India & China
02/11/2019 07:46 am MYT
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"Closer ties between India and China can only mean good things for everyone. Asia used to be the world’s leader. It is time for this to return. Perhaps this will bring about a more peaceful world."


The signing of Phase One of the US-China trade deal in Chile, where Xi Jinping and Trump were also supposed to attend the APEC Summit, has been cancelled. The cancellation was not due to Trump’s silly twits but due to the Chileans protesting their government’s economic policy. While US-China relations, especially trade relations, have been capturing headlines, looming in the background is another important bilateral relation with global implications that has not been highlighted, especially in the Western media.  


Even though India and China share  a long common border, and many neighbouring countries, the two Asian giants have on the whole maintained cordial relations, not the closest of allies but generally harmonious in the last 5 decades. (Sources:,

Although India and China, the two Asian giants, have had peaceful relations for thousands of years, the recent decades have seen more turbulence between them. Things actually got off to a good start at first. India even established diplomatic relations with the People’s Republic of China early, on 1 Apr 1950 to be exact. However, due to a lack of trust on both sides and a complex global geo-political backdrop from the Nineteen Fifties to the Seventies, the two Asian giants have not been able to build on this foundation and foster closer relations. The lowest point of their relationship was the short 1962 border dispute where more Indian and Chinese soldiers died from the bitter freezing weather in the high mountains than from actual combat. However, even though India and China share a long border as well as many neighbouring countries, the two Asian giants have on the whole maintained cordial relations - maybe not the closest of allies, but at least generally harmonious in the last 5 decades.

Well, after many false starts, India-China relations may have finally gotten onto a firmer footing. This could be because China is navigating a trade war with the US while India is trying very hard to revive an economy that’s seeing the slowest GDP expansion in many years. i Capital thinks that the improved India-China relations are more sustainable than these temporary factors would imply. Things were already getting better even before Trump became president and Modi became prime minister. For sure, the border issue between India and China, the Kashmir problem, India’s trade deficit with China, and India’s continued lack of support for China’s Belt and Road Initiative remain unresolved. However, what is bringing the two countries together on a sustainable basis are numerous powerful factors, which include the following:


  1. One, the people of both India and China suffered immensely and were humiliated under the Western and Japanese Imperial powers.
  2. Two, both nations seek to restore the past dignity of their glorious civilisations.
  3. Three, India and China have seen how the United States can be as authoritarian as any other authoritarian nation and an unreliable ally to boot. This explains why India only pays lip service to the weird American concoction of Indo-Pacific or the Quad.
  4. Four, both have been on very friendly terms with Russia.
  5. Five, the two Asian giants fundamentally realise that they need each other.
  6. Finally, prime minister Narendra Modi and president Xi Jinping are motivated and committed to make sure that relations between India and China are brought to their level of a thousand years ago.   


President Xi Jinping visited Chennai, India from 11 to 12 Oct 2019 to take part in the 2nd informal summit with prime minister Narendra Modi. There were no agreements, no Memorandum of Understandings, or joint communique announced during Xi Jinping's visit to India. This is the 2nd informal summit between Modi and Xi. The first one was held last year in Wuhan. Xi's visit to India coincided with the visit of Pakistan’s prime minister Imran Khan and her Army Chief. The Chennai summit focused on building on the Wuhan “consensus” for better ties and for the two leaders to build on the “personal chemistry” achieved in Wuhan. Other than that, there were no specific outcomes or agreements in the Chennai meeting. Both leaders will meet again at the East Asian and RCEP summit in Thailand. During the Indian visit, the two Asian leaders met in Mamallapuram, about an hour away from Chennai. President Xi joined prime minister Modi for sightseeing in the Mamallapuram temple complex. The choice of Mamallapuram and Chennai were made for several reasons. It was China that picked Mamallapuram as the venue for the summit and India agreed instantly. Tamil Nadu has a number of historical connections with ancient China, including Tamil prince Bodhidharma(who is credited with bringing Buddhism to China), the visit of 7th century traveller Hsuan-tsang to Kanchipuram, and trading expeditions from the Pallava kingdom to the South-east coast of China. The historic sea-side town has born witness to an ancient India-China tie : the 8th century security pact between the then Pallava king and Chinese emperor. For Modi, it could not have been more strategic given BJP’s political plans for Tamil Nadu. Modi’s BJP is not popular in Tamil Nadu. So, choosing a Tamil Nadu venue for the summit fit perfectly with BJP’s plans - even the DMK chief M K Stalin thanked Modi for choosing Mamallapuram.

Closer ties between India and China can only mean good things for everyone. Asia used to be the world’s leader. It is time for this to return. Perhaps this will bring about a more peaceful world.

Meanwhile, the US Federal Reserve cut interest rate for the 3rd time, a move that will boost the Hong Kong stock market too. i Capital is retaining its short-term outlook of the Hang Seng Index at a range of 22,000 to 29,000 to cater for volatile local and global conditions. i Capital is also retaining its medium-term outlook of the Hang Seng Index at a range of 22,000 to 35,000 and with the same caveat. Despite the onslaught from the United States, our long-term bullish view of China has not changed one bit. Capital Dynamics has just completed its 5-day China Immersion Programme in Shanghai from 14th to 18th October. With the deep and valuable insights gained from and about this fascinating great nation, we foresee China celebrating her 100th anniversary in 2049 with even greater splendour. i Capital is maintaining its bullish long-term outlook of the Hong Kong stock market and expects the Hang Seng Index to eventually rise beyond 50,000. Despite the slowdown in 2019, the Chinese economy has successfully progressed to a stage where it possesses true resilience.


Note from Publisher
Although India pulled out at the last minute, the 15-member Regional Comprehensive Economic Partnership (RCEP) agreement will be ready for signing next year. RCEP is a free trade agreement among the 10-member ASEAN, China, Japan, South Korea, Australia and New Zealand. It is to be the world’s largest free trade bloc. The 15 participating countries make up nearly a third of the world’s population and GDP. With the protectionist Trump administration terrorizing every country in the world with tariffs, a successful conclusion of RCEP is of utmost importance.

In addition, it is the first time that China, South Korea, and Japan are in the same free trade bloc, potentially paving the way for the illusive free trade agreement among the three East Asian economic powerhouses to be realized. i Capital has written many times about the immense potentials of a China-South Korea-Japan economic alliance. It would provide a real counter balance to the US and Europe, which have dominated the world since the first industrial revolution.

The world will definitely be more peaceful when no single super power is allowed to bulldoze its way through the rest of the world. Check and balance would promote justice, responsibility, and transparency.
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