After a four–year military standoff in eastern Ladakh that plunged India-China relations to their lowest point in decades, 2024 witnessed a thaw in ties. Now, as both sides pursue normalcy and stability, what are the main questions facing India-China relations in 2025, and where can one look for answers?
The issues are military, economic, and strategic, and a brief look at 2024 allows us to contextualise them. The standoff was at the front and centre of India-China discussions last year, as it had been for the preceding four years. Following sustained negotiations, the two countries worked out an agreement in October on patrolling in Depsang and Demchok. By December, India’s External Affairs Minister S Jaishankar announced the completion of disengagement in eastern Ladakh.
The border breakthrough enabled a meeting between Indian Prime Minister Narendra Modi and Chinese President Xi Jinping. It also allowed the resumption of dialogue between the Special Representatives (SRs) on the India-China boundary question—India’s National Security Advisor Ajit Doval and China’s Foreign Minister Wang Yi—culminating in Doval’s visit to Beijing in December.
India’s position has been consistent—relations cannot be normalised without restoring peace and tranquility in the border areas. With this process now underway, three related yet distinct sets of questions come into play.
Border management
The first set pertains to the standoff and border management. With disengagement completed, India has announced that both sides will turn their attention toward de-escalation. However, if the negotiations on disengagement are anything to go by, de-escalation is unlikely to happen quickly.
When the crisis began in the summer of 2020, the Indian government’s expectation was that disengagement would take place in a timely manner. It did not foresee it lasting four–and-a–half years, a situation PM Modi described as “prolonged” in April 2024. Keeping this in mind, the pace of de-escalation will need to be carefully watched. One indicator of how India sees progress on the standoff will be whether Modi visits China for the Shanghai Cooperation Organisation summit. China holds the SCO presidency this year, which was endorsed by Modi in his meeting with Xi.
However, Modi has not visited China in the past five years given the estrangement in ties. Likewise, the SCO Foreign Ministers Council meeting will also be held in China, and Jaishankar’s prospective visit and engagements will be worth watching.
India has also highlighted that both sides will discuss Confidence-Building Measures (CBMs) to enhance trust between the two militaries, lest they find themselves in a situation akin to the 2020 face-off. In this context, the Special Representatives—who are mandated to find a solution to the boundary question and explore measures to ensure peace at the border—have resumed their dialogue, stalled since 2019. When Doval visited Beijing, he invited Wang Yi to New Delhi for the next round of SR-level talks. Wang’s visit, if and when it takes place, will be keenly tracked.
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Economic ties
The second set of questions facing India-China ties is economic. Now that India-China ties are thawing, how will India deal with the vulnerabilities? Since the 2020 standoff, New Delhi has tightly screened and regulated Chinese investment in India, and also banned several Chinese mobile applications on security grounds. But it is worth highlighting that India’s imperatives to reduce dependency on and vulnerability to China precede the standoff. As far back as 2017 and 2018, India had expressed concerns about its trade deficit with China and attempted to bridge it.
In April 2020, the Ministry of Commerce & Industry announced the revision of the Consolidated Foreign Direct Investment Policy, further regulating investment from countries bordering India. The press note, which predated the Ladakh standoff by two weeks, didn’t mention China. However, it seemed that the change in policy was done to prevent possible acquisitions by Chinese companies of Indian firms affected due to the Covid-19 pandemic.
Cut to the present, and the government’s 2023-24 Economic Survey makes a case for increasing foreign direct investment from China to improve India’s integration in global supply chains. The contours of economic engagement with China are certainly being debated by the government, and it will be interesting to see where this conversation goes.
Policymakers will be mindful of the recent restrictions on the supply of Chinese workers and equipment to Foxconn’s factories in India—restrictions that the Chinese government is reportedly responsible for.
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Mutual trust
The most important questions facing India-China ties are political and strategic. Both countries have acknowledged that strategic mutual trust has been damaged by the events of the past four years. While both have advocated for rebuilding this trust and seem interested in restarting the process, strategic constraints hinder a substantive rapprochement.
In brief, these constraints are: Beijing’s view of India’s increasingly ‘assertive’ foreign and security policy as a threat to Chinese interests, and the supposed encouragement of this policy by the US to advance its own goal of containing China in Asia.
The bigger issue is that the current state of India-China ties, standoff included, represents a breakdown of the modus vivendi forged between the two sides in the 1980s and 1990s. India and China’s material capabilities and ambitions have changed significantly over the past three decades, but the understanding between them has not kept pace with these. Thus, the strategic consensus between them has eroded. Now that a limited re-engagement has begun, the need is for both sides to work toward a new “equilibrium”, as Jaishankar has noted.
Finally, 2025 also marks the 75th anniversary of diplomatic relations between India and China—an occasion the Chinese side has been quick to highlight. On the other hand, India is likely to be wary, given the events of 2020. In 2019, both sides had announced their intention to hold 70 events in both countries to celebrate the 70th anniversary of their ties. This enthusiasm evaporated with the onset of the border crisis. How India commemorates the 75th anniversary and approaches the military, economic, and strategic questions will help understand how the government is viewing the ‘road to normalcy’ with China.
The author is a senior research analyst at Carnegie India. He tweets @SahebSChadha. Views are personal.
(Edited by Aamaan Alam Khan)