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A landmark visit

Srinivas MazumdaruSeptember 19, 2014

As China's President Xi Jinping wrapped up his maiden trip to India, a series of deals aimed at boosting economic growth in both countries were closed. But tensions also flared over an unresolved issue. DW examines.

Indien Staatspräsident von China Xi Jinping in Neu-Dheli 18.09.2014
Image: Reuters/A. Masood

It was meant to be a visit to reset the relations between the world's two most populous nations - China and India - and lay the foundation for a much closer economic and geopolitical partnership. There were expectations that Chinese President Xi Jinping's trip to India would provide a boost to commerce and business engagement between the two Asian giants.

And for the most part, these expectations were met. During Xi's three-day state visit - which ended on September 19 - China and India signed a host of agreements in a number of key areas such as trade and investment, space exploration and railways. "The visit did most certainly mark the beginning of greater Chinese investments in India and the recognition that China has a stake in India's economy," said Gauri Khandekar, head of the Asia Program at the European think tank FRIDE.


Xi's trip came at a time when the recently elected government in New Delhi is seeking foreign investments in a bid to kick-start the country's flagging economy. To this end, the Chinese President announced that Beijing would invest some 20 billion USD in the neighboring giant over the next five years. It is a significant pledge as Chinese investment in India over the past 14 years amounted to a paltry 400 million USD.

Chinas Präsident Xi Jinping in Indien Premierminister Narenda Modi
During Xi's three-day state visit, China and India signed a host of agreements in a number of key areasImage: Reuters/India's Press Information Bureau/Handout

The money is intended to flow into developing the South Asian nation's creaking infrastructure as well as its crippled manufacturing sector. China is also set to assist India's efforts to modernize its mostly British-built railway network. While New Delhi has so far managed to lay just 11,000 kilometers of rail lines in the 67 years since its independence, Beijing added about 14,000 kilometers of track to China's railway system in just five years between 2006-07 and 2011.

Besides cooperation on the railways front, both countries signed a five-year trade and economic development plan that foresees greater access to each others' product and services markets, and China agreed to establish two industrial parks in India. Some 3.4 billion USD worth of deals were also signed between Chinese and Indian businesses.

Huge deficit

Experts believe these initiatives might help India to close its massive trade deficit with its neighbor, which is also New Delhi's largest trading partner. While bilateral commerce amounted to around 65.5 billion USD in 2013, it was largely tilted in Beijing's favor, with India's deficit hitting 31 billion USD last year.

Analysts say cutting this deficit is a priority for Indian Prime Minister Narendra Modi. Khandekar believes that Modi is trying to reduce this deficit by encouraging Chinese companies to set up manufacturing bases in the country, which could boost the country's exports to Asia's largest economy.

Indien Eisenbahn Passagiere
China is set to assist India's efforts to modernize the South Asian nation's mostly British-built railway networkImage: Reuters

Indeed, China offers a huge market for India's exports. The country is already the world's second largest economy and according to the estimates of IHS, an analytics firm, its consumer spending is set to rise from 3.5 trillion USD in 2013 to 10.5 trillion USD by 2023. At the same time, India - with its growing economy and more than a billion people - also remains an important long-term market for China's exports.

Xi's trip followed Modi's maiden visit as prime minister to Japan. In Tokyo, Modi secured investment pledges of more than 30 billion USD. "India will welcome investments from both economic giants. But it will not align itself with the US-Japan alliance in containing China," political analyst Khandekar told DW, adding that New Delhi is set to profit the most from Chinese-Japanese competition.

Tensions at the border

Despite efforts from both China and India to open a new chapter in bilateral ties, Xi's visit was clouded by the reported standoff along the contested border between the two countries. Hundreds of Chinese troops allegedly crossed into territory in the Himalayan region of Ladakh claimed by India raising tensions at the border and casting a shadow over the summit talks.

Such military skirmishes, however, are not uncommon between the two nations which have been embroiled in a territorial dispute over their border for decades. While Beijing lays claim to about 90,000 square kilometers of territory in India's northeastern state of Arunachal Pradesh, New Delhi accuses China of occupying 38,000 square of land on the Aksai Chin, a disputed border area between the two countries.

At the news conference following their talks, Modi and Xi underlined the need for maintaining peace along the border. Saying that he raised India's concerns over repeated border skirmishes, PM Modi stressed that "there should be peace in our relations and in the border regions. If this happens, we can realize the true potential of our relationship."

Noting that China is not a "warlike nation," President Xi said: "Sometimes there might be certain incidents, but the two sides are fully capable of acting promptly to effectively manage the situation."

'Pressure tactics'

Liu Zongyi, an expert on Indo-Chinese ties at the Shanghai Institutes for International Studies (SIIS), is of the view that the Line of Actual Control between the two nations has not been made clear, resulting in such border incursions. The analyst told DW that Indian mass media and some strategic and military elites "often hype the border issue, claiming a Chinese army invasion of Indian territory for their own interests." Nevertheless, he termed the border issue as the "biggest obstacle" in China-India relations.

Indien China Grenzsoldaten Archiv 2008
Analysts describe the border dispute between India and Pakistan as the biggest obstacle in bilateral tiesImage: Diptendu Dutta/AFP/Getty Images

These border skirmishes, however, will not flare up into armed conflict, Khandekar believes. The analyst is of the view that they are mere pressure tactics and geopolitical cosmetics rather than actual threats. Khandekar highlighted that Modi's main focus is to establish an economically developed India. At the same time, the expert noted, China "cannot afford to have one more simmering conflict on its borders in addition to those with Japan and South East Asian countries."