Posted by: John Elliott | September 18, 2014

India and China agree $20bn deals despite Himalayan border face-off

Narendra Modi’s birthday party with Xi Jinping in Gujarat

India and China’s two top leaders have today successfully agreed in Delhi on plans for economic and other co-operation despite over 1,000 troops from each side facing off against each other in Ladakh on the two countries’ disputed border, known as the Line of Actual Control (LAC), 15,000ft up in the Himalayan mountains,

modi-xi-swing1 - IndianExpress

China is to invest $20bn in Indian infrastructure projects over five years.

Eight agreements and memorandums of understanding were signed on subjects ranging from China modernising Indian railways and building industrial parks to twinning the commercial capitals of Mumbai and Shanghai as well as Ahmedabad in Gujarat with Guangzhou in the Chinese province of Guangdong. A five-year economic and trade development plan was also agreed.

The visit by Xi Jinping, China’s president, was supposed to have been full of friendliness and co-operation. He arrived on the Indian prime minister’s 64th birthday and Narendra Modi celebrated it by proudly hosting Xi to a carefully choreographed afternoon and evening of serenading and dining (with 150 vegetarian dishes) on the waterfront of the Sabarmati River in Ahmedabad, the biggest city in Gujarat where he was chief minister.

The chemistry between the two leaders, who had previously bonded at a BRICS summit July, was good and Modi’s eyes twinkled when he spoke to Peng Liyuan, Xi’s wife, who is a famous folk singer and former soldier. Later in the visit, Peng got widespread media coverage for relaxed informal meetings with school children

Modi-Xi2 -Peng - PTI - Indian Express

But Modi’s birthday was spoiled not only by Chinese troops massing on the border, which threatened to upset the mood, but also by bad by-election results announced the day before when the Bharatiya Janata Party lost significant regional assembly seats.

Confrontations happen frequently on the LAC, mainly because the line is not demarcated. A similar confrontation built up just before China’s prime minister visited India last year, but that was solved before he arrived.

This time, there have been at least two confrontations that increased even after Xi arrived without any withdrawal. While it seems unlikely that Xi personally ordered the Chinese troops to cross what India regards as the border, there is speculation that the People’s Liberation Army decided to flex its muscles and test India’s reaction – and Xi may not have been in a position to stop it. If that is correct, it underlines the PLA’s growing independence.

modi-xi umbrella - Indian Express

Modi had promised before he became prime minister to take a tougher line over border incidents with China and Pakistan, and it seems that India has reacted more aggressively than it has done in the past by moving troops rapidly to the LAC to match and even exceed the number of Chinese troops.

Inevitably, Modi complained about the Chinese troop activity during talks with Xi both in Ahmedabad and later in Delhi.

A prepared media statement after the talks, said Modi had voiced India’s “serious concern over repeated incidents along the border”. Peace on the border was essential for “mutual trust and confidence and for realising the full potential” of the relationship.

“This is an important understanding, which should be strictly observed,” said Modi, using tougher language than is usual. He also suggested reducing the risk of confrontations by demarcating where the existing border runs, while leaving (though Modi did not spell this out) the dispute over a permanent settlement till later.

Xi was the first Chinese president to visit India since 2006 and he sounded constructive in his remarks, though he used the words always deployed by China that the border dispute is something “left over by history”.

Modi saw Xi’s visit as an opportunity to attract China’s capital and technology to help modernise India’s infrastructure and industry. It follows a similar exercise when he visited Japan three weeks ago and obtained investment pledges, and then met the Australian prime minister in Delhi.

This is in line with Modi’s pro-active approach to diplomacy, which he will continue in the US at the end of this month. He wants to develop foreign policy far more pro-actively than has done in the past in order to harness other countries’ help in accelerating India’s under-performing economy and industry.

The $20bn figure is much lower than rumours of an unrealistically high figure of $100bn, but it is a massive increase on the $400m that China has invested in the past ten years. The figure offered by Japan was $35bn and the challenge for Modi now is to speed up India’s slow-moving bureaucracy and project approval system to absorb such big investments. There is also serious concern in India about the poor quality of some Chinese power project equipment which, it appears, was not mentioned in the talks.

umb--621x414 - Mint

Xi arrived in India from Sri Lanka and the Maldives where he had been increasing China’s involvement in what used to be seen as a region of India-influence. He unveiled new infrastructure projects in both countries, and talked about them having a role in reviving an “ancient maritime silk road” of trading posts that led to China.

In Sri Lanka he inaugurated a China-funded $1.5bn port development in the capital, Colombo, which is billed as the island’s biggest ever foreign investment project. Xi was also to have gone to Pakistan, a long-term China ally, but cancelled to visit because of the political unrest in the capital, Islamabad.

The BJP losses came in by-elections for state assemblies in eight states and followed other less significant defeats in recent weeks. This week’s results were significant because they involved the key northern state of Uttar Pradesh, where the BJP did spectacularly well in the general election but lost eight out of 11 seats to the regional Samajwadi Party. In Modi’s home state of Gujarat, it was defeated by the Congress Party in three out of nine seats.

These results may show some disenchantment with Modi’s national government for not tackling basic problems such as prices. But more importantly they seem to show voters in UP turning against divisive Hindu nationalist anti-Muslim rhetoric orchestrated by Amit Shah, a Modi confidante who has been controversially installed as the party’s national president. It is also significant that Modi was not personally active in the by-election campaigns, which underlines the point that the general election result was more a vote for him personally than for the BJP.

This article appears on Asia Sentinel, a Hong Kong based news website –


  1. Even though you seem to be guarded in your article and did not comment on the inappropriateness of the Chinese PLA action, I, as an ex-servicemen know the sneaky ways of these Chinese leaders. They are not straight in their dealings with any one in this world not even to their own people. But if Modi wants to defeat their designs he needs to play their own game on them and play it better than them. They had their time for far too long.
    As far as his loss in recent by elections is concerned I am very disappointed that he should leave the field open for the hard line Hindutava people. If he continues with this practice there is always a chance of Congress being voted back to power which no sensible Indian wants after 60 yrs of their experience with them mismanaging everything Indian.

  2. You are one of the very few who understands that factions within the PLA might have their own agendas and that some of them are trying to sabotage a settlement of the border disputes wit India. The PLA had done the same thing befoire the Brics summit last year. One group that would gain immensely from the absence of a settlement would be the thee Gorges Dam Company, which has alreadty staked a claim to build nine run of the river dms generating 40,000 MW of power by cutting off the Big Bend in the Brahmaputra , diverting its water through a tunnel from the northwestern arm of the bend to the south eastern through a tunnel and nine cascade dams. The Three Gorged dam Compamny in owned by the family of former premier Li Peng, of Tian anmen square fame.
    Prem Jha

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