offers only limited economic insulation to hedge against U.S. protectionism, although it does suit Beijing's interests of promoting regional free trade platforms that exclude the United States. While India may accordingly push to limit its resulting obligations to cut taxes and acquire greater market access to China, Beijing has yet to consider strong concessions that would address New Delhi's core concern: Its $57 billion trade deficit with China and the possible flood of Chinese goods into the Indian market. 

Of all the Belt and Road projects in South Asia, the China-Pakistan Economic Corridor will remain the biggest irritant in Sino-Indian relations.

Sino-Indian competition will drive the search for investments. The Indian Ocean will increasingly become a theater of Sino-Indian competition since China's economic and naval expansion challenges New Delhi's role as the region's dominant power. As Beijing's Belt and Road Initiative broadens China's reach into South Asia, Modi has strengthened regional relationships under his "Neighborhood First" policy. Already, Modi and Foreign Minister Subrahmanyam Jaishankar between them have visited the Maldives, Sri Lanka, Nepal, Bhutan and Bangladesh since the incumbent Bharatiya Janata Party won reelection in May. However, Chinese investments in strategic assets like ports and highways in all these countries apart from Bhutan are fueling New Delhi's long-term worries of encirclement amid concerns that China could one day use these projects in a bilateral conflict. In fact, as a result of this competition in the Indian Ocean, India and the United States are forging a stronger defense partnership as part of Washington's Indo-Pacific strategy to promote freedom of navigation.  

The Belt and Road Initiative's push into South Asia has compelled India to dangle its own mix of loans and investments in the region. In Sri Lanka, India has partnered with Japan to build the East Container Terminal — which sits right next to the Chinese-funded Colombo International Container Terminal — at a cost of half a billion dollars. In the southern port city of Hambantota, an Indian firm won a $3.85 billion contract in March to construct an oil refinery near the Hambantota Port, whose ownership by a Chinese state-owned firm has raised concerns about the unsustainable burden of Beijing's debt financing model on South Asia's developing economies. And in Bangladesh, New Delhi has lavished $8 billion in total credit, while Modi also recently signed an agreement to install a coastal surveillance radar system in Bangladesh's Chattagram and Mongla ports. China, however, has also been busy in the country, signing $24 billion worth of Belt and Road deals, funding projects like the Padma Bridge and developing special economic zones. 

But of all the Belt and Road projects in South Asia, the China-Pakistan Economic Corridor (CPEC) will remain the biggest irritant in Sino-Indian relations, since it crosses Pakistan's Gilgit-Baltistan, a territory India claims as part of the broader Kashmir dispute. A key part of CPEC's development is the port of Gwadar, which adds another Chinese port project in South Asia. (Partly in response to Gwadar, India is funding Iran's Chabahar port to circumvent Pakistan and trade with Afghanistan.) Indeed, Xi hosted Pakistani Prime Minister Imran Khan for a two-day visit that started Oct. 8. Nevertheless, not everything is smooth sailing in Beijing and Islamabad's relationship, as India's Aug. 5 decision to revoke the autonomy of Jammu and Kashmir puts China in a difficult spot as it tries to appease its ally, Pakistan, while also managing tensions with India. 

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