PM Modi, China’s Xi Jinping to hold bilateral after 5 years at Brics: Why it is important

Prime Minister Narendra Modi will hold a bilateral meeting with Chinese President Xi Jinping today (October 23) on the sidelines of the Brics Summit in Kazan, the capital of Tatarstan in Russia. This is the first structured meeting between the two leaders in five years.

The talks come on the heels of the two Asian giants reaching an agreement on patrolling along the Line of Actual Control (LAC) in eastern Ladakh. The development is significant as India’s relationship with China remains strained since the 2020 Galwan Valley clash.

Let’s take a closer look.

Dip in India-China ties

India’s relations with China spiralled downwards after the 2020 military standoff in Ladakh’s Galwan Valley. After the deadly border clash, New Delhi imposed strict visa restrictions on Chinese nationals.

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But this has impacted key manufacturing firms in India as heightened scrutiny for visa applications meant specialised engineers from the neighbouring country could not come here, as per a Reuters report.

After businesses complained that they were unable to operate or maintain equipment without Chinese technicians, New Delhi recently eased issuing visas for certain sectors.

In April 2020, India made government approval mandatory for investments from countries sharing a border with India to curb “opportunistic takeovers” of domestic firms. The move was aimed at restricting foreign direct investment (FDI) from China.

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According to Reuters, this has resulted in the proposed investment worth billions of dollars getting stuck in the approval process over the last four years.

Amid tensions with Beijing, India banned about 300 Chinese mobile apps citing data and privacy concerns.

There have been no direct passenger flights between India and China since the COVID-19 pandemic. The flights were not resumed even after the countries lifted the COVID-19 travel restrictions.

While rounds of military and diplomatic talks reduced border tensions over the past years, India maintained ties cannot return to normal until disengagement and de-escalation are complete. The two sides disengaged from several friction points after talks but border dispute persisted over key areas such as Depsang and Demchok.

PM Modi to meet Xi

PM Modi’s bilateral talks with China’s Xi at the Brics summit in Russia were confirmed by Foreign Secretary Vikram Misri on Tuesday.

“I can confirm that there will be a bilateral meeting between Prime Minister Modi and Chinese President Xi Jinping tomorrow on the sidelines of the BRICS Summit,” he said at a media briefing.

Commenting on the patrolling arrangement between the two sides, Misri said, “What it will entail is that in the pending areas under discussion, patrolling, and indeed grazing activities, wherever applicable, will revert to the situation as… in 2020… As far as the disengagement agreements reached previously are concerned, those agreements were not reopened in these discussions. The agreement that was reached yesterday, very early yesterday morning, was focused on issues that had remained outstanding in the last couple of years.”

Earlier on Tuesday, Chinese Foreign Ministry spokesman Lin Jian confirmed that “the two sides have reached a solution on the relevant matters, which China views positively”. “Over a recent period of time, China and India have kept close communication through diplomatic and military channels on issues related to the China-India border,” he said, adding that Beijing will “work with” New Delhi to implement the solution.

Modi and Xi had a brief informal interaction last August in Johannesburg on the sidelines of the Brics summit. Before that, the two leaders had a brief conversation at a dinner hosted by the Indonesian President for the G20 leaders in Bali in November 2022.

A thaw in India-China ties?

PM Modi’s meet with Xi assumes importance as this is the first structured bilateral meeting between the leaders of two Asian giants in five years.

This was possible after the two sides reached the patrolling agreement to resolve the four-year military standoff. It has also paved the way for India and China to boost their political and business ties.

Exporters in India have called it a “positive development” that is likely to improve trade ties with China.

Mumbai-based exporter and CMD Technocraft Industries Saran Kumar Saraf told PTI, “Present disengagement will give mental comfort to Indian businessmen doing business with China. The Department of Commerce should identify 10 top imports from China and work on them to cut the imports”.

There has been pressure from India’s business community on the government to get trade ties with China back on track. While commercial ties have eased since 2020, there is a huge imbalance in trade between the two countries.

India’s exports to China are far behind its imports. Chinese imports surpassed $100 billion in FY24, while India’s exports stood at $16.65 billion in the last fiscal.

India’s trade deficit with China at $85 billion in 2023-24 is one of the highest for the country.

Last month, External Affairs Minister S Jaishankar pointed out that Indian goods do not enjoy the same market access in China as Chinese products have in India. A working paper by the Economic Advisory Council to the Prime Minister (EAC-PM) has blamed non-tariff barriers in China for this, saying they restrict market access for Indian exports, reported Indian Express.

It is expected that India could ease up on Chinese investments, which can increase domestic output. The pre-budget Economic Survey in July said that increasing FDI from China would be beneficial for India by helping the country improve local manufacturing and exports.

Speaking to Indian Express, a senior government official said New Delhi could gradually open up to China, particularly by easing rules for companies from the mainland to invest in India, along with domestic partners.

“Joint ventures between Chinese and Indian companies, where the former is a minority shareholder, is something the government would be very open to,” the official said.

The two sides have also shown a willingness to resume direct passenger flights. This will benefit both countries but especially China where recovery post-COVID in air travel has been relatively slow, as per South China Morning Post (SCMP).

Modi’s talks with Xi indicate that the countries want to reduce tensions and move forward. When Modi skipped a meeting of the Shanghai Cooperation Organisation (SCO) where Xi was present in July but went to Russia, it was seen by analysts as a move reflecting unresolved tensions.

Harsh Pant, an international relations professor at King’s College London, told SCMP at the time that PM Modi probably wanted to avoid “the optics of meeting Chinese President Xi Jinping” to signal that the “top Indian leadership will not engage with China at the highest level unless something changes in the Chinese approach” to resolving the border issue.

It seems that has changed now with the patrolling agreement, signalling a thaw in the frosty relationship.

With inputs from agencies