On November 10, 2020, senior officials from India and China met for the eighth time to discuss the disengagement of military deployments from certain parts of the Line of Actual Control (LAC). The LAC is a 3,488-kilometer (2,167-mile) notional line that separates Indian- and Chinese-held territories. In the summer of 2020, China’s People’s Liberation Army (PLA) crossed several points on the LAC. It led to the beginning of a major standoff, and fatalities on both sides—the first since 1967.

As of December 1, the ground positions had not changed much since the standoff began in May—apart from a surprise move in August by the Indian Special Frontier Force to capture a set of strategically important heights along the LAC. This was in reaction to the PLA’s intrusion in the same area.

Rudra Chaudhuri
Rudra Chaudhuri is the director of Carnegie India. His primary research interests include the diplomatic history of South Asia and contemporary security issues.
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Today, the key questions have to do with competing visions for disengagement and what exactly a status quo ante means to both sides. For India, it appears that a full disengagement would mean returning to the positions held by both the militaries in March 2020, before the PLA downright broke with the terms and spirit of a prior set of hard-fought agreements between India and China that were designed to maintain “peace and tranquility” on the LAC.

What disengagement means for the PLA is less clear. Either way, the negotiations are likely to continue for at least a few months more. The deployments, with heavy armaments on both sides, will likely continue despite the thick snowfall, freezing temperatures, and the unimaginably harsh winter conditions.

Economic Relations Are On Thin Ice

To an extent, China’s inability to come to terms with a method for disengagement that is mutually acceptable is shaped by its leadership’s failure to appreciate the winds of change within India. In the minds of Chinese interlocutors, the troubles on the border are separate from China’s larger economic and strategic relationship with India. They simply cannot understand why the two should be connected. But they are.

For Indian diplomats, officials, trade negotiators, and, gradually, venture capitalists and start-up CEOs, the relationship with China has fundamentally changed. Aggression on the border directly connects to the way India will trade and do business with China. It shapes India’s strategic choices. So for China, trying to delink military aggression from strategic ties is both foolhardy and ineffectual.

Three points merit attention.

First, there is a concerted, organized, and much-needed effort in India to lower its economic dependence on China. This effort predates the June standoff. The rationale is simple: for far too long, Chinese investments in Indian infrastructure, mobile manufacturing, pharmaceuticals, and India’s vivacious start-up ecosystem continued with little or no reciprocity to market access within China. The trade imbalance that was more clearly visible in 2010 kept widening in favor of China. In 2014, Chinese officials introduced working mechanisms to correct the deficit, but this was nothing more than lip service. China’s unregulated access to the Indian market needed to stop.

Second, India’s efforts to detach itself economically were given a fillip following China’s barefaced military actions at the border. The Indian government announced a consolidated foreign direct investment policy in October. According to this policy, states that share a land border with India, like China, will no longer be able to invest directly in India. Their investments will first be scrutinized by government agencies. Additionally, there is little or no chance of Chinese firms investing in India’s 5G or 6G future—the border conflict has closed this road. Further, over a hundred Chinese apps were banned in India since the standoff began, including TikTok, AliExpress, WeChat, and others. This catalogue is likely to increase in the near future.

The long list of Chinese entrepreneurs with staff and offices in India’s tech capitals of Bengaluru, Hyderabad, and Gurgaon are unlikely to see much return for their investments anytime soon. This is the reality that the PLA’s aggression has cemented. This is not to presuppose that these costs matter to Beijing, but they do matter to an increasing number of Chinese tycoons and investors. For them, India’s ever-increasing data market provides unique opportunities. Viewed in isolation, India’s economic strategy may not in itself affect Chinese calculations. India is a minor player in China’s trading world. However, the border standoff has done more to connect economic initiatives to India’s diplomacy than at any time in the past.

Third, and relatedly, India has noticeably moved even closer to the United States, a trend that is again unlikely to change anytime soon. The continuing standoff has shaped India’s more assertive position toward working with the Quad group of countries—the quadrilateral security dialogue between Australia, India, Japan, and the United States. Such cooperation is not just in the maritime domain. The Quad is gradually becoming a marketplace for economic collaboration and potentially, down the line, a better-networked circuit of nations establishing standards in and for emerging technologies such as artificial intelligence. India’s revived interest in the Quad is yet another consequence of China’s aggression on the border.

The Consequences of Military Action

There is little point in trying to disconnect the effects of blatant belligerence on the border on present and future Chinese-Indian relations. The sooner that Chinese officials and China’s South Asia–focused experts understand this, the easier it will be to refocus Beijing’s approach to disengagement from the LAC. This is not to say that there is a perfect mathematical formula between the PLA’s position on the border and that position’s effects on India’s strategic and economic choices. It is simply to make the point that the connection exists, and it is getting stronger with each passing day.

Additionally, it should not be presupposed that Chinese leaders’ clearer appreciation of the link between the border and China’s broader relationship with India will or can shape the PLA’s advance in their negotiations with their Indian counterparts. The key point is that there should be no doubt in the minds of such leaders that the two are connected.

To be sure, when and if a mutually agreed disengagement takes effect, there will be no returning to normal for India. The perception and reality of what normal is has changed. What that means in practice will be the central puzzle for Indian policymakers and experts to work out as they chart the next decade with a country that is more likely than not to continue its bellicose advance across contested borders.