China-India Border Brawl Sparks Crisis, Threatening Economic Breakup

India and China Review Business... Huawei and ZTE Excluded from Communication Network Construction Project

[Image source=AP Yonhap News]

[Asia Economy Beijing=Special Correspondent Sunmi Park] The military clash in the border dispute area between China and India is leading to economic and diplomatic strategic changes between the two countries. There are even pessimistic forecasts that the two Asian growth powerhouses, China and India, will economically sever ties.

According to major foreign media on the 19th, in India, a thorough review of business with China has been underway since the military clash in the Galwan Valley, Ladakh, on the night of the 15th. India plans to soon cancel public project contracts pursued with Chinese companies, and the Indian state-owned telecom company BSNL is under strong pressure to find alternatives to Chinese companies such as Huawei and ZTE for its network construction projects.

India is also reportedly considering excluding Chinese companies from government procurement. Additionally, Indian intelligence authorities have requested the government to ban or restrict the use of 52 Chinese-related mobile apps, including Zoom and TikTok, citing security reasons.

Within India, there is a growing diagnosis that this military clash will serve as a turning point to distance economically close China and strategically align more closely with the United States. A senior Indian government official said, "India will steadily show moves to reduce economic relations with China," adding, "Instead of moving away from China, India will attempt to strengthen strategic ties with the U.S."

He explained, "Until now, India provided significant economic stakes to China with the expectation that strengthening business relations would enhance mutual understanding between the two countries. However, this incident revealed that such expectations were completely ineffective. The clash was brutal, and it would be foolish to expect no economic repercussions." Former Indian Foreign Minister Nirupama Rao also said, "(This clash is) a turning point in bilateral relations," adding, "Because much blood was shed in the Galwan Valley clash, economic relations between the two countries cannot return to what they were."

However, since the economic chains between the two countries are already intricately intertwined, a complete severance is not easy.

Although China and India have frequently clashed over border disputes, their economic ties have been close. Chinese conglomerates such as Alibaba, Tencent, and Huawei have already established a solid presence in India’s rapidly growing market. In the fourth quarter of last year alone, $1.4 billion of Chinese venture capital flowed into Indian startups, demonstrating strong cooperation in the advanced IT sector between the two countries.

A representative example showing that a split is not easy is the Asia Infrastructure Investment Bank (AIIB), led by China, approving a $750 million loan to India on the 17th for COVID-19 response, after the military clash. The Chinese state-run media Global Times reported that India ranks among the top recipients of AIIB loans for COVID-19 response, alongside Indonesia, the Philippines, and Pakistan, which received between $500 million and $750 million. It explained, "Internally, AIIB is making it clear through this loan approval to India that the economic relationship between the two countries will not be affected by the border skirmish."

Some analysts suggest that China’s failure to disclose specific casualty figures, despite India announcing the deaths of 20 of its soldiers in the border skirmish, reflects a perception that deteriorating relations with India would not be beneficial to China’s economy. Wang Dehua, a South Asia expert at the Shanghai Institute of International Studies, said, "China wants to control the situation rather than escalate the conflict. Conflict between the two giants only harms both."

Meanwhile, the closed-door talks between U.S. Secretary of State Mike Pompeo and Yang Jiechi, the Chinese Communist Party’s Politburo member in charge of foreign affairs, held over two days from the 16th to 17th in Hawaii, are expected to be a decisive variable in resetting relations not only between the U.S. and China but also between China and India.

This content was produced with the assistance of AI translation services.