India and China’s Love-Hate Relationship Enters ‘New Era’

Two men gaze out over the Bay of Bengal. They might’ve been chums on a coastal stroll, but Xi Jinping and Narendra Modi aren’t old friends. Locked in a ceaseless jostle for regional supremacy, the planet’s most populous nations have, it seems, little in common. A yawning trade deficit irks Indian lawmakers, while China bristles at New Delhi’s American love-in. Festering border tensions – now in their sixth decade – do little to improve the picture. But meeting informally earlier this month, both leaders called for a new era of cooperation. If accord is achieved between the ascendant superpowers, the shape of the region – and the wider world – could be changed for good. 

For six hours President Xi and Prime Minister Modi talked, breaking at times to amble through the eighth-century Mamallapuram rock carvings on India’s south-eastern coast. They hoped to mend ties tarnished by New Delhi’s division of the Jammu & Kashmir state, which saw Ladakh – a region claimed in part by China – carved out and stripped of its autonomy. But economics came to dominate the discussion. The pair’s bilateral trade is set to cross $100 billion by 2020 – but a gaping imbalance, $53 billion in Beijing’s favour, bedevils Indian business. 

In a world of soundbites, the meeting was a success. Much agreement was achieved during the freewheeling tête-à-tête Mr Modi said afterwards, hailing a fresh “era of cooperation”. Both promised to “remain sensitive to each other’s concerns,” and a commitment was made to address the trade deficit. “[The] dragon and the elephant dance is the only correct choice for China and India,” effused the Chinese side as talks concluded. 

But restive Kashmir – the other elephant in the room – remained undiscussed. The timing was perhaps too uncomfortable – just before the trip President Xi had held talks with Modi’s arch-nemesis, Pakistan’s Imran Khan. The two are close allies: Islamabad has bought $6 billion of Chinese weapons in recent years, and has won Beijing’s backing for its staunchly anti-Indian Kashmir stance.  

For its part, China is no fan of India’s friend-making. Under Modi, the south-Asian heavyweight has aligned ever closer with the United States, happily endorsing its divisive Indo-Pacific strategy. The two are united in their condemnation of Beijing’s territorial claims in the South China Sea, and – alongside Japan – seem happy to ruffle Chinese feathers with their annual Malabar military exercises. 

But commercially, India risks being hamstrung between Presidents Xi and Trump. The latter, bloody-minded in his trade war with China, is pressuring New Delhi to keep telecoms giant Huawei out of its 5G infrastructure. Responding in kind, Beijing has publicly warned India of “reverse sanctions” should they kowtow to D.C. demands.  

Eventually, lacking a viable alternative, Modi might have to plump for Huawei – but his suspicion of Chinese meddling won’t easily dissipate. Regionally, India stands alone in its rejection of Beijing’s much-heralded Belt and Road Initiative (BRI) – an ambitious foreign infrastructure investment scheme. Indians are particularly perturbed by the China Pakistan Economic Corridor project, which passes through a sliver of land upon which they lay claim.

Modi’s misgivings go further however, viewing BRI less as a vehicle for development than regional hegemony. His fears aren’t baseless – states historically under Indian auspices are now among those most reliant on Chinese money. In Sri Lanka, Beijing’s billions helped build a cutting-edge new port, only for it to be repossessed by Chinese firms when debts began to mount.

Then there is Nepal, perhaps the most long-standing of New Delhi’s dependants. For decades India has been the Himalayan nation’s commercial crutch – but Mr Xi is prowling. It was his first stop after meeting Modi, and he arrived bearing gifts: $500 million in development aid. A trans-Himalayan corridor is in the offing – another BRI blockbuster – that would connect the Tibetan and Nepalese capitals.

But amid the clutter of conflicting interests, China and India have common ground. Both fear the growth of Islamic radicalism within their borders. Modi used the spectre of terrorism to legitimise his Kashmir crackdown, and Beijing’s ‘re-education camps’ for China’s Uighur Muslim minority are well documented. Both, in a way, blame Pakistan. India seethes at Islamabad’s supposed support of armed separatists, while China is increasingly uncomfortable with its ally’s lawless Afghan border region, which it fears could become a launchpad for Uighur militancy.   

Ultimately, though, it will be finances that define the future of Indo-Chinese relations. Both countries are embroiled in something of an economic crisis. India’s mid-decade meteoric growth has lost steam, dipping to its slowest pace in six years. In China, where businesses are being battered by US tariffs, GDP rise is at a quarter-century low. But together, their populations account for one-third of humanity – an inestimably large and diverse market. That’s what each can offer the other, billions of consumers with untold purchasing power. 

This won’t have been lost on the men strutting the Bengali coast – and both will have been needled by a nagging thought: I need you more than I know.