What does the Pangong Lake disengagement mean for India-China trade and ties?

After the first fatal violence on their disputed borders in four decades in June 2020, India and China finally appear to be pulling back from the brink. Almost nine months after the standoff began in Eastern Ladakh, both countries last week announced an agreement for their soldiers to disengage on either side of the Pangong Lake, where the first clashes occurred in May.

But the limited efforts towards lowering tensions came with a Chinese media blitz that sought to depict India as the aggressor, anonymous reports that New Delhi might offer some economic concessions to Beijing – and constant reminders that the disengagement is only partial and could be reversed very quickly.

Consider each of these elements in turn.

Disengagement in Ladakh

Defence Minister Rajnath Singh on February 11 addressed the Rajya Sabha, announcing the decision to step back from the brink.

“The agreement that we have been able to reach with the Chinese side for disengagement in the Pangong lake area envisages that both sides will cease their forward deployments in a phased, coordinated and verified manner. The Chinese side will keep its troop presence in the North Bank area to east of Finger 8. Reciprocally, the Indian troops will be based at their permanent base at Dhan Singh Thapa Post near Finger 3.

A similar action would be taken in the South Bank area by both sides. These are mutual and reciprocal steps and any structures that had been built by both sides since April 2020 in both North and South Bank area will be removed and the landforms will be restored.”

As per the agreement, India and China will create what is effectively a no-man’s land between Finger 4 and Finger 8 on the North Bank of the lake. This does not amount to a return to the status quo before April 2020, since Indian troops used to patrol up to Finger 8 previously. But it does mean Beijing agreed to vacate territory that it had occupied for much of the last nine months, including dismantling constructions in the area.

Nitin Gokhale writes that this agreement appears to be the result of Indian perseverance in talks, as well as the bargaining chips it gained by occupying the heights on the South Bank of the lake in August.

“Multiple stakeholders involved in the negotiations reveal the constant battle of nerves that was fought across the table during nine rounds of negotiations with the Chinese, initially by the 14 Corps Commander and his team and in later months in association with the joint secretary handling China in the Ministry of External Affairs.

The result: A rare written document about the disengagement process detailing sequential steps, distance and place to which heavy armour and weapons platforms would be withdrawn in phases, also how and when negotiations over the remaining friction points in Ladakh would take place.”

Soon after, Lt Gen YK Joshi, the General Officer Commanding-in-Chief of the Indian Army’s Northern Command spoke to two media outlets about the operations in August 2020 that gave New Delhi leverage, offering a rare official acknowledgment of developments that are usually off-record.

“The Kailash Range was occupied with a purpose. The Chinese surprised us initially by occupying parts of our areas – till Finger 4 of the North Bank – and the negotiations were going nowhere. We had five flag meetings at the Corps Commander level and we were not succeeding in any manner. Then, I got instructions from my chief that we need to gain some leverage...

On August 29-30, we launched this operation and occupied the entire dominating heights of Rezang La, Rechin La on the South Bank, on the North Bank as well, where we were dominating the entire PLA deployment. This was done to gain some success on the negotiating table...

This disengagement is happening because we had taken the dominating position on the Kailash Range.”

Chinese narrative about disengagement

Indian officials weren’t the only one attempting to build a narrative to coincide with the disengagement announcement. In China, news of the decision to pull back was accompanied by an official acknowledgment of the deaths of four soldiers in the June 15, 2020 Galwan valley clash – when 20 Indian soldiers also died.

Alongside this, Beijing also led a concerted propaganda effort to convey the idea that India had been the aggressor, despite accounts that Indian soldiers were simply attempting to evict Chinese soldiers who were on territory that New Delhi considers its own.

The propaganda, according to Ananth Krishnan, has done its job within China:

“The announcement [of the deaths of four Chinese soldiers], coupled with the Galwan footage, has led to an outpouring of sentiment online - on a scale I’ve never seen when it comes to India possibly ever, and something usually only reserved for Japan...

The nationalism tap has been unleashed. Why now? ... The government in China possibly felt doing so in the midst of the crisis would have cramped its wiggle-room to find a face-saving exit.

The outpouring of sentiment and pride about the soldiers has also been the focus, more than what may have been awkward questions on where the PLA withdrew from.

I should also say here that it’s not just pride - sadly there’s tons of hate and abuse on weibo targeting India at the moment. Scrolling through any India topic now means looking at a flood of racist abuse...

The most liked response at the moment to the Indian Embassy’s post on the joint statement put out on the Corps Commander talks this weekend says: “You are not worthy to talk to us…. barbarians only worthy of being killed”.” 

The side-note to this Chinese propaganda is that it comes amid some amount of questioning on social media in the country about the developments in Ladakh, with at least 7 people detained for “defaming martyrs” and authorities attempting to clamp down on debates about whether the disengagement reflected badly on Beijing.

Economic disengagement?

Alongside the moves India’s military took last year in response to the Chinese agression, there were also a number of efforts made by the government to reduce the country’s economic dependence and connections with its belligerent northern neighbour.

These included passing new rules restricting investments coming from China, banning a number of apps including TikTok that were Chinese in origin and institution production-linked incentive schemes that sought to build out supply chains and reduce reliance on imports.

Some of these have been successful, with the government explanding its production-linked incentive schemes in the 2021 Budget to include more sectors and products. Yet India’s economic dependence on China could not be unwound quite so easily.

Provisional data from the Ministry of Commerce and Industry revealed that, despite the border tensions, China was India’s top trading partner in 2020.

“Electrical machinery and equipment, at $17.82 billion, and nuclear reactors, boilers, machinery and mechanical appliances, at $12.35 billion, continued to top the goods imported from China in 2020 — a sign of continued dependence as India works towards self-reliance in critical sectors...

Meanwhile, Indian iron and steel saw a 319.14 percent jump in exports to China, with shipments touching $2.38 billion during January to December 2020. Iron and steel exports to China in 2019 were around $567 million.”

Reports also emerged that the government was planning to relax some of the restrictions it had put on Chinese investments. Reuters reported that India is poised to clear 45 investment proposals from China in the coming weeks, a claim the government subsequently denied.

The Business Standard also reported that the government is considering allowing Chinese companies to invest using the “automatic route” – meaning without any need for clearances – of up to 25% of Indian firms in non-sensitive sectors like manufacturing and automobiles.

What happens next?

These hints at relaxation of restrictions come even as disengagement has only taken place at some of the flashpoints in the stand-off, even as other locations – Hot Springs, Demchok and Depsang – remain unresolved. And even at Pangong Lake, where both sides have followed through on their agrseements, the nature of the disengagement and subsequent processes will have to be carefully monitored.

According to the Deccan Herald, the Indian government had been hoping to resolve the military standoff ahead of the BRICS summit – which brings together Brazil, Russia, India, China and South Africa – slated for sometime this year, since India is set to host. On February 23, in fact, a Chinese foreign ministry spokesperson said Beijing supports New Delhi’s plans for the 2021 BRICS summit, though it was unclear if President Xi Jinping is committing to an India visit.

A phone call between the external affairs ministers of both countries on February 26 led to an agreement to set up a hotline between their ministries, in addition to the usual language about full disengagement that can allow for further de-escalation.

Even as those discussions happen, however, Indian public figures are still being very firm in their treatment of China, suggesting that the ‘informal summits’ and ‘Wuhan spirit’ will not be coming back anytime soon.

“China has been in the habit of creeping forward, making small incremental changes,” Army chief General MM Naravane said in a webinar. “Because of these small incremental moves, which has never been contested, it has been able to achieve its aim without firing a shot or suffering casualties. We have shown that this strategy will not work with us and every move will be met resolutely.”