TURKISH CENTER for ASIA PACIFIC STUDIES
President Xi Jinping shakes hands with Indian Prime Minister Narendra Modi during their meeting in 2025 in Tianjin. Modi is in China to attend the SCO summit. XIE HUANCHI / XINHUA
India-China Relations: Challenges and Opportunities in a Changing Global Landscape
The Turkish Center for Asia Pacific Studies - October 31, 2025
Professor Badar Alam Iqbal
APAC Non-resident Distinguished Fellow, e-mail: badar.iqbal@fulbrightmail.org
The most pressing issue in the Asia-Pacific region today is the strained relationship between India and China. These two nations, which should ideally act as catalysts for the region's growth and development, have instead emerged as major rivals. This rivalry has significantly hindered the progress and prosperity of the region.
Currently, the political and economic trust between China and India is at an all-time low. A persistent tension over border disputes has further exacerbated the situation. In 1979, Atal Bihari Vajpayee, then India’s Foreign Minister, made a historic visit to China—the first by an established Indian leader—demonstrating a keen interest in resolving the long-standing border issue. This visit was intended to initiate the process of normalizing relations between the two countries. However, despite the initial optimism, no concrete progress was made.
Over the past two decades, relations between China and India have failed to reach the level of mutual trust and cooperation that both nations had once envisioned. Peace along the Line of Actual Control (LAC) remains elusive. When Vajpayee later became Prime Minister of India, he again sought to create a conducive environment for resolving the border dispute and giving it the necessary political momentum.
A silver lining appeared in 2005 when both nations’ Special Representatives (SRs) reached an agreement that outlined the political parameters and guidelines for a possible settlement of the border issue. However, these political parameters have remained little more than a document for negotiation, with no tangible progress made in the two decades since.
As of 2025, the SRs of both nations are still struggling to reach a concrete solution to the ongoing border tensions. To date, the SRs have held 24 rounds of talks. During the most recent round, held on August 19, 2025, both sides reiterated their commitment to previous agreements and made efforts to move forward with discussions. However, a reasonable and mutually acceptable resolution remains elusive.
Former Indian Foreign Minister Nirupama Menon Rao, reflecting on the 2020 border clash, has observed that peace between the two nations requires renewed political will. She noted that while both sides have engaged in dialogue since the clash, the old equilibrium in their relationship has vanished. Today, the Sino-Indian relationship is characterized by "competitive coexistence"—a state of armed peace, where engagement is overshadowed by mistrust and cooperation is constrained by rivalry.
Changing Geopolitical Dynamics: The Role of the United States
The dynamics of global power have also shifted, further complicating India-China relations. The United States, once considered India’s most significant ally, has introduced a new layer of complexity. The imposition of tariffs, transactional policies, and unilateral conditions, particularly during Donald Trump’s second presidency, has created a more volatile and uncertain global political environment.
The return of Donald Trump for a second term has only intensified this volatility, adding further strain to the already delicate negotiations between India and China. Both Asian giants, having borne the brunt of Trump’s tariff wars, have seen their trade relations with the United States suffer. This has forced them to pay a heavy price in maintaining their respective trade relationships, which are now more fragile than ever.
In October 2025, China and India made efforts to rebuild their trade and economic relations, which had deteriorated significantly after the border clashes in 2020. However, the situation remains tense, with both nations continuing to engage in military buildups along the LAC. This ongoing military presence is costly for both Beijing and New Delhi, further straining their economic resources and hampering their ability to foster mutual growth.
The Economic Challenges of a Shifting Global Order
The persistent hike in tariffs by the Trump administration has created an unfavorable global economic environment. Countries worldwide have been compelled to explore alternative trade and economic partnerships to mitigate the damage caused by the tariff war.
China, known for its massive manufacturing capacity, continues to supply goods in enormous quantities to meet global demand. However, this dominance in manufacturing has created challenges for India. For instance, India chose not to join the Regional Comprehensive Economic Partnership (RCEP), a decision influenced in part by concerns over China’s economic dominance. Recently, Chinese Ambassador to India, Feihong Xu, emphasized the need for both nations to explore alternative export markets to boost their trade relations. While China’s emergence as a global economic powerhouse offers opportunities, India must take concerted steps to increase its share in global trade and exports.
The trade imbalance between India and its key partners highlights the challenges New Delhi faces. In 2024, India enjoyed a favorable trade balance with the United States, amounting to $29.6 billion out of a total trade volume of $129.2 billion. However, India’s trade relationship with China remains heavily skewed, with an adverse balance of $102.7 billion out of a total trade volume of $138.48 billion in 2024. This trade deficit is a significant concern for New Delhi, which must urgently address this issue to ensure a more sustainable economic relationship with Beijing.
Another pressing issue for New Delhi is its limited share in global manufacturing, which stands at just 3%, compared to China’s dominant 35% and the United States’ 12%. This disparity in global manufacturing output is a point of contention, particularly for the United States, which has seen its share in global manufacturing steadily decline between 1995 and 2020. During the same period, China’s share in global manufacturing has risen sharply, further tilting the balance of global trade.
The Way Forward
Many trade analysts believe that China’s best strategy is to diversify its export markets and reduce its reliance on the United States. For India, the path forward is more complex. New Delhi must navigate its relationships with both Beijing and Washington cautiously, balancing its economic and political interests. Failure to do so could lead to further challenges in the future.
In conclusion, the strained relationship between India and China continues to be a significant obstacle to the growth and development of the Asia-Pacific region. While there have been moments of progress, such as the 2005 agreement on political parameters for resolving the border dispute, the lack of sustained political will has prevented meaningful resolutions. Meanwhile, the shifting global political and economic landscape, compounded by the ongoing trade wars, has further complicated relations between these major powers. Going forward, India and China must prioritize dialogue, trust-building, and economic cooperation to overcome their differences and contribute to regional stability and prosperity.
References:
Nirupama Menon; 2025; Former India’s Foreign Secretary. The Hindu; October 11, 2025; P. 9
Manoj Joshi; 2025; Distinguished Fellow; Observer Foundation; the Hindu; September 09, P.8
Udit Mishra; 2025; the Indian Express; September 1, P.11.
Department of Commerce; Government of India; 2025