In the annals of history, few narratives illuminate the dynamics of international relations as vividly as trade. The East India Company’s interest in the Chinese markets for their homespun woollen cloth in the 16th century was one of the turning points in the commercial history of South Asia. Within the next two centuries, however, the British began to invest heavily in Chinese tea. It is no coincidence that King Charles II (1660-1685) declared tea to be the British national drink. Then came the smuggling of Indian opium into the Chinese kingdom. The contours of South Asia’s commercial landscape began to shift dramatically, laying the groundwork for the complex interactions we witness today.
What this trivia reveals is that the road to international relations-friendly, hostile, or outright exploitative-is paved by trade. If murmurs around Kartavya Path are to be believed, the business community has played a significant role in the India-China military disengagement along the Line of Actual Control (LAC) in Ladakh. This clearly implies that trade continues to be the lynchpin of diplomatic relations.
Trade And Ties
The recent agreement reached between India and China, announced on the eve of the BRICS summit and executed in a week’s time, to end their military standoff signals a significant thaw in ties that had reached a nadir following a deadly clash in 2020. As Foreign Secretary Vikram Misri announced, this new pact enables both nations to resume border patrols. This process allows each side to assert its territorial claims while simultaneously fostering a framework for mutual compliance. This disengagement is not merely a tactical manoeuvre; it reflects a broader desire for stability and cooperation that both India and China have recognised as vital.
The significance of this development cannot be overstated. The agreement comes at a time when China remains one of India’s most critical trading partners, with bilateral commerce reaching an impressive $118.4 billion in 2023-2024 alone. Despite the geopolitical tensions that often cloud relations between the two countries, China continues to be a crucial source of goods and industrial products for India. The pressures exerted by the Indian business community in favour of renewed dialogue and engagement are a testament to the undeniable link between economic interests and military posturing.
As we look ahead, the potential for a summit between Prime Minister Narendra Modi and President Xi Jinping looms large on the horizon. This would mark their first face-to-face meeting since 2020—a significant step that could further deepen economic ties while providing a platform for addressing thorn-in-the-side issues.
The Americans
However, it is crucial to recognise the broader context in which this disengagement has occurred. China’s assertive posture in the Indo-Pacific region, particularly concerning Taiwan and the South China Sea, continues to evoke unease. India, nonetheless, has the choice to limit its engagement in these areas. Additionally, it is crucial to differentiate between assertiveness and recklessness. Unlike the belligerence of the US and Soviet Union during the Cold War, which often pushed the world to the brink, China’s actions have, so far, not escalated to such extremes.
India finds itself in a delicate balancing act. Pragmatism governs its engagement with both the United States and China, rooted in strategic interests rather than ideological alignments. By prioritising issue-based cooperation over rigid camps, India aims to foster stability in a multipolar world. The United States, for its part, has navigated this complexity with a policy of “managed competition”-an approach that acknowledges the necessity of collaboration even amidst confrontation.
It is noteworthy how the American goods and services trade with China stood at $758.4 billion in 2022, with a trade deficit of $367.4 billion, as per the Office of the United States Trade Representative, an executive office of the President. A glance at the disaggregated data shows the growing economic interdependence of the two countries. All this is despite the US sanctions and restrictions on Chinese companies and players. The impact of the latest slew of sanctions on China, including restricted investments in the tech sector and companies in China supplying microelectronics and machine tools to Russia, is yet to be seen. History, however, shows that sanctions have rarely managed to annihilate the foes of the United States.
Confrontation Can Be Detrimental
Ultimately, the path forward for India and China hinges on recognising the interdependence that trade fosters. India’s lack of cutting-edge innovation in the business arena has made it dependent on the Chinese tech industry. India currently accounts for less than 3% of the global R&D expenditure as opposed to China’s 22.8%. The US accounts for about 25% of all R&D expenditure and remains at the top of the table.
Until India emerges as an equal in economic terms, a confrontational stance with China is detrimental to its goals. Even between equals, collaboration fetches better results than confrontations. While territorial disputes linger, the foundations of a more stable and constructive relationship may very well be built on the economic ties that bind them. As India and China seek to navigate an increasingly complex geopolitical landscape, it is the microchips and the LEDs that will continue to light up the negotiating tables, just as they have been lighting up the Diwali installations at home and offices.
Our season’s greetings have been ‘Made in China’ for a while now.
(Nishtha Gautam is a Delhi-based author and academic.)
Disclaimer: These are the personal opinions of the author
