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Executive Summary
The Shanghai Cooperation Organisation (SCO) summit in Tianjin this week is more than a symbolic gathering. With China hosting Vladimir Putin and Narendra Modi, it marks a deeper pivot toward strategic alignment among non-Western powers. Could it be that India and China are ready to Tango? Indeed, that is the tentative conclusion after Xi Jingpin and Narendra Modi met in the past day.
The Tianjin SCO summit felt like more than choreography. Leaders leaned into deep historical symbolism to signal a visible Eurasian realignment, with the Xi–Modi encounter at its centre. The “dragon and elephant” line, replayed across Indian and Chinese media, captured a marked thaw since Galwan. Long-standing rivalry—fed by borders, maritime competition and mistrust—hasn’t vanished, yet the mood shifted from suspicion to cautious engagement.
India and China are entering a phase where rivalry and cooperation must co‑exist. The two economies are too large and too close to ignore one another, yet political trust remains fragile following the 2020 border clashes.
Opportunities lie in sectoral deals: India needs cost‑effective inputs for its energy transition, where China dominates supply chains. In return, China could grant greater access for Indian pharmaceuticals, agrifood, and select services.
Enduring frictions are not completely forgotten: border disputes, Beijing’s defence ties with Pakistan, and India’s tightening of standards in sensitive technologies.
The U.S. factor complicates ties: tariffs, technology controls and sanctions may make any rapprochement difficult to sustain.
Leadership dynamics are limited but improving; Modi and Xi appear to have had a break though in terms of personal ’warmth’. The US’s recent political maneuverings appear to have brought the two sides closer together.
Upcoming moments to watch: the G20 in October, the BRICS+ summit in Kazan, COP30 in Brazil, and India’s 2026 Budget — all potential signalling points.
Third‑country facilitation: the UAE, Singapore, Russia, ASEAN and Europe may play quiet roles in bridging gaps.
A grand bargain is not on the table, but practical, sectoral cooperation could emerge from this weekend’s meeting — especially in energy transition and agriculture. History shows cooperation has been episodic, not alien; the challenge is to make it systemic and resilient.
India and China: Pathways to Managed Interdependence
Setting the Scene
India and China are bound together by geography and sheer scale, yet their political trust deficit remains challenging. Since the 2020 border clashes, relations have oscillated between frost and fragile détente. However, there is improvement. Recent discussions in New Delhi – including the resumption of direct flights, talk of reopening land crossings, and even whispers of ‘early harvest’ boundary agreements – suggest that a narrow but real opening is emerging. The challenge is to move beyond episodic gestures and create what might be called managed interdependence: limited, verifiable cooperation in areas where both stand to gain, while ring‑fencing the most sensitive disputes. Are the Elephant and Tiger about to Tango?
Potential Areas of Opportunity
Energy Transition Hardware: India’s ambitious clean‑energy goals require vast amounts of solar panels, batteries and grid equipment. China dominates these supply chains. Carefully structured supply agreements, tied to localisation and joint ventures, could lower India’s costs while giving Chinese manufacturers a vast market outlet.
Pharmaceuticals: India is a global force in generics. For China, facing the burden of an ageing population and rising healthcare costs, faster regulatory approval for Indian drugs would reduce costs and diversify supply. A reciprocal opening could anchor a new strand of cooperation.
Agriculture and Seafood: Shrimp, spices and basmati rice already feature in bilateral trade. With tighter cold‑chain and sanitary protocols, this could scale rapidly into a billion‑dollar plus flow that is politically uncontentious.
Metals and Raw Materials: Indian iron ore and cotton yarn already flow to China. Long‑term offtake agreements could stabilise supply for Beijing while protecting India’s domestic development priorities.
IT and Services: China will not welcome large‑scale Indian IT players into its domestic data ecosystem, but Indian firms can service Chinese multinationals’ global operations. This would extend Indian capabilities without stirring sovereignty concerns.
Enduring Frictions
Borders and Sovereignty remain the hardest obstacle. Without robust patrolling protocols and agreed buffers, another incident could unravel progress overnight.
Pakistan and Regional Security: Beijing’s close defence ties with Islamabad, and the China–Pakistan Economic Corridor crossing disputed territory, are permanent wedges.
Technology and Data: New Delhi’s exclusion of Huawei and ZTE from 5G, and its growing scrutiny of Chinese‑made equipment, reflects a deep strategic mistrust.
Defence Industry: Collaboration is off the table. The best that can be achieved is transparency and mechanisms to prevent accidental escalation.
External Pressures
The United States looms large. Tariffs, sanctions and technology controls make any India–China rapprochement more complicated. Washington’s restrictions on semiconductors and AI tools already constrain Indian firms. Were similar controls extended to battery minerals or grid equipment, India’s energy transition would feel the pinch. Put simply, the U.S. remains the biggest spoiler – even indirectly – to an India–China reset.
Leadership Calculus
The days of the ‘Wuhan Spirit’ and ‘Chennai Connect’ are long past. Prime Minister Modi and President Xi had little personal chemistry left after 2020. The conclusion of geopolitical watchers is that the past weekend’s meeting could be a potential turning point. This weekend’s tentative reset is less about grand gestures and more about measured institutional repair. That may actually be more durable. The early feedback from both sides was that the meeting between the two leaders is a positive step forward.
If we were to summarise the read out from the direct meeting between Modi and Xi Jinping it was that –
Looking Ahead
G20 Trade and Investment Working Group (October 2025): A chance to test softer trade language.
BRICS+ Summit (late 2025, Kazan): A platform where both can align without the glare of bilateral talks.
COP30 in Brazil (November 2025): Clean‑energy pledges could be an area for joint announcements.
India’s Budget (February 2026): Domestic tariff and FDI measures will signal how open New Delhi is to outside capital, Chinese included.
The Role of Others
Third countries can provide ballast. The UAE and Singapore offer trusted platforms for joint ventures in logistics and finance. Russia retains influence with both capitals and has historically encouraged stability. ASEAN states could host trilateral initiatives in trade facilitation. Europe, meanwhile, has a vested interest in lowering global clean‑tech costs and may quietly encourage selective India–China cooperation.
A Cultural Reminder
Despite the geopolitical rancour, history shows that India and China have periodically found ways to work together. Buddhism spread from India to China, leaving a profound cultural legacy. The Silk Road fostered trade for centuries without political union. Even in the 20th century, the Bandung Conference (1955) and the brief ‘Hindi‑Chini Bhai Bhai’ spirit showed that cooperation is not alien – only fragile.
Perspective
India and China will not sign a grand bargain, but they can make pragmatic deals. Stabilising the border, securing supply chains for the energy transition, and expanding uncontentious trade (food, raw materials, pharmaceuticals) could all form the basis of managed interdependence. The risk of relapse is ever‑present – especially with U.S. policy shocks – but history and culture provide a reminder that cooperation, though episodic, has always been part of the relationship.
Gary Dugan – Investment Committee Member
2nd September 2025
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