India and China: Balancing borders and business in a changing world

Dipak Kurmi

(The writer can be reached at dipakkurmiglpltd@gmail.com)

In the landscape of international diplomacy, few relationships have been as complex and multifaceted as that between India and China. The recent meeting between Prime Minister Narendra Modi and President Xi Jinping in Kazan, Russia, brought the two leaders to a pivotal moment, focusing on mending ties amidst lingering border disputes. While the official discourse highlighted aspirations for a “multipolar Asia” and broader cooperation, the undercurrents of this meeting reveal a delicate balance between historical grievances and contemporary economic imperatives.

A Fraught History and the Search for Stability

The roots of tension between India and China are not recent, tracing back to historical claims and territorial disputes that have simmered for decades. The Line of Actual Control (LAC), a loosely demarcated frontier, has been the focal point of skirmishes, misunderstandings, and incursions. The 2020 confrontation along the LAC marked a low point in bilateral relations, exacerbated by nationalist rhetoric on both sides. President Xi’s move across the LAC was seen as a manifestation of overconfidence, possibly fuelled by India’s assertive posturing in the summits held between 2014 and 2019. In the backdrop of these clashes lies a broader narrative: a rapidly changing geopolitical order, with China’s assertiveness unsettling the status quo.

The meeting in Kazan, while not revolutionary, signalled a step towards stability. The leaders signed a forward-looking statement, a tacit acknowledgement of the need to maintain peace and prevent border tensions from derailing other aspects of the relationship. Yet neither Modi nor Xi is in a political position to make concessions on national boundaries—highlighting the entrenched nature of this territorial dispute. The resolution of these differences and the drawing of a mutually agreed-upon border remain a distant goal, perhaps relegated to a future era.

The Gap between Ground Reality and Diplomatic Rhetoric

A crucial aspect of the Kazan dialogue was the recognition that the border dispute is not merely about the delineation of physical boundaries; it encompasses national identities and evolving maps of self-perception. For China, any compromise on territorial claims would be seen as a retreat from its hard-won position as a dominant regional power. For India, making concessions would undermine its sovereignty and political standing. Thus, a cautious status quo persists, underlined by the agreement that soldiers will disengage, allowing the nations to focus on re-engagement.

The symbolic value of the Kazan meeting lies in its pragmatism—both leaders, aware of the limits of their power to enforce a new border settlement, chose to prioritise stability. The challenge now is to maintain this fragile equilibrium while navigating the complex geopolitical currents that have evolved since the days of Rajiv Gandhi’s dialogue with Deng Xiaoping and the more recent overtures during Manmohan Singh’s tenure.

The Rise of China and India’s Strategic Response

In the past two decades, China’s meteoric rise has reshaped the global power structure. Once defined by a relatively balanced equation, the India-China relationship has shifted towards a more asymmetric dynamic, with Beijing asserting itself as a dominant force in Asia. This transformation has forced New Delhi to adapt, seeking to recalibrate its foreign policy. A key aspect of India’s strategy has been its alignment with Western powers, particularly the United States, to counterbalance China’s regional ambitions. However, the limitations of this alignment have become apparent, with Modi’s administration reluctant to fully commit to an anti-China alliance, mindful of the costs and geopolitical risks involved.

Thus, India’s approach has morphed into a policy of multi-alignment, maintaining ties with the West while simultaneously seeking rapprochement with China and Russia. This strategy aims to leverage relationships with multiple global powers to preserve strategic autonomy, allowing India to navigate the complexities of a multipolar world order.

Economic Realities: From

Confrontation to Cooperation

Despite the political and military tensions, the economic relationship between India and China remains robust. China is India’s largest trading partner, and the trade imbalance is heavily skewed in Beijing’s favour. This imbalance underscores the challenge facing India: how to benefit from economic engagement with China without becoming overly dependent.

The Kazan meeting, therefore, was not only about de-escalating border tensions but also about paving the way for economic normalization. One of the most pragmatic outcomes would involve encouraging Chinese investment in India, particularly in the manufacturing sector. India’s Economic Survey, published by the Ministry of Finance, has raised pertinent questions about the nature of this economic engagement, emphasizing the need to balance importing goods with attracting Chinese capital.

The survey’s analysis suggests that while many Western economies are shifting towards a “China plus one” strategy—diversifying supply chains without fully decoupling from China—India could benefit from a nuanced approach. Instead of merely importing from China, allowing Chinese companies to invest in India’s manufacturing sector would bring multiple benefits: it could reduce the trade deficit, integrate India into global supply chains, and provide a stable source of capital for India’s growing economy.

Navigating Economic Engagement Amidst Political Tensions

The Economic Survey’s recommendations highlight a critical dilemma: How can India maintain a constructive economic relationship with China amid a politically strained atmosphere? The proposed solution is pragmatic—fostering Chinese investments in Indian industries while carefully managing political sensitivities. This strategy acknowledges the reality that China’s economic prowess cannot be ignored, even as New Delhi remains cautious of Beijing’s political ambitions.

One possible outcome of this approach would involve increased Chinese Foreign Direct Investment (FDI) in Indian manufacturing, aimed at producing goods not only for the domestic market but for export to Western economies. This would allow India to play a key role in the evolving global supply chain, potentially reducing its economic dependency on Chinese imports. However, such a move would require a delicate balancing act, ensuring that economic cooperation does not compromise national security or geopolitical interests.

A New Era of Strategic Calculus

As Modi and Xi set the tone for the future, the relationship between India and China is at a crossroads. The path forward will be defined by both countries’ ability to reconcile their historical grievances with the demands of modern statecraft. For India, this means acknowledging the realities of China’s rise while asserting its own economic and geopolitical aspirations. For China, it involves recognising India’s importance as a regional power and a key player in shaping a multipolar Asia.

This evolving dynamic underscores the need for both nations to adopt a long-term and strategic perspective. While border tensions may persist, the broader focus is on fostering stability and predictability in the relationship—a goal emphasised during the Kazan meeting. A pragmatic approach to economic engagement, coupled with a cautious handling of geopolitical flashpoints, will be essential for sustaining this fragile equilibrium.

A Relationship in Transition

The Modi-Xi meeting in Kazan was not a resolution but a recalibration—a recognition that while border disputes remain intractable, economic interdependence offers a pathway to stability. The decision to allow Chinese investment in Indian manufacturing sectors reflects a pragmatic assessment of global economic trends, acknowledging that decoupling from China is neither feasible nor desirable. Instead, India is pursuing a strategy of managed engagement, seeking to extract economic benefits while minimising geopolitical risks.

As India and China navigate this complex relationship, the future will depend on their capacity to balance competing interests—economic cooperation with political caution, national pride with pragmatic realism, and historical grievances with a forward-looking vision. Whether this approach leads to a stable, mutually beneficial partnership or a renewed cycle of competition and confrontation remains to be seen. What is clear, however, is that the India-China relationship is evolving, reflecting the broader shifts in the global order, and will continue to be a central theme in the geopolitics of the 21st century.