• Commentary Asia
  by Antara Ghosal Singh
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In the latest sign of warming of relations between the world's two largest economies, direct flights have resumed between India and China on October 27th, 2025 after a five-year hiatus. India-China relations have been showing signs of improvement since early last year as both sides occasionally sent out positive signals. Indian Prime Minister Narendra Modi called for an "urgent" solution to the border stalemate in a magazine interview in April 2024. This was followed by China appointment of a new ambassador to India after an 18-month gap. On October 21, India and China reached an agreement on patrolling arrangements along the Line of Actual Control (LAC) in the areas of Depsang and Demchok, which led to the final disengagement of troops from all the hotspots of 2020. This culminated in the October 23 meeting between PM Modi and Chinese President Xi Jinping at the BRICS Summit in Kazan. High-level exchanges between India and China have gained momentum after the summit, aimed at restoring normalisation of bilateral ties.

Border patrol agreement: the key icebreaker

It is generally understood that the border patrol agreement has been the key ice-breaker in China-India bilateral ties. Since the Galwan clash of 2020, New Delhi has consistently demanded that the Chinese army withdraw to its position prior to April 2020 and restore India's patrol rights in the disputed area. From India's perspective , the agreement of October 2024 is a sort of "diplomatic victory", as it finally restored patrol rights in the disputed area after four years of confrontation.  At the same time, the Chinese side proclaimed that the deal only involves border patrol and has nothing to do with sovereignty demarcation. Thus, the issue of border sovereignty was handed over to the meeting mechanism of special representatives on border issues, which was restarted after a gap of five years. It is this re-shaping of the rules of engagement at the LAC, that has formed the basis of progress in bilateral negotiations.

What compelled China and India to patch up?

Now the question arises: why were China and India compelled to conclude this border agreement at this point in time? The Trump factor and the possible uncertainty associated with Trump 2.0 might have influenced both side's initial calculations. In subsequent months, the White House's aggressive tariff policy might have further fast-tracked the process of reproachment. But, apart from that, it is also the fundamental interests of both China and India, that is eventually shaping the contours of this consequential relationship. Another incentive for this relative rapprochement has come from the closer ties the White House is establishing with Pakistan: the series of high-level meetings between the leadership of the two countries - including Shehbaz Sharif visiting Donald Trump in Washington last August - contributed to rise concerns not only in India, where tension is still high after Operation Sindoor, but also in Beijing, where Pakistan is a critical ally, despite recent decrease in bilateral investments.

However, India is well aware of China's manufacturing prowess and is particularly concerned about its high dependence on Chinese manufacturing. The India Economic Survey 2024-25 has clearly highlighted China's overwhelming manufacturing dominance in various sectors like electric vehicles (EVs) and critical minerals, and stated how China's manufacturing output, which is now nearing 45% of the global total, is at a level not seen since the UK and US at their industrial peaks. The survey also pointed out India's heavy dependence on Chinese supply chains, particularly for solar energy components like polysilicon, wafers, and batteries, which makes India particularly vulnerable to supply chain disruptions, price fluctuations and currency risks. In recent months there have been multiple instances of China putting export control on rare earth magnets, fertilizers, tunnel boring machines etc headed to India, which has had devastating impact on various Indian industries. No wonder, there is interest in various industries in India to revive economic engagement with China after years of tension, albeit while maintaining caution.

However, although often underexplored, the importance of relations with India from Beijing's point of view is self-evident. One of the main concerns in the Chinese economic debate is the sustainability of their export-led economic model: on the one hand, given the severe overcapacity in the country's domestic market, there is anxiety that without new overseas markets, domestic manufacturers will go "out of business." On the other hand, China's access to global export markets is shrinking under the impact of intensifying great-power competition. This makes India a critical market for Chinese businesses, which are convinced that, in the near future, India will "become one of the only three independent big markets of the world, after the US and China, with market size and development opportunities far ahead of other countries". What makes the Indian market more attractive to Chinese companies is that it is the only large market where the local companies are still weak, thus marking a more certain prospected consumption upgrade. Faced with such a large market with such great potential, it is only natural for Chinese enterprises to be particularly enthusiastic about being in India. Because if they don't, they fear others will, which will only be affecting Chinese companies' global competitiveness.

Ties with India are extremely relevant also on the political side. For China, which often sees the China-India border dispute and the Taiwan issue as a two-front challenge, stabilizing its western front is imperative to carry out its crucial goal of cross-strait reunification. Many Chinese observers admit that India's imperfect development trajectory has a greater appeal among developing countries or global south countries compared to China's daunting economic achievements. From that perspective, if India were to align more closely with China, it would provide great legitimacy to its development model and its leadership of the global South and help it counter the US or the West more forcefully. It is all these geopolitical considerations that seem to be pushing Beijing to improve its ties with India.

However, despite the positive trend in China-India bilateral ties in the past few months, the future remains uncertain. Deep down, Beijing remains adamant not to see India emerge as the "second China" which, it fears, may complicate its security environment. At the same time, New Delhi remains deeply anxious of China's overwhelming productivity, capable of wiping out its indigenous industries and endangering its sovereignty and national integrity - a deadlock with no easy way-out, particularly in the current turbulent international environment.