Prime Minister Narendra Modi and Chinese President Xi Jinping are set to meet on the sidelines of the BRICS Summit in New Delhi, marking a significant moment in India-China relations after years of heightened tensions. Xi’s visit is his first to India in seven years and comes as both countries attempt to cautiously rebuild bilateral engagement following the military confrontation in eastern Ladakh in 2020.

The meeting is expected to provide an opportunity for the two leaders to assess the progress made since the border crisis and discuss the challenges that continue to affect political, security and economic relations between the two Asian powers.

Although India and China have taken several steps towards normalising ties, the relationship remains sensitive. The situation along the Line of Actual Control (LAC), unresolved territorial differences and a continuing trust deficit remain major obstacles to a complete reset.

From Ladakh crisis to cautious normalisation

India-China relations suffered a major setback after the 2020 military confrontation in eastern Ladakh. The prolonged deployment of troops along the disputed border created serious concerns about the stability of bilateral relations and led to a sharp reduction in political and economic engagement.

A significant change came in October 2024, when India and China reached an understanding aimed at ending the prolonged military standoff in Ladakh. Modi and Xi subsequently met in Russia and agreed to work towards improving relations while continuing discussions on the boundary question.

Since then, both sides have gradually restored several forms of engagement that had been disrupted during the period of heightened tensions.

Direct air connectivity has resumed, while the Kailash Mansarovar Yatra has also been revived. Traditional border trade through designated routes has restarted, and India has eased certain visa procedures for Chinese citizens.

These developments indicate that both governments are willing to move beyond the immediate fallout of the Ladakh crisis. However, the restoration of normal diplomatic and people-to-people ties has not eliminated deeper strategic disagreements.

Border peace remains central to bilateral relations

For India, the condition of the border continues to be the most important indicator of the health of the broader relationship with China.

Indian officials have repeatedly emphasised that peace and stability along the border are necessary for progress in other areas. National Security Adviser Ajit Doval recently linked the improvement in bilateral relations to the maintenance of peace and tranquillity in border areas.

China has also called for stronger communication and greater mutual confidence between the two countries. Beijing has stressed the importance of managing differences through dialogue and preventing disagreements from escalating into wider confrontation.

However, the situation along the LAC remains a major source of uncertainty.

Reports of fresh tensions involving Indian and Chinese troops emerged from the Taksing area of Arunachal Pradesh’s Upper Subansiri district in July. While India did not publicly disclose extensive details about the reported incident, China later described the overall border situation as stable.

Both countries have continued using diplomatic and military channels to prevent misunderstandings and miscalculations. A corps commander-level meeting was also held at the Wacha-Damai border meeting point in Arunachal Pradesh’s Kibithoo sector on September 7, representing another attempt to maintain communication in the eastern sector.

Arunachal Pradesh remains a sensitive issue

Beyond Ladakh, Arunachal Pradesh continues to be one of the most politically sensitive aspects of the India-China boundary dispute.

India maintains that Arunachal Pradesh is an integral and inseparable part of the country. China, however, continues to make claims over parts of the region and has objected to India’s moves concerning the naming of locations there.

The disagreement over the state highlights why the current improvement in relations should not be interpreted as a complete settlement of the border dispute.

For New Delhi, maintaining peace along the LAC is closely connected to broader diplomatic engagement with Beijing. Any significant deterioration in the border situation could therefore have consequences for the progress achieved in other areas.

Economic relations remain behind the diplomatic thaw

While political contacts between India and China have begun to improve, economic relations have not recovered at the same pace.

Businesses in both countries continue to face challenges related to investment approvals, visas, industrial equipment and supply chains. India has gradually relaxed some restrictions on Chinese investment, particularly in sectors such as electronics, capital goods and solar manufacturing.

Some Chinese-linked projects have subsequently received approvals, including a manufacturing partnership involving Indian electronics manufacturer Dixon Technologies and Chinese smartphone company Vivo.

However, several major Chinese investment plans remain stalled or have not returned to the Indian market. Companies such as BYD and Great Wall Motor had previously considered significant investments in India but faced increased scrutiny following the deterioration in bilateral relations.

Restrictions and delays affecting Chinese equipment and components have also created difficulties for sectors that depend on imported technology and manufacturing inputs.

This demonstrates the complexity of the relationship. India and China may seek greater political stability, but economic cooperation remains influenced by concerns over national security, strategic dependence and supply-chain resilience.

Trust deficit remains a major challenge

The biggest obstacle to a complete improvement in India-China relations may be the lack of mutual trust.

The border confrontation fundamentally changed India’s assessment of its relationship with China. While diplomatic engagement has resumed, New Delhi remains cautious about restoring relations to the level that existed before 2020.

For China, rebuilding communication with India is also strategically important as Beijing navigates an increasingly complicated international environment and seeks stronger cooperation among emerging economies.

The economic relationship presents an additional opportunity. Both countries have significant markets, manufacturing capabilities and trade interests. Greater stability could potentially benefit businesses and reduce disruptions in supply chains.

At the same time, India is unlikely to separate economic engagement from security considerations. New Delhi’s approach increasingly reflects the view that stronger commercial ties must be accompanied by confidence and stability along the border.

What the Modi-Xi meeting could mean

The Modi-Xi meeting at the BRICS Summit is therefore important not simply because it brings the two leaders together, but because it could help determine the next phase of India-China relations.

The immediate objective is unlikely to be a dramatic breakthrough on the boundary dispute. Instead, the focus is expected to be on maintaining peace, strengthening communication and consolidating the limited progress achieved since 2024.

A successful meeting could provide political momentum for further engagement between officials from both countries. It could also encourage progress in areas such as travel, trade, investment and diplomatic exchanges.

However, the durability of the thaw will ultimately depend on developments along the border.

For India, diplomatic normalisation cannot be separated from border security. For China, maintaining stable relations with India could help reduce tensions with a major regional power and strengthen cooperation within multilateral groupings such as BRICS.

A relationship moving from confrontation to cautious engagement

India-China relations today are best described as a cautious thaw rather than a full reset.

The two countries have moved away from the most intense phase of the Ladakh crisis and have restored several channels of communication. Yet the unresolved boundary dispute, tensions in Arunachal Pradesh, economic restrictions and the legacy of the 2020 confrontation continue to limit the depth of the relationship.

The Modi-Xi meeting could help consolidate the progress made so far, but a lasting improvement will require sustained efforts from both sides.

For India, the central test will remain whether peace along the border can be maintained. For China, rebuilding confidence will require addressing the concerns that have emerged since the Ladakh crisis.

The meeting in New Delhi therefore carries significance beyond the BRICS Summit itself. It could become another step towards stabilising one of Asia’s most consequential bilateral relationships, while also demonstrating how far India and China are prepared to go in managing their differences without allowing them to derail broader cooperation.