The exchange of sweets at 10 posts along the India-China border on New Year’s Day and recent talks between the two sides have indicated that New Delhi and Beijing are seeking greater stability in relations and haven’t given up hopes of a breakthrough, despite the massive 1,00,000-strong troops still amassed on both sides after nearly 20 months of a stand-off and a continuing stalemate in disengagement .
The hopes of 2021, when the two sides agreed to disengage and withdraw troops from Pangong lake in February, including the heights on the Kailash range taken by the Indian army just months prior, and at Gogra, were belied later in the year. According to officials, China’s People’s Liberation Army (PLA) has refused to budge on India’s demand that they restore status quo ante by withdrawing from other areas like Demchok, Hot Springs and Depsang plains.
Even so, the exchanges on January 1, several rounds of talks between diplomats and military commanders, and an unexpectedly upbeat farewell video conference between Chinese Foreign Minister Wang Yi and the outgoing Indian Ambassador Vikram Misri last month, where both sides spoke of uninterrupted communication as the “silver lining” around the dark clouds that engulf bilateral relations which are perhaps at their worst point since the 1980s, are indications of both sides seeking an improvement. It is particularly significant that the exchanges took place in areas such as Demchok and Depsang that saw PLA troops occupy land claimed by India, leading to criticisms that the Modi government may be looking to agree to a compromise in these areas.
That Mr. Wang chose to speak with Mr. Misri, and moreover, that the Chinese Foreign Ministry sought to publicise the meeting despite the state of relations and the recently shrill rhetoric from the state media in China, was also seen by observers as significant. Mr. Misri has now taken over as Deputy National Security Adviser. “Even though certain challenges since last year had overpowered the vast opportunities in the relationship, he was hopeful that with continued communication at all levels, the two sides would be able to resolve the current difficulties”, a readout from the Indian Embassy said.
Another positive sign came in December after Russian President Vladimir Putin’s talks with Prime Minister Narendra Modi in Delhi, and Mr. Putin’s virtual conference with Chinese President Xi Jinping later in the same month. A senior Kremlin aide said the leaders had discussed holding a Russia-India-China trilateral in the “near future”, a possibility the Ministry of External Affairs has neither confirmed nor denied. Mr. Modi and Mr. Xi have not spoken since the LAC crisis began in April 2020, a sharp contrast to the previous six years when they met 18 times. A RIC summit would be the first such direct personal contact.
Regardless of the possibilities, the situation at the LAC remains fraught with risk, given the likelihood of a recurrence of violence with both disengagement and de-escalation nowhere near completed, and an official said that the most they can hope for is that ties “stabilise” in the coming year as the Indian army attempts to hold off Beijing’s territorial aggressions. As of Sunday evening, Beijing’s official media was yet to mention the New Year’s Day exchange, and instead, state media outlets shared a video from Galwan Valley showing PLA troops there pledging to protect “every inch” of Chinese territory.
New border law
Beijing is also pushing ahead with bolstering its infrastructure in border areas and has passed a new border law that came into effect on January 1. The law calls on government agencies in China to take steps to “safeguard sovereignty”.
Beijing has also accelerated plans to build civilian “frontier” villages, including in disputed areas, while the Chinese government on December 30 issued new “standardised” names for 15 places in Arunachal Pradesh, to be used on Chinese maps, ahead of the law coming into effect.
With the boundary stalemate, ties in other areas have come to a standstill. Curbs on Chinese investment, that were put in place a month before the LAC crisis began, have seen Chinese FDI to India plummet, a stark contrast from years of rapid growth starting in 2014, when the Modi government made a push to attract Chinese investment. Since then, total investment rose from under $2 billion to $8 billion in 2018, according to the Chinese Ministry of Commerce’s figures. Chinese firms have also been kept out of 5G trials while authorities have investigated Chinese companies in India over tax issues, two moves that brought sharp responses from Beijing.
Bilateral trade has, however, continued to boom, and in 2021 reached the highest ever. After 11 months of the year, two-way trade reached $114.26 billion, with Chinese exports to India touching a whopping $87.9 billion and Indian exports accounting for $26.35 billion, both record figures, according to China’s General Administration of Customs.
Despite a push from India to reduce dependence on China, imports have only grown in the past year, up by 49% year-on-year. The total trade is even higher than pre-pandemic levels, with India’s imports from China up by 30%, driven by purchases of machinery as well as medical equipment and supplies during the pandemic. India’s exports to China, mainly iron ore, cotton and other mostly raw material based commodities, are up 60% from before the pandemic.