China and India to Reach "Final Settlement" Over Border Disputes

Chinese Foreign Minister Wang Yi has said that China is prepared to reach a final settlement with India on the issue of border disputes and investment if India is open to increasing bilateral trade and relaxing foreign direct investment regulations.

“Through years of negotiation, we have come to an agreement on the basics of a boundary agreement, and we are prepared to reach a final settlement,” Wang said.

China and India have a long history of border disputes, and briefly clashed in a 1962 border conflict. India currently accuses China of occupying 38,000 square kilometers of its territory in Jammu and Kashmir while Beijing claims roughly 90,000 square kilometers of land in Arunachal Pradesh.

As China seeks to consolidate its economic ties with India, the resolution of outstanding border disputes is a key step towards ensuring the establishment of an amicable long-term trading relationship.

“China’s middle class is set to boom, from about 250 million today to 600 million by 2020. The reality is that China must now ensure that its enormous middle class and graying population will be able to enjoy the benefits of cheap and easily available products. The only country that has the workforce able to cheaply deliver on the huge scale required is India. Therefore, getting India up to speed and producing mass-quantity, reasonable-quality consumer products is an absolute must for the Communist Party. Investing in India’s ability to provide China with cheap goods, while simultaneously pushing China’s own manufacturing up a few notches toward more innovative and hi-tech products, would be a win-win for both parties,” commented Chris Devonshire-Ellis of Dezan Shira & Associates.

Other key issues discussed included Chinese investment in Indian infrastructure, including high-speed rail networks, India’s manufacturing sector and more investor-friendly rules and regulations.

“China-India cooperation is like a massive buried treasure waiting to be discovered,” Wang said. “The potential is massive. We regard each other as a priority and each other’s development as an opportunity.”

Modi’s new government appears eager to rise to the challenge and demonstrate to China it is serious about consolidating the two countries’ economic ties, with Environmental Minister Prakash Javadekar fast-tracking new road projects along the India-China border that could lay the foundation for cross-border trade.

According to Prime Minister Modi’s office, Modi accepted an invitation from Chinese Premier Li Keqiang to visit Beijing in the coming months and continue progress towards the consolidation of India and China’s trade relationship. Modi and Chinese President Xi Jinping are also expected to meet informally on the sidelines of a summit held at the UN General Assembly in September.

This article was first published on Asia Briefing.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam, in addition to alliances in Indonesia, Malaysia, Philippines and Thailand, as well as liaison offices in Italy and the United States.
 
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