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India-China Relations: Challenges And Opportunities

I had earlier (on 14 October 2006) drawn attention to the differential priorities accorded by each country to India-China relations. India has always been according a very high priority to its relations with China. China, on the other hand, had been perceived to have accorded higher priorities to its relations with many other countries and regions. Of late, China would seem to be paying more attention to India. This is not as a favour to India but is a part of China’s pragmatism and primary attention to her own strategic interests. In a way, it is based on the recognition that India has really grown out of her exploited under-dog status of nearly two centuries and of the potential of her current status as a significant power – economically as a matter of fact, militarily as a matter of relative strengths, and politically if we can learn to leverage them to our national advantage. The current situation poses many challenges (like getting over past deficit of trust and opposition to “international communism”) as well as opportunities to India in the conduct of her relations with China in the coming years.

Certain Basic Realities

India and China together comprise 37.64% (India : 17.14 & China : 20.5) of the world’s population. However, their combined area is only 8.64% (India : 2.2 & China : 6.44) of the world’s land mass. At present, their combined GDP is 7.5% (India : 2.48 & China : 5.02) of the total GDP of the world; but they have two of the fastest growing economies in the world and their share of the world’s GDP may exceed 20% by 2025. Any congruence and co-operation between the policies of the two countries (however limited be the areas and scope) would make a formidable combination in world affairs.

It is an immutable fact that India and China are close neighbours, sharing a long land frontier. They have forever to live with this reality. They had both been significant powers centuries ago; and have again become significant powers, speeding on their way to becoming big powers. China (which was not as colonised as India), inspired by her perennial “Middle Kingdom” syndrome, is easily growing back into her big-power ways, overcoming the limitations imposed by a long period of foreign influence in her affairs. India, on the other hand, seems to have allowed foreign invasions and colonial rule to make her forget her glory days, except in speeches and school text books. A change in our mind-set would make it easier for India to deal with China (and many other countries and entities) on equal or near-equal terms.

In the 1950s, India and China were seen as crucibles in which different political and economic models for newly-independent and developing countries were being tested – democracy with a socialist leaning in India and classical Marxism in China. The current reality is that both countries have moved away from those doctrinaire approaches and are perhaps closer to market-driven policies than many “capitalist” countries.

It has to be recognised that the era of superpowers (and of “gunboat diplomacy”) has ended. Even at the height (or the nadir) of the Cold war, the “authority” of the two superpowers was essentially based on the fear of the opposite camp. The terms of bipolar or unipolar international order have lost their relevance. What we are likely to see as the current century progresses would be the emergence of multiple centers of political and economic power and influence, highlighting the need to achieve a stable equilibrium amongst them. The threats of economic losses and instability would become strong incentives for all economically powerful countries to cooperate and work together.


The progress towards India-China “strategic cooperation” has not totally eliminated Chinese concern at the growing India-US “strategic partnership”. China’s remarkable consistency in her dealings in India’s neighborhood could easily and pardonably be seen as “China’s strategic encirclement of India”, as described in November 2005 by retired Air Chief Marshal S P Tyagi, former Chief of Air Staff. Even while going ahead with developing a close and comfortable relationship with China, India has to consider very carefully the implications to India’s security and economic interests of various Chinese actions. While it may not be necessary to take reactive counter-measures at each and every stage, our own policies and actions in various regions and on various issues have to be devised suitably to protect our overall national interests.

Both India and China had made significant miscalculations in the period leading to the traumatic events of 1962. It would help if the policy-makers in both countries could develop the art of looking at issues also from the perspective of the other country. India could also consider unilaterally introducing more transparency in her policy-making process. She could, make public disclosure, subject to security requirements, of her reasons – security, strategic, financial, and commercial – for taking specific positions or actions. India should be unambiguous, in public or in private, in expressing her sensitivities on specific issues to China and other concerned countries. These measures would help in avoiding over-sensitivity and any unjustified sense of mistrust; and in preventing reactive counter-measures. In the present scenario, for instance, a relatively innocuous action taken by China in her own national interest could otherwise be misinterpreted by India as an unfriendly (or even a hostile) act; or vice versa.

India has had difficulties in maintaining friendly and cordial relations with her smaller neighbours, probably due to her not dealing with them as equals. Worried about the asymmetry in size, human and material resources as well as economic and military strength, and by India’s perceived willingness and tendency forcibly to assert her national interests, the smaller neighbours have tended to guard themselves by avoiding the development of very close (and possibly dependent) economic and other linkages with India; and by developing (balancing) economic and military linkages with China. This frequently results in positions of near hostility, suspicion and distrust. If India could avoid being perceived as the ubiquitous “Big Brother”, but function more as the benevolent and helpful karta of a traditional joint family, artificial “balancing” relations with China may become unnecessary.


Economics has, over the past many decades, been gradually replacing territorial and imperial ambitions as the prime mover behind international relations. India and China have achieved a lot in the economic field since the policies of liberalisation and globalisation were brought into play. The aphorism that less government leads to good governance is being proved in the economic field and the two economies are generally thriving in international competition. People-to-people and business-to-business relations have taken their rightful places in economic relations between the two countries. In the field of economics, the world is rapidly becoming multi-polar, with multiple foci of economic power.

Growing economic relations between India and China are of relatively recent origin, more or less coinciding with the onset of comfortable levels of economic growth in both the countries. India-China trade and economic cooperation is marked by strong political commitment of the leaderships of both countries in this regard. The structural framework for economic cooperation is being continuously strengthened and expanded.

The economies of India and China are somewhat parallel and competitive. However, there are many opportunities to make them also cooperative. It has been observed that China’s emergence as a significant link in the manufacturing chain of the world and India’s potential for the knowledge-based services and manufacturing are complementary strengths and could be further exploited for mutual benefit. The impact of an India-China business alliance could catapult their corporate sector to be among the best in the world. The new generation of joint India-China companies could change the competition landscape in global business. Combining China’s infrastructural and logistical efficiency and massive economies of scale with India’s world class innovative capability, management know-how, and corporate leadership could result in a business superpower of the 21st century. China’s growing economic might is being seen in India more as challenge than as a threat. More and more Indian companies are looking at China as a commercial opportunity and are entering China’s manufacturing, service and financial sectors.

As the two economies further expand, some competition will be inevitable. However, the competition should not be over-emphasized, as it will be a natural and healthy development. The Asia-Pacific region is large enough for them to develop together. Prime Minister Manmohan Singh had observed (London, 10 Oct 2006) that “the world is large enough to accommodate the growth ambitions of India and China”.

India and China are competing for additional energy resources, for improving their energy security. India’s ONGC Videsh Ltd (OVL) and the China National Petroleum Corp (CNPC) have often been rivals in the race for overseas oil resources; and the competition continues. However, if it is recognised that joint ventures have immense potential, the two government-owned firms could work together more often and closer than they have been doing till now.

India and China resumed official bilateral trade in 1978. The two countries signed a Most Favoured Nation Agreement in 1984 and bilateral trade has been steadily increasing, to reach USD 18 billion in 2005 and about USD 20 billion in 2006.


India and China agreed, when Prime Minister Vajpayee visited China in June 2003, on the need to broaden and deepen defence exchanges between the two countries, which will help enhance and deepen the mutual understanding and trust between the two armed forces. A protocol on the Modalities for the Implementation of CBMs in the Military Field was signed during the visit of Chinese Premier Wen Jiabao to India in April 2005. The two military establishments are slowly developing a professional relationship and this could lead to better and beneficial understanding of each other’s capabilities, intentions and concerns; resulting in a more stable military environment.

The Boundary Issue

I will accept the risk of being considered not being adequately patriotic or nationalistic and state (even if only for the purpose of an enlightened discussion) some personal views of mine on the India-China Boundary issue. So much information about the origins and “progress” of the dispute is available in the public domain that it is not necessary to discuss the basics in detail here.

It is an over-simplification to state that the issue is merely a legacy of the colonial era. It may be more objective to accept that vast tracts in the peripheral (and border) areas of both countries were factually “unadministered” for a long period, in the modern concept of administration. China’s claim to about 90,000 sq kms in Arunachal Pradesh (presently a part of India and under effective Indian administration) and India’s claim to about 43,180 sq kms in Jammu & Kashmir (including 5,180 sq kms illegally ceded by Pakistan), presently under China’s control, are based on “past sovereignty” and not on “past administrative control”. Except for a short duration during the hostilities in 1962, China had not had any meaningful administrative presence in Arunachal Pradesh in the modern era. Similarly, India became fully aware of the Chinese construction (over a period of nearly three years) of the strategic road between Kashi (Kashgar, in Sinkiang) and Kaerh (in Ali Administrative District in western Tibet), through Ladakh, only when a patrol party of the CRPF was “captured” by the Chinese while walking along the then unknown road. Thus was born the current concept of Line of Actual Control (LAC) between India and China.

An Agreement on the Maintenance of Peace and Tranquillity along the Line of Actual Control (LAC) was signed during Prime Minister Narasimha Rao’s visit to China in September 1993. An India-China Expert Group of Diplomatic and Military Officers to assist (on the boundary question) the Joint Working Group was set up. This Agreement provided for both sides to respect the status quo on the border, clarify the LAC where there were doubts and undertake Confidence Building Measures (CBM). The thinning out of forces in areas close to the border (as part of the CBMs) and the commencement of a dialogue relating to the ultimate delineation and demarcation of the disputed segments of the Sino-Indian border reduced the apprehension of any unintended armed confrontation.

When Vajpayee (as Prime Minister) visited China in June 2003, the mechanism of Special Representatives was established to explore, from the political perspective of the overall bilateral relationship, the framework for a boundary settlement. The present UPA government has maintained and, to a certain extent, accelerated the pace. During the visit of Chinese Premier Wen Jiabao to India (April 9-12, 2005), the two Special Representatives signed an Agreement on the Political Parameters and Guiding Principles for the Settlement of the India-China Boundary Question. The new guiding principles in effect ratified the status quo, by requiring the negotiators to respect historical evidence, practical difficulties, settled populations, national sentiments and each other’s security concerns. Renouncing the use or threat of force, they called for “a package settlement” that “must be final, covering all sectors of the India-China boundary”. The indications were that both countries realised more opportunities than threats in each other.

A total of ten rounds of discussions have so far been held (including the recent round during 21-23 April 2007) between the Special Representatives. Dai Bingguo, Vice Foreign Minister, has represented China in all the ten rounds. India has been represented by the incumbent National Security Adviser to the Prime Minister (Brajesh Misra, JN Dixit and MK Narayanan). After the conclusion of the tenth round, it was stated that the talks had been held in “open, friendly, cooperative and constructive atmosphere” aimed at reaching an “amicable and mutually beneficial” agreement. Narayanan described Dai as “a brilliant negotiator” and Dai reciprocated by saying that Narayanan was “a good negotiator”. One hardly needs a dictionary or a thesaurus to realise that the two Special Representatives, despite political directives and the best intentions to reach an agreement, have been unable to leave behind the issues of “past sovereignty” and claims and counter-claims. It is obviously not possible to settle the “international boundary” without settling these issues. In effect, the present framework of the talks militates against a solution, even half a century after the disagreements erupted in the open.

It is my personal opinion that there is an urgent need to take these talks to a new dimension. It might be useful if the Special Representatives could be authorised by their principals to look beyond the issue of sovereignty and quickly evolve a practical solution. They may then be able to place the settlement of the issue of sovereignty over the “disputed” areas on the back burner (perhaps for a very long time) and go ahead to work out an agreement on a practical “administrative boundary” between the two countries. The fact that this concept may not have been tried before in international relations, through a treaty or an agreement, should not prevent the Special Representatives to start thinking outside the box. The issue of Tawang could probably be addressed by agreeing to set up a Joint India-China Peace and Friendship Centre there, with tourists and pilgrims from both countries having free access, subject only to infrastructural limitations. The Government of India may, of course, have to discuss any such “radical” idea with all the major political parties and arrive at a national consensus – in order to present to China a unified national position.


The present international situation presents India and China with a lot of challenges and also opportunities. If the challenges are met and the opportunities fully utilised, the two countries together can soon become a very significant and stabilising influence in world affairs. The developed countries may then have to prepare for a different future, one where they must learn to share political and economic power as never before.

With bold and imaginative thinking in both countries, India and China can agree on a “working” arrangement despite their different views on the issue of sovereignty over disputed areas along their border. This may still not lead to a return to the “Hindi Chini Bhai Bhai” relationship, but would send a very strong signal to the world that the two countries are now ready to play their potential roles as partners in the effort to develop a stable and peaceful world order.

(This paper was presented by R.Swaminathan, former Special Secretary, DG (Security), Government of India, at an interaction organised by the Chennai Chapter of the Observer Research Foundation on 28 April 2007 – as a follow-up to the interaction on 14 October 2006, with some additional emphasis on the ongoing India-China talks on the boundary question. He is associated with the Chennai Centre of China Studies. email:

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