Despite signs of cautious improvement, India-China relations remain deeply strained by border tensions and mutual distrust.
China-India relations, which have long been fraught, were further complicated by the 2020 military standoff on the Himalayan border. The political disruption had a significant impact on Chinese companies’ presence in India. And yet, India’s dependence on Chinese imports has increased since.
The Indian economy is decelerating at a challenging time for Prime Minister Modi, who governs in a coalition. China could offer a partial solution to India’s economic woes by providing manufacturing FDI and creating jobs. The Modi-Xi ‘rapprochement’ after their encounter at the October 2024 BRICS summit signals that relations could improve. India may be willing to accept targeted investment from China, but relations are unlikely to fully normalise, particularly since the 2025 India-Pakistan military stand-off.
There are three main reasons for this. First, the Indian army remains cautious about the situation at the border and security risks relating to China. Second, the United States under President Trump will exert pressure on Modi not to depend further on China. This is even more relevant in the context of Trump’s threat to impose tariffs on India. Third, Indian public opinion on China and the Belt and Road Initiative remains negative.
India is predicted to experience greater growth than China in the coming decades, meaning China could lose its upper hand in economic relations between the two countries. This, however, will depend on how dependent India might have become on China for imports or for jobs through FDI and other channels. The militarised border, India’s asymmetric economic dependence on China and China’s leadership in the Global South will still shape the relationship even if the Indian economy grows to a similar size to China’s. India-China ‘rapprochement’ is possible but will remain fragile and unlikely to be maintained in the long run.
Source : Bruegel
Quantitative easing has faced recent criticism for causing large central bank losses and contributing to…
Artificial intelligence is already reshaping the economy and society. This column analyses how AI affects…
A record number of young people are approaching working age in emerging markets and developing…
Poverty is not a static condition but a dynamic process. Yet the at-risk-of-poverty rate, which…
Governments increasingly look to capital income for both revenue and redistribution. This column compares two…
Of the estimated 244 million firms in Africa, 232 million (95%) are own-account businesses consisting of…