India’s National Security Advisor recently met Chinese Foreign Minister Wang Yi for the first time since 2019. This meeting, once an annual event, had been suspended after the 2020 border clashes between Indian and Chinese soldiers. Its revival suggests a tentative easing of tensions, following discussions between Prime Minister Narendra Modi and President Xi Jinping during a BRICS summit in Russia in October. While this marks a thaw, it remains cautious; both armies are still stationed in hostile positions amid the harsh Himalayan winter.

This shift in relations comes after years of deepening hostility, fueled by China’s discontent with India’s growing alignment with the United States and India’s anger over Beijing’s attempts to alter the border status quo. A key driver of this change is economic concern: both nations are grappling with challenges in reviving slowing growth.

China’s economic struggles, particularly its sluggish recovery from a real estate crisis, have reverberated across sectors like steel and appliances, leaving many consumers feeling financially insecure. With declining house prices and excess industrial output, China’s ability to stimulate domestic demand has weakened. Exporting surplus goods has also become challenging due to anti-dumping measures in some Southeast Asian countries.

Meanwhile, India has sought to reduce its economic dependence on China, intensifying efforts after the 2020 border conflict. Measures included tighter regulations on Chinese imports and restrictions on Chinese investment and visas. However, these efforts have not curbed the rising trade deficit. Paradoxically, India has been importing more Chinese goods in areas like electronics, even as it boosts its own competitiveness in these sectors.

This trend reflects a broader reality: India’s integration into global supply chains—such as those supporting Apple’s iPhone production—inevitably involves reliance on Chinese inputs. With India striving to create high-quality jobs and stimulate economic growth, some policymakers now recognize that collaboration with China may be necessary to achieve these goals.

For India to become a competitive manufacturing hub, it may need to integrate into supply chains currently dominated by China, involving Chinese investment and expertise. However, such collaboration requires a stable geopolitical environment, prompting both nations to cautiously repair their strained relationship.

Despite these efforts, underlying tensions persist. India seeks Chinese investment and a cessation of border provocations, while China views India as a potential market and hopes to temper its alignment with U.S.-led efforts to politically and economically isolate Beijing. Both countries are aware of these differing agendas but are currently prioritizing economic recovery over their disputes.

Disclaimer: This image is taken from Bloomberg