Indo-China Relations : Border vs Trade Crisis?
India and China, the two most populous fast-growing economies in the world, decided to establish diplomatic relations and jointly advocated Five principles of peaceful coexistence in 1950. Later that year the conflict of territories began when China claimed Tibet as Chinese territory. It was that time when India knew that China may not be their friend but a potential enemy. India accepted Tibet to be a part of China but stressed that traditional trade arrangements should continue.
The Indo Chinese border disputes have continued till now whenever any country starts building infrastructure on disputed land, more likely when China claims Indian territories as its own. These border disputes have also caused wars and withered the relations between these two like the Indo China war in 1962 which led to India's defeat and China occupying strategic points in the Aksai Chin and Demchok regions of Ladakh, before declaring a unilateral ceasefire. China, then, actively continued propaganda to cause tension in India and the relations further deteriorated when China started supporting Pakistan in the India-Pakistan war and started issuing ultimatums and threatened India of starting a war at its border. Ever since China and Pakistan relations grew stronger in an attempt to contain India, the tension between these countries started growing more. Further, there have been many clashes on the borders since then in which both sides suffered heavy casualties. In the 1980s, India started infrastructural development and patrolling in disputed regions but China built helipads on the disputed region before Indian troops got there which again caused disputes. Another set of negotiations took place between these two countries between 1981 to 1987 which achieved nothing.
In 1988, Indian Prime Minister Rajiv Gandhi visited China, initiating the process of normalization of bilateral relations. The two sides agreed to 'look forward' and develop bilateral relations actively in other fields while seeking a mutually acceptable solution to boundary questions. Several rounds of talks have taken place since then. Cross border cooperation, trade treaties and partnerships have been discussed and signed several times. Issues surrounding energy have risen in significance. Both countries have growing energy demand to support economic growth. In 2006, China and India reopened Nathula pass for trading. Nathula was closed 44 years before 2006. China also claimed Arunachal Pradesh as its territory in 2006 but this claim was denied by Asian Development Bank when it provided India a loan for a developmental project there in 2009.
India and China have signed various trade and business deals and have been interdependent trade partners. The economic ties have grown since the early 2000s and have been at the forefront of this relationship. The rapid expansion of India-China bilateral trade since the beginning of this century propelled China to emerge as India's largest trading partner by 2008, a position which China continues to hold today. Even after years of tension between these countries and years of trying to boycott Chinese products, India can't completely cut off its ties with China as both these economies are intertwined.
China and India are Asia's 1st and 3rd biggest economies and China is India's biggest trading partner besides the US as it is involved in the Indian economy from supplying raw materials to investing in Indian tech companies. Chinese exports to India comprise smartphones, electrical appliances, power plant inputs, fertilisers, auto components, finished steel products, capital goods like power plants, telecom equipment, metro rail coaches, iron and steel products, pharmaceutical ingredients, chemicals and plastics and engineering goods, among other things, according to the Ministry of Commerce. Exports to China grew at a rate of 26.19% compared to a decrease in overall exports at 21.13% in 2020. The amount of FDI inflow from China to India in the fiscal year 2020 was estimated to be around 162 million U.S. dollars and China' FDI comes to metallurgical industries, renewable energy (solar panels), electrical equipment, automotive and chemicals. India is highly dependent on China for electronics, hardware and smartphones. Chinese smartphones like Oppo, Vivo and Xiaomi are leading the Indian market and have about 70% market share.
The recent clash of the Galwan Valley when China objected to Indian road construction there caused political tension because of the military stand-off that resulted in the deaths of 20 Indian soldiers. For the first time in 45 years, the first shots and warning shots were fired along the LAC. The call for boycotting Chinese products was made in India while the government banned 59 Chinese Applications. The Indian Railways cancelled an INR 471 Crore deal with a Chinese firm. Similarly, state-owned telecom firm BSNL was instructed not to use gear from Chinese firm Huawei for a network upgrade. The government has mandated all products to have the Country of Origin tag for products on the Government e-Marketplace to identify Chinese-origin goods. In July, India placed colour television sets imports under the restricted category, thus requiring a licence to import; and air conditioners under the prohibited category.
Even after all this, it is not possible for India to cut off its ties with China. India China bilateral trade deficit accounted for $45.8 billion in 2020, clearly stating that India is heavily dependent on China to meet its needs. India's pharmaceutical industry is the third-largest in the world by volume and ranks 14 by value but India imports two-thirds of its active pharmaceutical ingredients from China. Also, India is not technologically efficient to replace Chinese products as they are globally known for being affordable. China has resurfaced as India's biggest trading partner in 2021 and India needs to go a long way to take control and not depend on China. Apart from the economic ties with China, there is still a lot of tension between these countries. On 27 October, the United States and India signed the Basic Exchange and Cooperation Agreement (BECA), enabling greater information-sharing and further defence cooperation, to counter China's growing military power in the region.
