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Sino-India Relations since 1949

Thesis · April 2017

DOI: 10.13140/RG.2.2.29690.90560

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Sino-India Relations since
1949
Professor E. Sridharan
Group E10
Group Members:
Shweta Chopra
Saurabhi Purohit
Nithin Shamsuddin
Rohit Lahoti

TOPIC
Analyse the evolution of India-China relations since 1949
taking into account the border and Tibet issues, the 1962
war, nuclear weapons, and Cold War and post-Cold War
geopolitics and the growth of economic relations with
China. Take a position on whether you see the
relationship as one of permanent tension or amenable to
resolution.
GLOSSARY

AIIB - Asian Infrastructure Investment Bank

ASEAN - Association of South East Asian Nations
BBIN - Bangladesh, Bhutan, India, Nepal
BIMSTEC - Bay of Bengal Initiative for Multi-Sectoral Technical and Economic
Cooperation
BMD - Ballistic Missile Development
BRICS - Brazil, Russia, India, China, South Africa
CPEC - China Pakistan Economic Corridor
JeM - Jaish-e-Mohammad
GDP - Gross Domestic Product
LAC - Line of Actual Control
MFN - Most Favoured Nation
NAM - Non-Aligned Movement
NEFP - North East Frontier Province
NPT - Non Proliferation Treaty
NSG - Nuclear Suppliers Group
OBOR - One Belt One Road
PRC - People’s Republic of China
RCEP - Regional Comprehensive Economic Partnership
SAARC - South Asian Association for Regional Cooperation
SCO - Shanghai Cooperation Organization
UK - United Kingdom
UN - United Nations
UNSC - United Nations Security Council
US - United States of America
USSR - Union of Soviet Socialist Republics

2
Abstract:

India and China, today, account for over one third of the world’s population, and are fast
growing economies, gaining significance on the global stage. The relations between these two
nations, are thus significant for the future of the international system. Despite a rich history of
ties in the past, the period since 1949 has seen an evolution in relations in a period of nuclear
power and unprecedented economic growth for both countries. Moving from relations plagued
by numerous border disputes and military tension to one of greater economic cooperation and
relative peace, Sino-Indian relations have seen huge progress. However, along with the increased
cooperation through bilateral and multilateral initiatives, the growth of both countries looms as a
threat to one another. Regional tensions in South Asia, between China and Pakistan on one hand,
and India on the other, continue. On the world scale, China has increasingly grown to become
the biggest challenge to US unipolarity. Strengthening ties between the United States of America
and India add to China’s wariness regarding India’s growth. Its blocking of Indian interests on
international forums, is an inkling of the tension that continues. Thus, strands of cooperation and
competition, both exist simultaneously. However deep-rooted historical disputes and conflicts,
along with their nuclear power and growing economies ensure that tensions between both nations
will continue. This paper explores the history of Sino-India relations since 1949, and explores the
factors that make this relationship one of permanent tension.

3
 India - China Relations, Since 1949
1. Introduction:

China as we know it today, or the People’s Republic of China(PRC), was formed in October
1949, a little more than two years after the creation of independent India. Though both nations
have had cultural ties over millennia, the period after 1949 has seen distinct challenges in the age
of nuclear, and with both countries accelerating development. With the nations being the two
most populous, yet fastest growing economies in the world today, and China posing the closest
challenge to United States of America (henceforth referred to as US) unipolarity in the world, the
relations between the two countries are of extreme importance to the global order. In June 2012,
China stated its position that "Sino-Indian ties" could be the most "important bilateral partnership
of the century"1. This paper attempts to analyze the progression of the diplomatic, military and
economic relations between these two nations, and ascertain the likely future of the relationship.

2. Diplomacy

On 1 April 1950, India became the first non-communist bloc country to recognize the PRC over
the Taiwan-led Republic of China (ROC), beginning the post-1949 diplomatic relations between
the two nations. The popular Hindi slogan of “Hindi-Chini Bhai Bhai” was common during
relatively congenial relations between the two early to mid-1950s. It is also covered in
international relations literature, that India, under Nehru, refused offers from US and Union of
Soviet Socialist Republics (USSR) to a permanent seat at the UN Security Council, in an effort
to encourage greater integration of China in the international community.2 Eventually however,
ties between the two nations began to sour.

1
Rajat Pandit, and Sachin Parashar, “US, China woo India for control over Asia-Pacific,” The Times of
India, (2012).
2
Anton Harder, “When Nehru Refused American Bait on a Permanent Seat for India at the UN,” The
Wire, (2016).

4
2.1. Tibet

With the growing military pacts between US and Pakistan in the early 1950s, India was perhaps
“impelled to enter into a somewhat asymmetrical agreement with China in April 1954 on ‘Trade
and Intercourse between India and the Tibet Region of China,’ also known as the “Panchsheel
Agreement.” Due to this, India had to renounce its British India inherited extraterritorial rights
in Tibet, and recognize the ‘Tibet region of China’ as a part of China. This negated the principle
of reciprocity, since China did not correspondingly recognize India’s sovereignty over Kashmir.3
The agreement called for five principles of peaceful coexistence between India and China -
mutual respect, mutual non-interference, mutual non-aggression, equality and cooperation, and
peaceful coexistence.4

After the Tibetan uprising of 1959, China annexed the region, with the Tibetan spiritual and
political leader, the Dalai Lama and lakhs of Tibetan refugees, fleeing to India. They were
granted asylum in India, by the then Indian government. China suspected India’s involvement in
the uprising, based on a US led covert operation led by its Central Intelligence Agency, leading
to a souring of relations between the two nations.5

The continued presence of the Tibetan government-in-exile in Dharamshala, under the Dalai
Lama, is a permanent cause of Chinese frustration, albeit one that is rather peripheral to the
relationship as a whole.

Tibet has increasing strategic value in terms of its geography, being a crucial water source for
Asia. This has allowed it to remain a dispute, pursued by both sides now and again. China’s
border disputes with India are also based in claims over Tibetan geographies, which it attempts
to assert through cross-border excursions from time to time. India, then allows for Tibetan
refugee protests against China to be highlighted, in retaliation. Thus, both sides continue to use

3
Sunil Khatri, Events Leading to the Sino-Indian Conflict of 1962 (New Delhi: IDSA Monograph Series,
No. 58, 2017), 15.
4
Ankit Panda, “Reflecting on China's Five Principles, 60 Years Later,” The Diplomat, (2014).
5
Khatri, Events Leading to the Sino-Indian Conflict of 1962, 12.

5
the Tibet issue in their diplomatic dealings, with it being a peripheral but continuing aspect of
their relations.

2.2. Border Disputes

India and China share a 4,056-km border, heavily disputed in several areas. The recognized
border today, is the Line of Actual Control (LAC). The demarcation existed as the informal
cease-fire line between India and China after the 1962 conflict until 1993, when its existence was
officially accepted as the 'Line of Actual Control' in a bilateral agreement.6

2.2.1. Arunachal Pradesh

China’s acquisition of Tibet, complicated the Sino-Indian border dispute. The Arunachal Pradesh
region, previously administered as the North-East Frontier Province (NEFP), was claimed by
China as South Tibet. Though this region was earlier a part of Tibet, it was ceded to British India
as part of the Simla Agreement (1913-14), where the MacMohan Line was drawn. In the 1950s,
India believed this dispute could be resolved with all parties jointly recognizing the validity of
the MacMohan Line, however, the border only got further confrontational with time. In the 1962
war, China claimed Arunachal Pradesh as part of its territory through military intervention.
However, after winning the war, it unilaterally withdrew from the region.7

China has since tried to negotiate the Arunachal Region in exchange for control over Aksai Chin,
with India. In 2006, it attempted to claim control over the territory, prompting India to increase
military presence in the region. Since the conflict over Arunachal Pradesh costs more for the
Indian government to manage, China makes use of this border dispute as leverage in
international relations with India.

6
“India-China Border Dispute,” Global Security, accessed April 5, 2017.
7
Brahma Chellaney, “A war China won only to lose,” Live Mint, (2012).

6
Figure 1 - Disputed Area in Arunachal Pradesh

2.2.2. Aksai Chin

Aksai Chin, in the eastern part of Ladakh, Jammu and Kashmir, forms an important part of the
Sino-Indian border dispute. The fact that a third party, the British, was responsible for drawing

7
up borders before Indian independence, has further complicated matters. India considers the
Johnson Line drawn up in 1865, and advocated by the British post 1940s, which puts Aksai Chin
as part of India, as the official border in this region. On the other hand, China considers the
Macartney-MacDonald Line, which left the Aksai Chin within Chinese borders, as the official
border.8

In 1958, Aksai Chin was a nearly uninhabited region, officially part of Indian territory at the
time. That year, Indian officials received information about significant Chinese encroachment in
the region. The Chinese had been building a highway from Tibet to the autonomous Chinese
region of Xinjiang, through the region. Within a few months, Chinese maps began to display the
region as part of their territory.9 India was deeply outraged by the open Chinese provocation, but
Chinese outrage at India’s granting of asylum to the Dalai Lama and other Tibetan refugees in
1959, created a counterbalancing of sorts. Rising tension is evidenced in the series of letter
exchanged by the Prime Ministers of both nations. These tensions went on to culminate in the
Sino-Indian war of 1962.

Today, Aksai Chin is administered by China, but continues to be claimed by India. China
National Highway 219 runs through the region, from Yecheng in Xinjiang to Lhatse in Tibet,
and was recently repaved to survive harsh weather, in 2012. This highway is strategically
important to the Chinese because provides an essential north-south transportation and logistics
link between its two most western territories – Xinjiang Province and Tibet.10

In 2013, Chinese troops entered the Daulat Beg Oldi region, close to Aksai Chin, into Indian
territory, causing a three-week standoff that was later resolved through bilateral negotiations.11

8
Mohan Guruswamy, “, "The Great India-China Game," Rediff, (2003).
9
John W. Garver, “China's Decision for War with India in 1962,” (2003).
10
Peter Navarro, “How China and India may come to Blows,” The Globalist, (2015).
11
Sandeep Dikshit, “China ends stand-off, pulls out troops from Daulat Beg Oldi sector,” The Hindu,
(2013).

8
Figure 2 - Territorial Disputes in Aksai Chin

2.2.3. Sikkim

The border dispute in Sikkim began with the Nathu La and Cho La incidents of 1967, when
Chinese troops infiltrated Sikkim, which was at that point, still not a part of India. Later in 1975,
a unanimous referendum by the Sikkimese people, made Sikkim an official part of India, a

9
decision unaccepted by the Chinese at the time. Later, in 2003 China agreed to accept Sikkim as
an Indian state, in exchange for India recognizing Tibet as an autonomous region of China,
something India had already done in 1953.12

2.2.4. Shaksgam

Shaksgam Tract or the Trans-Karakoram Tract is an area of 9,900 square kilometers currently
administered by China as part of its Xinjiang region. The area was controlled by Pakistan until it
ceded the region to China in 1963 under the Sino-Pak Frontier Agreement13, an important step in
the growing China and Pakistan relations. India claims this region to be a part of its territory, and
the dispute continues today. The Hotan-Golmud Highway built by the Chinese in this region,
links Xinjiang to Qinghai province and central China. It provides faster access to Golmud, a
commercially and militarily significant base for China, making the area of strategic importance
to them. The Siachen Glacier is also situated close to Shaksgam Valley, giving this region
military importance in terms of the India-Pakistan conflict. This is why India is wary of Chinese
control and development of the region, given Pakistan and China’s strategic alliance.

2.2.5 Border Agreements

Post the 1991 economic liberalization in India, economic ties with China saw an improvement,
showing spillover effects in terms of diplomatic relations. The LAC received legal recognition
through bilateral agreements, with the Agreement on the Maintenance of Peace and Tranquility
along the Line of Actual Control (LAC) being signed during a diplomatic visit in 199314, and
with an agreement on Confidence Building Measures in the Military Field along the LAC being
signed in 1996.15 Recently, in October 2013, both countries signed the Border Defence

12
“India and China agree over Tibet,” BBC News, (2003).
13
Senge Sering, “China’s Interests in Shaksgam Valley,” Sharnoff’s Global View, (2013).
14
“India-China Border Dispute,” Global Security, accessed April 5, 2017,
http://www.globalsecurity.org/military/world/war/india-china_conflicts.htm
15
“Agreement Between the Government of the Republic of India and the Government of the People's
Republic of China on Confidence-Building Measures in the Military Field Along the Line of Actual Control
in the India-China Border Areas,” United Nations Peacemaker, (1996).

10
Cooperation Agreement to ensure that border patrolling does not escalate into a military
conflict.16 With China’s blocking of certain Indian interests in the UNSC, the current
government has also been negotiating a peaceful mutually acceptable resolution to the border
disputes between the two nations, with discussions taking place during Indian Prime Minister
Modi’s visit to China in 2015.

2.3 Geopolitics

2.3.1. Cold War

From 1949-1991, a Cold War lasted between the two superpowers of the world – US and USSR.
Although, no direct war took place between them, there was tension among the two and proxy
wars were fought between both the blocs of nations, led by each power. It was thus, a bipolar
world. All nations of the world took a different stand vis-à-vis the cold war. China, having turned
communist in 1949, was aligned with USSR17. India, under Jawaharlal Nehru’s idealistic
leadership, chose to maintain its strategic autonomy without picking sides. It contributed to the
beginning of the Non-Aligned Movement (NAM) in 1961, of states that refused to align with any
bloc. China, however, refrained from joining NAM suspecting India’s involvement in the
Tibetan movement.18

India’s conflict with Pakistan eventually led to its disillusionment with the United Nations (UN),
for its inability and perceived unfairness in resolving the Kashmir dispute. Moreover, US sided
with Pakistan instead of India, inviting it to be a part of its security alliances as early as 1954,
due to its explicit anti-communist stand, whereas India was perceived to be equivocal about its
stand on communism.19 Post the Sino-Indian war of 1962, and growing strategic relations
between China and Pakistan, having found a common enemy in India, an axis of US-Pakistan-
China power began to form, by the early 1970s.
16
Bijoy Das, Border Defence Cooperation Agreement, (New Delhi: IDSA, Journal of Defence Studies,
Vol. 8, No. 1, 2014), 35.
17
Robert L. Worden, Andrea Matles Savada and Ronald E. Dolan, editors, China: A Country Study
(Washington: GPO for the Library of Congress, 1987), Sino Soviet Relations.
18
Khatri, Events Leading to the Sino-Indian Conflict of 1962, 53.
19
Manzoor Khan Afridi, “Pak-China Relations in the Cold War Era: A Theoretical Perspective,” American
International Journal of Research in Humanities, Arts and Social Sciences, (2014).

11
Meanwhile ideological, economic and security concerns led to a deterioration of relationships
between China and USSR, with the period of the 1960s-1980s being known as the Sino-Soviet
split20. China began to introduce wide ranging economic reforms, particularly post 1978, which
helped expand its economy, diverging away from India in terms of economic strength, and away
from USSR in terms of ideology. Instead, this period saw a warming of relationships between
India and USSR, culminating in a friendship treaty between both nations in 1971.21 This stood
for an implicit military security backing by USSR, for India. At the time, both US and China has
nuclear weapons, and India was yet to run its first nuclear test, which came in 1974.22 In the face
of the power axis facing India, dropping of its non-aligned stance and siding with USSR, became
a strategically necessary counterbalancing move. For USSR, the move offered it a continued
influence in the South-Asian region, having lost its hold over China after the Sino-Soviet split.

USSR became India’s largest arms exporter and the strong relationship between the two
continued until the end of the Cold War in 1991, when USSR dissolved. Though Indian
governments like the Janata Party and the Rajiv Gandhi led Congress attempted to reconcile ties
with US, and with China, post the death of Mao Zedong, India’s growing nuclear strength and
the continued conflicts with Pakistan and China kept the geopolitical situation more or less the
same, until 1991.

2.3.2. Post-Cold War

The post-Cold War period saw India lose its implicit military backing from USSR, with the
dissolution of the latter. This essentially left the world in a unipolar situation, with US remaining
the only superpower. China’s rapid economic expansion had enhanced its status to the largest
regional power in Asia, creating a regional threat for India, and a possible looming threat to US
on the global stage. With India kickstarting its own economic liberalization slowly in the 80s and

20
Robert L. Worden, Andrea Matles Savada and Ronald E. Dolan, editors, China: A Country Study, Sino
Soviet Relations.
21
James Heitzman and Robert L. Worden, editors. India: A Country Study, (Washington: GPO for the
Library of Congress, 1995), Russia.
22
“The NPT and the Aftermath of India’s Nuclear Test — May 1974,” Association for Diplomatic Studies
and Training, (2015).

12
with rapid pace post 1991, India joined China as one of the fastest growing economies of the
world. By gaining a larger share of world GDP, India began to gain more relevance on the global
geopolitical stage as well. This created the right environment for ties between India and US to
improve, with China being a threat to the power of both, at the regional and global stage,
respectively. Thus, while US interest in Pakistan continues because of security considerations,
the explicit bias has given way to a more neutral stand on India-Pakistan issues. The Indo-US
Nuclear deal signed in 2008 is a testimony to US recognition of India as a solid regional power
in Asia, and a viable ally against the threat of China, in the region.

China and Pakistan have continued their strong strategic alliance, with China assisting Pakistan
with developing its military and nuclear strengths, and creating strong economic partnerships
with the latter. This suggests that India will continue to face the two-front threat of both
countries in Asia, even in the future, making US support essential. However, economic
liberalization in India also led to an expansion of economic relations between India and China,
which translated into a thawing of tensions due to border disputes and the nuclearisation of India.
This is evidenced in the number of bilateral agreements and expanding trade and investments
between both nations, as a result of which no major conflict has taken place between the two
since 1987. The battle for greater regional power continues with several multilateral partnerships
and tactics to expand influence, being carried out by both nations. On the international stage,
China having a veto as a permanent member of the UN Security Council and larger global
bargaining power, has not boded well for India. Recently, China has blocked India’s Nuclear
Suppliers Group membership bid and vetoed its attempts to get Jaish-e-Mohammad (JeM) chief
Masood Azhar designated as a terrorist by the United Nations (UN). These disputes continue,
despite the improving economic relations between both nations, hinting towards a future of fewer
full-scale conflicts but continued strategic disputes, more competition as well as cooperation,
depending on both countries and their situational preferences.

13
3. Military Relations

3.1. Conflicts

There have been primarily three direct conflicts over border disputes between India and China,
since 1949.

3.1.1. Sino-Indian War of 1962

India was invaded in Aksai Chin and across the McMohan Line in Arunachal Pradesh by China’s
People’s Liberation Army on October 20, 1962. The unsuspecting India forces were unprepared
and lacked the numbers to compete with the Chinese, leading to an Indian loss. The war was a
shock for India, and particularly Nehru, and was far from expected.

China was secure with US posing a neutral stand in event of Sino-Indian conflict in the early
1960s. This, along with USSR’s offer of restitution of Sino-Soviet alliance in mid-October 1962
and lessening of its pro-India tilt due to the Cuban Missile Crisis, removed all hurdles in the way
of China’s attack on India23. India requested assistance from both the superpowers at the time,
however received none. This was a major event causing a shift in India’s international politics
from being an idealist nation to a more pragmatic stance, where they realized that international
cooperation could not always be relied upon to resolve disputes and conflicts.

The Chinese are claimed to have declared a unilateral ceasefire and withdrawn out of the war.24
Some attribute the withdrawal, to their inability to maintain logistic support to the advancing
troops beyond the Tawang region in Arunachal. Another possible reason could be the fear of US
intervention in the issue, if escalated.

3.1.2. Sino-Indian War of 1967

23
Khatri, Events Leading to the Sino-Indian Conflict of 1962, 12.
24
Hong Yuan, “China won, but never wanted, Sino-Indian war,” Global Times, (2012).

14
The Sino-Indian War of 1967 is not very widely known of, and is also referred to as the Nathu
La and Cho La incidents, lasting from 11-14 September and 1-10 October 1967, respectively.
The Chinese military infiltrated into the territory of Sikkim, that was independent at the time.
After their defeat at the hands of the Indian forces, the Chinese retreated. 25

The tactic of border infiltration by China began to be used post the Indo-Pak 1965 war, as a
strategy to dilute India’s military strength.

3.1.3. Sino-Indian War of 1987

The Sino-Indian War of 1987 was a bloodless conflict between the Chinese and Indian Armies
and occurred at Sumdorong Chu Valley, in Arunachal Pradesh.26 It was triggered when India
granted statehood to the disputed region of Arunachal Pradesh in December 1986. Indian
military movements in the Tawang region combined with this action were seen as a provocation
by the Chinese and they proceeded to protest, with military deployment. However, this time the
Indian military had deployed advanced weapons which sent out a clear message to the PLA
about the change in India’s strategy, to an offensive role. War was predicted. However, eventual
diplomatic steps helped India and China realise the danger of inadvertent conflict and they
decided to de-escalate their deployments.

With the eventual signing of border agreements and rising economic relations between the two
nations, no direct conflict has taken place since.

3.2. Nuclear Weapons

Both India and China are, today, part of the 9 nuclear weapon powers of the world.
China officially became part of the nuclear club with its nuclear test on October 1st, 1964,
making it the fifth nuclear power.27 The test left US wary about the repercussions of a nuclear

25
Taurgo, “Second Sino-Indian War of 1967: Decisive Victory for India and Defeat of China,” Active
Defence, (2015).
26
Claude Arpi, “The Sumdorong Chu Incident: a strong Indian stand,” Indian Defence Review, (2013).
27
“16 OCTOBER 1964 - FIRST CHINESE NUCLEAR TEST,” CTBTO, (2012).

15
China for the balance of power in Asia, and the world. The stakes for non-proliferation of
nuclear weapons rose, signified by the Non-Proliferation Treaty (NPT) of 1970, where the
horizontal proliferation of nuclear power was banned, conferring nuclear status only upon US,
USSR, UK, France and China.28

After the Sino-Indian war of 1962, and growing strategic closeness between Pakistan and China,
the nuclear test of 1964 was a wake-up call for India. Within the South Asian region, it was now
challenged by two powers, one of which had gone nuclear. The lack of US or USSR support
during the 1962 war left India unable to rely on their support, against China. Thus, India decided
to pursue nuclear power on its own, to develop a nuclear deterrent, and kept out of the NPT in
1970.

India ran its first nuclear test in Pokhran, in 1974,29 during the Indira Gandhi government. Its
nuclear development program, that had begun before independence, was given a boost post the
Chinese test. It continued in the shadows until the 1990s, along with ballistic missile
development (BMD) - part of the weapons delivery system. In 1998, India tested 5 nuclear
weapons as part of the Pokhran - II Test, bringing its nuclear program out of the shadows, and
onto a global scale. This deteriorated India’s relations with US, and the non-proliferation
community at the time, and instigated Pakistan as well30. It was followed up with Pakistan
testing its own nuclear weapon within a span of a few weeks, and three days. It is suspected that
China has played a major role in the development of Pakistan’s nuclear capabilities, training its
scientists and even sharing weapons designs and tests31. This is seen as an attempt to create a
counterbalancing force against India, their common enemy in the region. This makes the nuclear
threat in the region, three-way, with Pakistan being an essential part of the Sino-Indian nuclear
relations.

28
Daryl Kimball, “The Nuclear Nonproliferation Treaty (NPT) at a Glance,” Arms Control Association,
(2012).
29
“First Nuclear Test at Pokhran in 1974,” FAS, (2000).
30
Robert Farley, “India's Mighty Nuclear-Weapons Program: Aimed at China and Pakistan?” The National
Interest, (2015).
31
Alex Kingsbury, “Why China Helped Countries Like Pakistan, North Korea Build Nuclear Bombs,” U.S.
News, (2009).

16
The north side of India being blocked by two strategically allied nuclear weapon states is one of
the major constraints faced by India, in its quest for power. As per current estimated nuclear
warhead inventories, China stands at 260 warheads, with Pakistan and India being at around 140
and 110, respectively32. Both India and China have no-first use policies in terms of their nuclear
weapons, and would be unlikely to pick a war with each other. However, recent tensions with
Pakistan have prompted dialogue within India, about an alteration of that policy vis-a-vis
Pakistan.

Currently, India is building on its nuclear capabilities, which are significantly less mature than
Chinese capabilities. The Indo-US Nuclear deal allows India to use more of its indigenously
available Uranium for the purpose of weapons, while importing material for nuclear power use.
This has been flagged by China as a violation of the Non-Proliferation Treaty. India also refused
to sign the Comprehensive Test Ban Treaty in 1996. Recently, India had two quick missile tests
of the long-range missile Agni IV and its first Intercontinental Ballistic Missile, Agni V. These
were met by criticism by China, and some consider China to have been rattled by the rapid
development of Indian missiles that can reach any part of Chinese territory.

3.2.1 Likely Future

Given the structural conflicts in the region, and the longstanding India-Pakistan conflict, nuclear
power is likely to be a permanent feature in the subcontinent. Since Pakistan cannot compete
with India on the conventional weapon front, it has to adopt the nuclear path, along with
assistance from China.

India is preparing for a two-front war with China and Pakistan. Opinions vary on whether it
makes strategic sense for China to engage in such a war, but it is likely to continue assisting
Pakistan with its weapons program. Given strengthening economic ties between India and China,
and the fact that the border disputes lie in remote parts of most countries, it is unlikely that India
and China will go to full scale conflict, let alone a nuclear war, with one another. However, the
presence of Pakistan as a wildcard in the region adds to the complexity of the situation.

32
Kelsey Davenport, “Nuclear Weapons: Who Has What at a Glance,” Arms Control Association, (2017).

17
3.3. Naval Strengthening

China’s increasing expansion in the South China Sea, through the creation of artificial islands,
has repercussions for its economic and naval military future. Some view this as an important
move for China to focus on its naval capabilities, including nuclear based submarines, as the
forces for future wars. The ‘String of Pearls’ theory also talks about China’s attempts at
establishing a string of military bases in the Indian Ocean region, which has historically been a
stronghold for India.

With India being an arms importer, and having a lower military budget, it is harder for the
country to focus on naval capabilities. However, India too has been participating in naval
exercises along with US military, in efforts to strengthen its forces and ties.

4. Economic Relations

After the death of Mao Zedong, China began opening up its economy and implementing reform
in 1978, leading to a divergence in economic development between India and China, China
growing into a much larger economy.33 While China began leveraging export driven growth
based on its cheap labour driven competitive advantage, India remained a relatively closed
economy till as late as 1991. This, along with the border disputes and regional conflicts between
the two nations led to a period of limited economic relations between them. Post India’s
economic liberalization in 1991, economic cooperation and relations between the two have been
accelerating, as witnessed in trade, investment and other exchanges.

4.1. Trade & Investment

Bilateral trade between India and China has grown from $1.99 billion in 1999 to a massive $70.8
billion in 2016. India faces a substantial trade deficit in trade relations with China ($46.56 billion

33
Anna Cienciala, “Communist Nation Since 1917,” The University of Kansas.

18
in 2016), with many considering the current trade mix to be unsustainable34. China mainly
imports commodity goods like cotton, gems, copper and iron ore from India, while India imports
manufactured capital goods from China, it being a low-cost manufacturing hub35. The cause
behind India’s trade deficit is the inability for it to compete with China in terms of manufactured
goods.

Chinese investment in India was a meagre $1.35 billion from the year 2000 till 2016. However,
with India’s increased stress on manufacturing, highlighted through the ‘Make in India’
campaign, several Chinese companies have begun setting up manufacturing units in the country.
Since June 2016, Chinese companies have pumped in almost twice the money they had invested
in the country in the decade and a half before that. While technology firms like Xiaomi, Huawei
and Oppo now have their phone manufacturing units in India, banks like Softbank have invested
in the Indian startup space, through investments in companies like Snapdeal and Ola.36

Additionally, India is seeking to establish its presence in mainland China, with the State Bank of
India having received authorization to conduct local currency business at its branch in Shanghai,
along with several other banks having set up operations. Further, a China-India technology park,
being set up in Hainan province, would likely open-up opportunities for about 2,000 high-skilled
Indian professionals.37

Both nations signed the Most Favoured Nation (MFN) agreement in 198438, having conferred
that status upon each other since, and have also signed dozens of bilateral trade and investment
agreements with one another over the past few decades. These have been signed in recognition of
the rising two-way trade and investment flows between the two.

34
Ishu Jain, “Understanding India’s trade deficit with China,” Global Times, (2016).
35
R.S. Kalha, “$56 Billion and Growing, it’s Time India Addressed the Trade Deficit With China,” The
Wire, (2016).
36
“Chinese firms invested $2.3 billion in 3 months in India,” Business Standard, (2016).
37
Dipanjan Roy Chaudhury, “China eyeing highly skilled Indians to turn itself into a technological hub,”
The Economic Times, (2017).
38
Vijay Gokhale, “India-China Bilateral Relations, Trade & Commercial Relations,” Embassy of India
Beijing, China.

19
A Strategic Economic Dialogue Mechanism between both nations has been set up since 2010, to
discuss macroeconomic concerns, best practices, and areas for future cooperation. A Financial
Dialogue forum has also existed since 2005 to enable greater bilateral financial cooperation. In a
Five Year Trade and Economic Development Plan signed in September 2014, key sectors like
Pharmaceuticals, IT, Tourism, Textiles and Agro-Products were recognized to exploit
complementarities within.39

At the Strategic Economic Dialogue in 2016, both countries agreed to strengthen economic ties
through cooperation on sourcing energy from international markets, construction of high-speed
railways and the development of coastal manufacturing zones, looking towards the future of the
global economic system40. Under the present Indian government, talks have produced 24 new
bilateral agreements between the two nations covering the establishment of consulates, skill
development, health, education, tourism, a sister cities program, and railways, amongst other
things. These signals the likely future trajectory of economic relations between the two.

4.2. Economic Partnerships

With India and China being the two largest players in the South Asian region, and amongst the
developing countries of the world, both are pursuing multilateral economic partnerships, at times
inclusive of (cooperation), and at times exclusive of (competition), each other.

While India is critical of China’s increasing interference in the Indian Ocean region and the
South China Sea, it is keen to establish cooperation with China on multilateral forums like the
G20, the East Asia Summit and BRICS (Brazil, Russia, India, China, South Africa). The New
Development Bank is a multilateral development bank established by the BRICS states in 2014,
that has announced its first set of loans recently. China is also seeking greater economic
cooperation with India on the Bangladesh-China-India-Myanmar corridor and the New Silk
Route programme. India and China are part of the 21 countries that have signed on to the Asian

39
“Joint Statement between the India and China during Prime Minister's visit to China,” Ministry of
External Affairs, Government of India, (2015).
40
“China-India trade relations,” Millennium Post, (2016).

20
Infrastructure Investment Bank (AIIB), that aims to form an Asian counterpoint to the World
Bank and the IMF41. A free trade agreement, called the Regional Comprehensive Economic
Partnership (RCEP) has also been signed by the ASEAN (Association of South-East Asian
Nations) states and others, including India and China.

China’s One Belt One Road (OBOR) initiative aims to build land and sea links between China
and Europe, passing through over 60 countries, however India has not yet confirmed
participation in the Belt Road forum to be held in May 2017. The China-Pakistan Economic
Corridor (CPEC), a flagship program of OBOR, has posed a sore point for Sino-Indian relations
from both an economic and strategic standpoint. However, it is unlikely that India will hold back
from participating in the massive program that has the potential to increase Chinese influence in
today’s global system, with a weaker and distracted US.

The Shanghai Cooperation Organisation (SCO) formed by China along with Russia and other
Central Asian countries has been seen as one of the few countervailing forces to US unipolarity,
through a political, economic and military function of the organization.42 India was excluded
from the SCO until as recently as 2016 when it was accepted as a full member, along with
Pakistan. This bodes well for the Sino-Indian strategic ties.

With China and Pakistan forming a bloc of sorts, in the region, India depends heavily on strong
relations with other South Asian countries, often excluding China from some of these
agreements. India has still not accepted the addition of China to the group of South Asian
Association for Regional Cooperation (SAARC) countries, despite a push from Pakistan. China
has been included as a dialogue partner but not as a member state of the Indian Ocean Rim
Association, initiated by India along with other nations. This is likely due to India’s interest in
keeping China’s influence to a minimum with regards to the Indian Ocean Region. The Bay of
Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and the
Bangladesh, Bhutan, India, Nepal (BBIN) initiative, are other regional initiatives being pursued

41
Neeta Lal, “India and China, a New Era of Strategic Partners?” Inter Press Service, News Agency,
(2016).
42
Andrei Volodin, “America’s Unipolar World and the Countervailing Powers of the Eurasian SCO Military
Alliance,” Global Research, (2011).

21
by India, without Chinese participation. The recent strengthening of India’s relationship with
Japan is also a movement in an effort to counterbalance Chinese power and weight in Asia.

4.3. Space and Satellite Technology

While nationalistic showmanship and national defence enhancement have been important factors
behind space programs of nations, space has an economic relevance. Both India and China are
vying to develop their own high speed communications infrastructure, more effectively mitigate
natural disasters, explore for natural resources and gain satellite launch contracts from other
nations43. While Chinese capabilities remain far superior, India has upped its spending and
capabilities. It has recently created a name for itself in launching satellites at a low cost, and for
its successful Mangalyaan mission (Mars Orbitor). China’s attempts to kickstart its ‘OBOR’
infrastructure program by offering global satellite-navigation facilities to all members have left
India skeptical about a Chinese lead in communications infrastructure in the South Asian
region44. Thus, while India is yet to compete in terms of manned missions, in the satellite arena
both nations are currently competing with each other. In efforts to cooperate, India and China
have signed a memorandum of understanding to cooperate “in the exploration and use of outer
space for peaceful purposes”45. They are also part of the launch of a “BRICS Constellation of
Satellites”.46

5. Conclusion

Though no direct conflicts have occurred between India and China in decades, the progress in
their international relations since 1949, hints at this being a relationship of permanent
antagonism in the foreseeable future.

43
Go Yamada, and Shuhei Yamada, “India-China rivalry reaches into orbit and beyond,” Financial Times,
(2017).
44
“India vs. China: The Next Space Race?” The American Interest, (2017).
45
K.S. Jayaraman, “India and China Sign Space Cooperation Pact,” Space News, (2014).
46
Pallava Bagla, “India, China set eyes on joint satellite constellation for BRICS,” The Economic Times,
(2016).

22
The geopolitical circumstances put India in opposition of the dual front of China and Pakistan in
South Asia, and as a part of a larger US-India-Other Asian Powers front against China in the
region, as well as on the global stage. It will be India’s prerogative to aggressively pursue ties
with US, that have fallen prey to the inefficiency and complexity of India’s domestic political
scene. Under President Trump, US is likely to be distracted, providing China with some cover to
continue its expansionist policies, like in the South China Sea and Indian Ocean. These actions
have not gone unnoticed, and India is likely to be perturbed by these developments. US itself,
under Trump, is largely unpredictable but has a proposed increase in military budget under the
current administration’s tentative budget. With Pakistan and China also continuing their military
expansion, and the former being a wildcard, having launched several cross-border terror strikes
against India in the recent past, it will be difficult for India to hold back on military expansion.
Given the speeches by representatives of the present government in India, defence is likely to be
a front and center focus for India47. Thus, military competition between India and China is set to
continue.

On the diplomatic front, while cooperation has taken place in several bilateral and multilateral
agreements, resolving some disputes, China has very recently blocked India’s bid to the NSG. It
is also the only permanent member of the Security Council that has refused to support India’s bid
for a permanent seat. This suggests that China will continue attempting to ensure India’s power
and influence remains limited, at least in the near future.48 At the same time, to ensure the
maintenance of its strategic autonomy on the global scale, and not get cowed down by US
dominance, it is advantageous for India to continue cooperation with China in non-contentious
areas.

Greater Sino-Indian economic cooperation has the potential to confer mutual gains upon both
nations. The enlargement of common markets, deepening of global division of labour and
lowering of costs in natural resource and space exploration, can be of benefit to both.
Additionally, both nations will continue to see an increased bargaining power within the

47
“India-US Joint Statement on the Visit of Minister of Defence Manohar Parrikar to the United States,”
Press Information Bureau, Government of India, Ministry of Defence, (2015).
48
Keshava Guha, “Sino-Indian Relations: History, Problems and Prospects,” Harvard International
Review, (2012).

23
international economic system, with cooperation. On the other hand, certain bottlenecks still
exist on the path to mutual gains. Varied domestic interests in both nations bring up opposition to
trade relations, witnessed often in India due to its diverse yet democratic politics back home. The
influence of powerful external markets, particularly US, also plays a significant role, as it would
prefer a weak Sino-Indian relationship for its own gains. Lastly, the bilateral disputes and
regional and global geopolitics we’ve discussed above, create a push towards competition
between the two, creating a challenge to growth cooperation.

Thus, there are two competing tendencies towards cooperation and competition, that are
simultaneously being acted upon by both nations. Currently it seems that cooperation is being
pursued for selfish neo-liberal style aims. India is far from the idealist nation, it was during
Nehru’s times, and China’s expansionist tendencies are evident from its actions on the world
stage. Competition continues to be the underlying drive behind Sino-Indian relations. While the
nature of competition might have shifted away from direct military conflict, it is likely to
continue being manifested in permanent tension between the two nations in the future.

24
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28

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