Image Courtesy: Reuterus
Article: 49/2024
Five years after the historic 2019 Mahabalipuram summit between Indian Prime Minister Modi and Chinese President Xi Jinping, the two leaders met again on the sidelines of the BRICS summit in Kazan, Russia. This was their first bilateral meeting since the Galwan Valley clash, which had sparked prolonged tensions between the neighbouring countries. The meeting has stirred optimism among experts and the business community regarding the future of India-China relations. In a media briefing at Kazan, Foreign Secretary Vikram Misri noted that both Modi and Xi emphasised the potential for a "peaceful, stable, and mutually beneficial" relationship, achievable through maturity, wisdom, and mutual respect for each other's sensitivities, interests, concerns, and aspirations.
Relations between India and China had significantly soured, with India taking steps to reduce interactions and limit ties with China. This strain extended to people-to-people exchanges, as India began scrutinizing visa applications and banning Chinese apps and goods to exert pressure on Beijing. India maintained a firm stance that it would not engage in further dialogue until border issues returned to a pre-Galwan clash status, despite China being its largest trading partner.
The BRICS meeting offered a critical opportunity as both sides showed efforts to ease tensions. Just prior to the meeting, India and China reached a significant agreement on border issues, including patrolling rights in Depsang and Demchok. During their bilateral discussions, both leaders welcomed the new border agreement, seeing it as a step toward normalizing relations. According to an official spokesperson, the two leaders also agreed to "effectively use the Special Representatives mechanism on the China-India boundary question, maintain peace and stability in border areas, work toward a fair and reasonable settlement, enhance communication in multilateral settings, and protect the common interests of developing countries."
India’s Foreign Minister Subrahmanyam Jaishankar confirmed that “the disengagement process with China has been completed,” while Chinese Foreign Ministry spokesperson Lin Jian added that “China and India have resolved border-related issues through close diplomatic and military communications.” The disengagement involved withdrawing troops, tents, and temporary structures from disputed zones, concluding on October 30, 2024, with both sides celebrating the milestone by exchanging sweets for Diwali. Next steps include coordinated patrols, with ground commanders at the brigadier level and below continuing talks to finalize protocols and maintain stability in these sensitive areas.
In efforts to ease tensions after the Galwan clashes, several rounds of dialogue were initiated, with India emphasizing three key conditions: adherence to the Line of Actual Control (LAC) agreement, no unilateral changes to the LAC status, and full compliance with existing agreements. Diplomatic and military discussions over the past four years included nineteen rounds of Corps commander-level meetings, sessions of the Working Mechanism for Consultation and Coordination (WMCC), and foreign ministerial dialogues. Through these discussions, mutually acceptable solutions were reached, aligning with India’s demand for a return to the pre-April 2020 status along the LAC. Disputes in areas like Gogra-Hot Springs, Pangong Tso, and the Galwan Valley were resolved, while recent talks settled patrolling rights in the final contested areas of Depsang and Demchok.
Diplomatic efforts gained momentum in recent months after foreign ministers of the two countries met in July and agreed to step up talks to ease the border tensions.
According to the statement by MEA’s spokesperson Vikram Misri, during the meeting both the leaders underlined that “maintaining peace on the border should be our priority” and “mutual trust, mutual respect and mutual sensitivity should be the basis of our ties”. It is stated that the two leaders “agreed” that the “Special Representatives on the India-China boundary question will meet at an early date to oversee the management of peace and tranquillity in border areas and to explore a fair, reasonable and mutually acceptable solution to the boundary question”. According to MEA: The leaders agreed that stable and friendly India-China relations will positively impact regional and global peace, while supporting a multi-polar Asia and world.
The leaders stressed advancing bilateral relations with a long-term strategic view, enhancing communication, and exploring cooperation to address developmental challenges. PM Modi stressed that boundary differences should not disrupt border peace. Both leaders agreed on the vital role of Special Representatives in resolving the issue and instructed them to meet soon to continue their efforts. The leaders reviewed bilateral relations with a strategic, long-term view, agreeing that stable India-China ties positively impact regional and global peace. They emphasised mutual respect for each other’s sensitivities and interests as key to fostering cooperation. The MEA stated that restoring peace at the border will pave the way for normalising India-China relations, as seen over the past four years. Officials will now discuss enhancing strategic communication and stabilising ties through existing bilateral dialogue mechanisms, including between the Foreign Ministers.
In India-China relations, economic ties have played a particularly significant role. China overtook the U.S. to become India’s largest trading partner, with bilateral trade reaching $118.4 billion in FY24. However, following the border dispute and the Galwan Valley clash, India imposed strict restrictions on Chinese businesses and investments. India’s new policies included investment screening, product bans, and tax investigations aimed at curtailing Chinese economic influence. These measures built on a 2020 regulation, Press Note 3, which mandates that entities from countries sharing a land border with India must obtain government approval for investments to prevent opportunistic takeovers by Chinese investors during the pandemic downturn. Consequently, India rejected numerous Chinese FDI applications over the past few years, including significant investments from major firms like Great Wall Motors and BYD, which abandoned billion-dollar projects after prolonged government inaction.
India also banned approximately 250 Chinese mobile apps, including WeChat, PUBG, and TikTok, citing national security concerns. Chinese telecommunications companies like ZTE, Huawei, OPPO, Vivo, and Xiaomi faced tax probes and were excluded from India’s 5G rollout. The government further restricted Chinese phone usage among defense personnel and promoted domestic manufacturing through its Aatmanirbhar Bharat initiative, encouraging Indian production of key goods such as pharmaceuticals, solar panels, EVs, and semiconductors with Production Linked Incentive schemes.
Reports suggest India may cautiously ease trade with China, though it remains unclear if Chinese FDI will return to pre-2020 levels. While there may be a gradual softening, India is likely to maintain restrictions to support domestic businesses and limit Chinese economic influence, driven by trust concerns. The approach going forward will be carefully monitored.
Image Courtesy: Fortune India
The India-China border agreement and the recent bilateral meeting between their leaders can be seen more as a stabilizing factor in the tense relationship than a decisive strategic shift. These discussions open the door for future dialogue and ongoing engagement, but both nations have a long way to go to restore relations to their pre-Doklam state. Many core issues remain, with the border dispute still a primary concern, as China rejects the MacMahon Line demarcating the India-China boundary. The economic and business ties between the two countries have suffered during the standoff, and the Indian business community’s call for easing restrictions on Chinese investments will play a crucial role in India’s approach to these limitations. Historical border disputes, India’s closer relations with China’s adversaries, and China’s increased presence in India’s neighboring regions all fuel the mutual distrust. Even if a fully friendly relationship remains elusive, both countries aim for a stable, mutually beneficial relationship, especially as two of the world’s leading economies.
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