India China relations in the near future

India China relations take the form of a sinusoidal curve. There have been periods of poor bilateral relations and there have been periods of a stable relationship. There are two elements of this important relationship: one, China and India are neighbours and that cannot be wished away. Two, India has some critical dependencies on China like power and telecom equipment, solar panels, Active Pharma Ingredients for the pharma industry, rare earths for magnets for electric vehicles, electric components etc. That is responsible for the $100 billion trade deficit with China in 2024. In 2025 too, the trade deficit with China is likely to be the same.

Under Press Note 3 that was promulgated in April 2020, prior to the Galwan incident, investment proposals by some Chinese companies were approved. There is pressure from Indian industry on New Delhi to take a relook at Press Note 3. The Chief Economic Advisor also suggested in the 2024 report that Chinese Foreign Direct Investment will help ease the trade deficit. This will require easing the investment norms for Chinese companies. However, all countries have to keep in mind their strategic and security interests. It is in this milieu that it is necessary to view India-China relations.

There are a number of actions that both India and China can take to improve the bilateral. However, these carry four caveats. One, peace and tranquility should be maintained along the Line of Actual Control (LAC). India is not looking for the resolution of the boundary question in toto. It is simply looking for assurance that there will be no effort to change the status quo on the LAC and peace and tranquility will be maintained – which has always been a prerequisite for better bilateral relations. Two, it is necessary to follow the three mutuals – mutual respect, mutual sensitivity and mutual interest. Three, there needs to be a level playing field for Indian companies seeking to operate in China, and four, both countries should maintain mutual and equal security.

If these are met, then several actions that can be undertaken to improve the bilateral. These can be seen under six heads. Most of these points have already been agreed by both India and China during PM Modi’s visit to China in 2015, and some that were agreed to by both countries during the informal summits in Wuhan and Mahabalipuram.

First, is to strengthen political dialogue and strategic communication. Even if meetings cannot be undertaken at the apex level due to various reasons, they can be undertaken at other high levels. For instance, there are more than 15 dialogue mechanisms that have been established between India and China pre-Covid, which can now be better utilised During the visit of Mr Modi to China in 2015, a Chief Ministers’ level interaction was instituted. The same can be resumed. Even if it is done in a controlled manner, it will reduce the tensions in the bilateral. A hotline between the military headquarters of India and China has been under discussion for a long, which has been stuck on issues of protocol. This needs resolution. Hotlines exist between opposing formations in Eastern Ladakh, Shipki La, Nathula, Bum La and Kibithu. They come in handy during emergencies and result in improving cooperation. India and China can continue the process of increasing the number of locations where border personnel meetings take place along the LAC. During the visit of China’s Foreign Minister Wang Yi to India in August 2025, it was agreed by both sides that higher level military commanders meeting in other sectors, similar to what is conducted in Eastern Ladakh, will be established. That needs to be followed through.

Second, is to improve the closer development partnership. Under this partnership, both sides can work towards reducing the impediments in bilateral trade and investment. Both governments can strengthen trade in identified sectors such as pharma, IT, tourism, textiles and agro products. Measures should be taken to alleviate skewed bilateral trade by cooperating on identified sectors. Establishing speedy phytosanitary conditions for agricultural trade is a necessity. For example, an agreement was reached during former Prime Minister Atal Bihari Vajpayee’s visit to China in 2003 to export Indian mangoes to China. It took more than a decade to start the export due to phytosanitary and other measures imposed by China. The same mangoes were being exported to the developed economies of the West regularly with no issue. There have been talks of combining the software and hardware strengths of India and China respectively – a large, winning opportunity for both. Trade in tourism, films, healthcare and logistics can be increased. The India China Joint Economic Group, revamped in 2010, can be used more fully, and both countries can work towards a gradual reduction of tariffs under the Asia Pacific Trade Agreement of which they are members and which provides for preferential treatment. Prior to the Covid 19 pandemic, a strategic economic dialogue between Niti Aayog of India and its counterpart the National Development and Reforms Commission of China, had been conducted regularly since 2010 alternatively in India and China. It can be revived. Though the social media in China carries posts that discourage the transfer of technology and assistance to India to improve its manufacturing, if China can take part in the Made in India campaign, it will definitely be beneficial for the India-China relationship. The 2015 visit of PM Modi to China brought about an agreement to establish a Railway university to study and improve the railway systems jointly. That can be pursued.

Third, is the cultural and people-to-people exchanges. For two decades, since 2006, 200 youths from both countries would travel to each others’ countries as part of a youth exchange programme; this must be revived. So can the establishment of a collaboration between Indian Council of Cultural Relations and Yunnan National University, which had also been agreed upon to. Provincial and sister city partnerships can restart, and the India China Think Tanks Forum which had a few iterations first by Institute of Chinese Studies and later by the Indian Council for World Affairs, can be reactivated. A high level media forum under the aegis of the MEA and State Council Information Office had been agreed upon earlier and held a few meetings, but have since stopped. Restoring these linkages are easy wins.

Fourth, is trans-order cooperation. Flood season hydrological data was being shared by China but the agreement for both the Satluj and Brahmaputra have expired. During foreign minister Wang Yi’s visit , it was agreed that China would provide that data on a humanitarian basis, but not regularly as prior. These, too, need to be reviewed. Cooperation on emergency management for natural calamities, which had been agreed upon, has become competitive, as seen in the case of earthquake in Nepal and drinking water crisis in Maldives. This is unnecessary, as they are humanitarian crises. Reviving the suspended border trade at Nathula, Shipki La and Lipulekh after the Galwan incident of 2020, can be a significant positive.

Fifth, is shaping regional and global agenda. India and China share some of the same world views, and can consult on international peace, security and development and work together to shape regional and global agenda and outcomes, as they used to do prior to the international financial crisis in 2008. After that, the difference in growth between India and China began to increasing, and the parity narrowed. Restoring this was also agreed on in 2015 but has been shelved. Both India and China can coordinate and cooperate in SCO, BRICS and the G20. A bilateral consultative mechanism on the WTO was on the cards. Both India and China support a rules-based multilateral trading system. There is a meeting of minds there. Cooperation on terrorism is another possibility. Though both countries agree that all forms of terrorism need to be contested, China’s actions on that subject has not been supportive of India’s stand. China can show goodwill by coming onboard the Comprehensive Convention on International terrorism that India has proposed. Both Countries agree that the UN needs serious reform and China has stated that it supports India’s ambitions of playing an increased role in the international system, but it is only concrete action by China to support India’s quest for a permanent seat in UN Security Council that will actuallybuild the trust between both the countries.

Sixth, is the outcomes from the informal summits. Cooperation on climate change issues is one where both have common cause not only for themselves but also on behalf of the Global South. Another area of collaboration is digital empowerment i.e. the process of equipping individuals and communities with the skills, tools, and knowledge to use digital technology for personal, economic, and social benefit. India and China have adopted different methodologies for the same, but they can seek commonalities in the approaches. Establishing an academy to study linkages between Mahabalipuram and Fujian; Ajanta and Dunhuang and maritime relations was agreed upon in the Mahabalipuram Summit which can be activated, as can a high level economic and trade. There are enough avenues to improve relations between India and China. If the caveats are met, then there is a considerable scope for the two Asian giants to come together in the near future.

Lt Gen S L Narasimhan is the Adjunct Distinguished Fellow for China and National Security Studies at Gateway House.

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