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China and India desperately want to improve their trade relationship. But it seems whenever the countries’ leaders meet, the Himalayas get in the way.

When Chinese President Xi Jinping and Indian Prime Minister Narendra Modi met in the Chinese city of Wuhan in 2018, it came after a tense, months-long military standoff over Doklam, a disputed region in the “trijunction” between India, China and Bhutan, high in the Himalayas. That standoff at times appeared poised to spill over to outright conflict, a repeat of the brief border war the two countries fought in 1962.

As Xi lands in the coastal city of Chennai Friday for a two-day visit to India, it’s the Kashmir Valley at the northwestern tip of the mountain range that’s poised to spoil efforts to improve Sino-Indian ties.

At least this time, Beijing isn’t directly involved in the conflict. While it claims parts of eastern Kashmir as its territory, tensions were recently raised when New Delhi scrapped the special status of the Indian state of Jammu and Kashmir, ending its autonomy and setting the stage for mass Hindu migration to the Muslim-majority area.

Both India and rival Pakistan claim sovereignty over all of Kashmir, and Islamabad swiftly declared the move – which was followed by a major crackdown by Indian security services – as illegal.

Beijing is a longtime ally of Islamabad, and New Delhi is keen to keep China out of the dispute. According to the Hindustan Times, Indian officials said the recent change in status for Jammu and Kashmir “won’t be up for discussion” when Xi and Modi meet this week, with talks expected to focus on trade issues.

On Wednesday, however, Pakistan Prime Minister Imran Khan threw a spanner into the works with a visit to Beijing, where he met with Xi in an apparent attempt to shore up support ahead of the Modi summit. Following talks, Xi said that “China supports Pakistan to safeguard its own legitimate rights and hopes that the relevant parties can solve their disputes through peaceful dialogue.”

In response, Indian foreign affairs spokesman Raveesh Kumar said New Delhi’s position “has been consistent and clear that Jammu & Kashmir is an integral part of India. China is well aware of our position. It is not for other countries to comment on the internal affairs of India.”

A traffic policeman stands beside a welcoming board for China's President Xi Jinping in Chennai on October 9, 2019, ahead of a summit with his Indian counterpart Narendra Modi held at the World Heritage Site of Mahabalipuram from October 11 to 13 in Tamil Nadu state.
ARUN SANKAR/AFP/AFP via Getty Images
A traffic policeman stands beside a welcoming board for China's President Xi Jinping in Chennai on October 9, 2019, ahead of a summit with his Indian counterpart Narendra Modi held at the World Heritage Site of Mahabalipuram from October 11 to 13 in Tamil Nadu state.

China has close economic, diplomatic and military ties with Pakistan, making it one of the nation’s closest allies in the region. Between 2008 and 2017, Islamabad purchased more than $6 billion of Chinese arms, according to think tank CSIS. China has also invested billions in the China-Pakistan Economic Corridor, an integral part of Xi’s Belt and Road Initiative (BRI) trade and infrastructure mega-project.

Trading partners

India’s economy, however, dwarfs that of its neighbor – and the country’s importance to China has only grown as the trade war between Beijing and Washington has continued. Pakistan may be an “all-weather ally,” but it is Indian consumers who can help pull China out of the economic doldrums.

“The common interests of China and India far outweigh their differences,” state-run newspaper China Daily said in an editorial ahead of Modi and Xi’s 2018 meeting. Since that summit, China’s vice foreign minister and former ambassador to India, Luo Zhaohui, said this week that “relations have entered a new stage of steady growth, with cooperation and exchanges being carried out in various fields and differences being properly managed.”

India and China together account for 17.6% of the global economy. But although China is India’s largest trading partner, their estimated $84 billion bilateral trade in 2017/18 was a mere fraction of the US-China trade volume, which stood at almost $600 billion.

Foreign direct investment into India has risen from less than $25 billion in 2014 – before Modi took power – to about $45 billion in the last fiscal year, and China is seeking to be a major player in the growing Indian market.

One big success story has been the smartphone industry, which has helped drive a boom in India’s digital economy. China’s Xiaomi has tripled the number of smartphone plants it has in India in recent years, and is now on its way to taking top spot in the country’s market. Beijing will also be hoping that India could be a big market for telecoms giant Huawei, which is facing increasing pressure and restrictions from the US and its allies.

Difficult relationship

As well as potential political problems caused by its relationship with Pakistan, China has a number of long-running disputes with India, both diplomatic and territorial.

They include New Delhi’s sheltering of the Dalai Lama, the exiled Tibetan spiritual leader whom Beijing considers a separatist traitor.

Economic and strategic competition between China, a Communist-ruled one-party state, and India – the world’s largest democracy – has also intensified in the past few years as Beijing started to expand its influence in India’s traditional backyard, especially through Xi’s ambitious BRI global trade plan.

Recent moves arousing suspicion in India include China taking control of a major port in Sri Lanka and signing groundbreaking trade deals with Nepal, and its navy conducting anti-piracy operations in the western Indian Ocean.

And while the Doklam issue appears to be on the back burner, it is one of multiple territorial disputes between New Delhi and Beijing. India held major military exercises in Arunachal Pradesh this month, parts of which China considers to be in South Tibet.

According to the Hindustan Times, Luo – the Chinese vice foreign minister – dismissed questions about the exercises this week, saying the claim that they took place in disputed territory “is not true.”

“Second, the region you mentioned is a sensitive region and we don’t want to hear that reference,” Luo added.

His comments are perhaps indicative of China’s overall strategy when it comes to its Himalayan issues – downplay and ignore them in favor of boosting trade.

CNN’s Ben Westcott and Steven Jiang contributed reporting.