India’s Prime Minister Narenda Modi has just returned from a landmark visit to China where the two countries signed trade deals worth more than $22 billion. From a narrow perspective it seems that common prosperity brings the two rising powers together. However, in the grander scheme of things, trade deals are not enough to curtail existing tensions as the two Asian giants tussle for power in the Asian continent.

trade deal

Xi Jinping and Narendra Modi
Photo credit: narendramodiofficial / Foter / CC BY-SA

What Do The Trade Deals Include?

Mr Modi met Chinese president Xi Jinping in the three-day visits (14 May – 16 May) that took place in the ancient capital of China, Xi’an, Beijing and commercial hub, Shanghai. The deals include:

  1. Developing renewable energy and education
  2. Scientific research
  3. Improve India’s railway system with modern high-speed links
  4. Build industrial parks in the cities of Gujarat and Maharashta
  5. Focus on civil nuclear energy
  6. Space exploration

The trade deals are important for both countries; India’s economy and infrastructure are 30 years behind its economic partner. China’s GDP (Gross Domestic Product) stands at 9.24 trillion USD and India at 1.877 trillion USD and it is said that China is 30 years ahead of India regarding infrastructure.

On the other hand, China needs to tap into the Indian market to make up for its market slump in March 2015.  Mr Modi said: “We are very keen to develop the sectors where China is strong. We need your involvement. The scope and potential, the breadth and length of infrastructure and related developments is very huge in India.”

Trade talks were not the only item on the agenda, but the two leaders also discussed border issues as a way to show genuine commitment to build economic prosperity. Even so, the two growing superpowers remained reserved about each other’s intentions in the Southeast Asian region.

China-India Border Tensions 

The source of China’s and India’s border tensions started at the turn of the 20th century. During that time, Western powers such as Britain had imperialist interest in China and had intensions to expand its colonial power. Britain, China and Tibet attended the Shimla Conference (October 1913 – July 1914) to define the borders between China and India, and to mark Tibet’s legal status and boundaries.

China

Parties at the Simla Conference prior to the withdrawal of the Chinese representatives

China, however, withdrew from the Shimla Accords thus Britain and Tibet signed it themselves. The demarcation point, known as the McMahon Line or the Line of Actual Control (LAC), runs across the Indian states of Jammu and Kashmir, Uttarakhand, Sikkim, Himachal and Arunachal Pradesh. But the Chinese do not recognise the Shimla Accords because when the agreements were signed, Tibet was under Chinese jurisdiction and is now an Autonomous Region of China. Therefore, China argues argue the five states are a part of Tibet, and effectively under Chinese territory.

On 29 April 1954, Beijing and Delhi signed the Panchsheel Treaty to establish peaceful coexistence. However, the Treaty did not seem to have an effect because in 1959, Beijing accused Delhi of meddling in its affairs because India opened its doors to the exiled Dalai Lama. Subsequently, China and India engaged in military conflict over border disputes. These were: Sino-Indian War in 1962, the Chola Incident in 1967 and the 1987 Sino-Indian clash.

China-India relations improved significantly in 1988 when Prime Minister Rajiv Ghandi visited China – it was 34 years since the last diplomatic visits. But tensions flared up again in 2000 when India opened its doors to exiled Tibetan Buddhist Leader Karmapa Ugyen Trinley Dorje, who wanted to join the Dalai Lama in India. In January 2009 Indian Prime Minister Manmohan Singh visited China to sign a bilateral trade deal that was worth more than $50 billion, and China became India’s largest trading partner.

The latest territorial quarrel is during the devastating earthquake in Nepal in April 2015. Both sides sent in aid and assistance, but also accused each other of taking advantage of the situation to expand their influence. Nepal is a small, landlocked country sandwiched between China and India.

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India-China Map of Disputed Areas
CC-by-sa Arun Ganesh, National Institute of Design Bangalore

China and India have substantial influence over the Himalayan state; India and Nepal share similar cultures and language, and Nepalese citizens serve the Gurkha regiment in the Indian army. However, Chinese influence has been growing steadily in the past few years. China overtook India as Nepal’s largest trading partner in late 2014, and the Chinese government has increased educational and cultural exchanges. The BBC reported more and more students are learning Mandarin and Nepalese citizens have growing interests in finding job opportunities in China.

China-India Power Struggle

But competition is beyond border rows – it is the struggle to be the leading power in the Asian continent. Since China initiated the Open Door Policy in 1978 under the leadership of Deng Xiaoping, the global community kept a close eye on China for fear it has ambitions to expand its territorial control. In 2012, China was accused of breaching international law in asserting its claims over the oil-rich South China Sea and the Diaoyu Islands in the East China Sea.

Beijing believes Delhi is siding with its competitors for the South China Sea as a way to enforce a containment policy. This suspicion is proven when Delhi decided to be more involved in the South China Sea issue in 2014. India joined Vietnam, who is one of the more assertive contenders for the disputed zone, to demand Beijing to abide by international law. India and Vietnam also signed an agreement in 2014 where Vietnam allowed Indian ships to explore South China Sea for oil – much to the chagrin of Beijing.

On the other hand, India sees China implementing the Strings-of-Pearl strategy, also known as the Maritime Silk Road, to delimit India’s influence. Beijing worked on building relations with India’s two long-time rivals, Sri Lanka and Pakistan. In 2013 Beijing and Colombo signed an investment deal where China would build a $500million Port Terminal in Colombo Port. Further, in January 2014 China made the commitment to invest in Pakistan’s Gwador Port. This port will expand trading opportunities between China, Pakistan, Afghanistan, Iran and Central Asia. China has also been a strong ally of Pakistan; in April 2015 Islamabad and Beijing signed an arms deal where Pakistan purchased eight Chinese submarines.

The trade deals in May are merely common economic prosperity, but it seems security matters will take precedence no matter what. Many have hoped this trade agreement would render Beijing and Delhi to put aside differences and commit to regional stability for the good of the Asian continent. However, the existing border tensions, coupled with mutual suspicions are far too complex and intricate to be untangled by a multibillion deal.

Perhaps the future of China-India relations can be described with the Chinese saying: “ Two tigers cannot live on one mountain”.

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Hsin-Yi Lo

Hsin-Yi Lo

I am freelance journalist and writer, and a Multimedia Journalism graduate from the University of Kent. I am originally from Melbourne, Australia.