India-China Relations – Significance & Challenges – Explained Pointwise

PM Narendra Modi is visiting China after 7 years to attend the Annual SCO leader’s summit. Since last year, India & China have worked mend bilateral ties that collapsed after the border clashes in Ladakh in June 2020. In this regard, let us understand the importance & challenges of India-China relations.

What is the significance of India-China Relationship?

1. Economic & Trade Importance: China is India’s largest trading partner, with bilateral trade reaching around $118 billion in 2024-25, making economic ties vital for business, manufacturing, and supply chains. China supplies critical inputs to India such as pharmaceutical APIs, rare-earth metals, solar modules, and other key industrial components. Stable relations ensure India’s access to essential resources for its renewable energy and technology ambitions.
2. Geostrategic & Regional Stability: Both countries are major Asian powers whose rivalry or cooperation impacts regional security in South Asia, the Indo-Pacific, and beyond. India-China stability reduces the chance of conflict in a sensitive region and contributes to peace in the Himalayan and Indo-Pacific theatres. Their relationship influences multilateral organizations like BRICS and SCO, shaping discourse on global governance, development, and economic reform.
3. Global Governance: India and China together form a powerful bloc advocating for the interests of developing countries and pushing for reforms in international institutions such as the WTO, IMF, and UN. Their cooperation helps counterbalance Western influence and provide alternative development and trade models.
4. Collaboration & Global Challenges: Stability between the two enables joint efforts against transnational challenges like climate change, public health emergencies, and energy security. Their combined leadership uplifts regional cooperation on issues with global impact.
5. Historical & Cultural Ties: Complex historical linkages, shared cultural heritage, and civilizational connections create a foundation for engagement beyond transactional relations.

What are the challenges in the India-China Relationship?

1. Border Disputes & Military Tensions: The unresolved Line of Actual Control (LAC) remains the foremost challenge, with competing territorial claims in Aksai Chin (controlled by China) and Arunachal Pradesh (administered by India). Repeated border clashes and standoffs in areas such as Galwan Valley (2020) and Doklam (2017) have resulted in casualties and heightened distrust. Lack of full demarcation and differing perceptions of the LAC fuel a fragile security environment.
2. Strategic Rivalry and Regional Competition: Both countries aspire to be dominant regional powers in Asia, often competing in South Asia, the Indian Ocean, and in multilateral platforms like BRICS and SCO. India perceives China’s growing influence and infrastructure projects (e.g., China-Pakistan Economic Corridor) as a security threat.
3. Trade Imbalance & Economic Friction: Despite large bilateral trade, India suffers a massive trade deficit due to large Chinese exports and limited Indian market access in China. Non-tariff barriers, quality controls, and regulatory challenges sometimes hinder Indian business expansion into China.
4. Political Trust Deficit & Nationalism: Historical conflicts and border incidents generate mutual suspicion; nationalist sentiments in both countries exacerbate tensions. Domestic political narratives often portray the other as a threat, hampering efforts for full normalization.
5. Geopolitical Alignments & External Partnerships: India’s closer ties with the US, participation in the Quad, and defense collaborations contrast with China’s strategic rivalry with the US. This dynamic complicates India-China relations, leading to strategic skepticism on both sides.
6. “String of Pearls” vs. “Necklace of Diamonds”: China’s infrastructure investments and military presence in the Indian Ocean region, often referred to as its “String of Pearls” strategy, are seen as an attempt to encircle India. In response, India has pursued its own strategy, the “Necklace of Diamonds,” by strengthening its naval ties and presence in key locations. 
7. China-Pakistan Nexus: The close strategic and military relationship between China and Pakistan, particularly the China-Pakistan Economic Corridor (CPEC) which passes through Pakistan-occupied Kashmir (PoK), is a major security concern for India. China’s military aid and support to Pakistan directly threaten India’s security and sovereignty.
8. Water Security: China’s control over the headwaters of several transboundary rivers, most notably the Brahmaputra (known as the Yarlung Tsangpo in China), raises concerns in India about its water security and potential for environmental harm.

What have been various initiatives to boost the relation?

1. High-Level Diplomatic Engagements: Regular bilateral summits and meetings between Prime Ministers and Presidents, including Modi-Xi meetings at SCO and BRICS summits in 2025. Visits by senior officials and foreign ministers to maintain ongoing dialogue and address border and trade issues.
2. Border Management Mechanisms: Establishment of confidence-building measures, such as flag meetings, military hotlines, and border personnel meetings to prevent escalation. Agreements on disengagement in conflict areas and protocols for peace and tranquility along the LAC.
3. Reopening Border Trade Points: Reopening of three Himalayan border trade points (Shipki La, Lipulekh, Nathu La) in August 2025 after five years, facilitating economic and cultural exchange. Encouragement of local border trade and cooperation to improve livelihoods in border communities.
4. Expanding Economic & Trade Ties: Efforts to ease trade restrictions and boost bilateral trade, including Chinese exports of critical inputs like fertilizers and rare earth minerals. Cooperation in multilateral economic forums such as BRICS, SCO, and G20.
5. People-to-People & Cultural Exchanges: Promotion of tourism, educational programs, and cultural exchanges to build mutual understanding. A key initiative has been the resumption of direct flights and the Kailash Mansarovar Yatra, a pilgrimage that was suspended after the 2020 border clash. These moves are aimed at rebuilding trust and fostering a sense of normalcy in the relationship.
6. Strategic & Multilateral Cooperation: Engagement in strategic dialogues through platforms like SCO and BRICS aimed at addressing global challenges together. Collaborative efforts in combating climate change, health pandemics, and regional security matters.

What can be the way forward?

1. Maintain Peace & Stability at the Border: Priority on peace and tranquility along the Line of Actual Control (LAC) through sustained disengagement, confidence-building measures, and renewed military dialogues. Joint mechanisms and working groups should be deepened to prevent misunderstandings and escalation.
2. Expand & Deepen Economic Cooperation: Gradually address bilateral trade imbalances by opening markets, easing non-tariff barriers, and promoting mutual investments. Foster strategic economic partnerships in emerging sectors such as technology, green energy, infrastructure, and digital economy.
3. Strengthen Multilateral & Regional Engagements: Collaborate actively within regional forums like the Shanghai Cooperation Organisation (SCO), BRICS, and G20 to align on global challenges and projects of shared interest. Encourage dialogue on global issues like climate change, terrorism, and pandemics to build trust and joint leadership.
4. People-to-People & Cultural Exchanges: Promote tourism, educational exchanges, and cultural diplomacy to enhance goodwill and break stereotypes among the populations. Resume and increase direct flights and visa facilitation to boost cross-border connectivity.
5. Manage Geopolitical Complexities & Strategic Autonomy: India’s approach of strategic autonomy, balancing relations between China, the US, and other global powers, should continue to guide foreign policy. Engage in selective cooperation while safeguarding national security interests and hedging against geopolitical risks.
6. Innovate Track-II & Backchannel Diplomacy: Encourage dialogue at academic, civil society, and business levels to complement official diplomatic channels and build shared understanding.

Conclusion:
India & China need to handle their differences through peaceful discussions bearing in mind the importance of respecting each other’s sensitivities, concerns & aspirations & not allowing these differences to become disputes.