New Delhi and Beijing’s Realignment?

12 January 2025 - Written by Adina Jung

Introduction

We currently live in what is described as an "American unipolar world," where US liberalism dominates global affairs. However, China’s rapid rise presents a realistic potential to shift the global order. This shift reflects the gradual erosion of US liberal hegemony as China emerges as both an economic and political powerhouse. By leveraging tools such as international organisations, trade, and strategic partnerships, China seeks to engage with the world on an equal footing. This report examines how China aims to build and utilise strategic partnerships to assert its influence and challenge US dominance, with a focus on the Sino-Indian relationship as a case study to illustrate these strategies.

Contextual Analysis

Historically, China has adhered to a strategy of "peaceful development,” often summarised as "keeping a low profile and biding time." Leaders like Deng Xiaoping and Hu Jintao embodied this approach through principles of "observing calmly, securing position, and achieving a 'harmonious society.’” For many years, China followed this strategy, recognising that direct competition with post-Cold War America, with its unparalleled dominance, would be too costly. In response, China cooperated with the US, fitting into a global structure where the US was the singular superpower amongst other powers.

In recent years, however, China’s approach has become more assertive. Xi Jinping’s doctrine of "peaceful rise 2.0" marks a departure from the earlier, more passive strategy. It emphasises safeguarding China’s national interests, demanding reciprocity from other nations for peaceful coexistence, and adopting a pragmatic stance to shape a stable external environment that aligns with China’s development goals. Overall, China’s growing prominence in international affairs has made its earlier strategy of laying low increasingly untenable. Instead, China now aims to create a security sphere around its borders and across Asia, which is perceived by the US as a direct challenge to its regional and global interests.

China’s ability to shape its external environment is significantly facilitated by its engagement with international organisations, economic partnerships, and increasingly through its military partnerships. While the US often prioritises its allies within global institutions, many Global South states find themselves excluded. China’s initiatives provide these nations with alternatives, positioning Beijing as a leader of the Global South. For example, the Asian Infrastructure Investment Bank (AIIB) serves as a counterpart to the US-dominated World Bank, offering loans with less stringent conditions that developing states can more easily access . As a self-declared "developing country” itself, China resonates with nations overlooked by the US, presenting itself as a partner rather than a hegemon. This strategic alignment allows Beijing to expand its influence in regions where US dominance has faltered.

Sino-Indian Relations

In 1951, Mao Zedong described the relationship between India and China as historically characterised by friendship and collaboration. However, in modern times, such a characterisation would only be partially accurate. Their relationship has been increasingly strained, plagued by insecurities stemming from India’s involvement in the Quadrilateral Security Dialogue (Quad) and its closer ties with the US, as well as escalating tensions at the contested Himalayan border that both India and China share. In 2020, these tensions culminated in a deadly standoff at the disputed Ladakh border region, marking the bloodiest confrontation between the two states since the 1962 war. And so, what were once ‘flowering relations’ have significantly deteriorated. However, despite such recent strained relations, shifting geopolitical dynamics has prompted both nations to pursue a tactical thaw in their relationship, seemingly to counterbalance American influence. In October 2024, China and India reached a border agreement that de-escalated tensions at their previously contested Himalayan border, paving the way for a meeting between Xi Jinping and Narendra Modi. This agreement signals both countries' commitment to strengthening bilateral relations, especially as US-India ties deteriorate.

Why would India consider aligning with China?

India has historically been viewed as a ‘neutral state,’ famously being a core post-colonial state in the non-aligned movement (NAM) and as recently as May 2020 Modi participating in the NAM summit. While the US regards India as a potential counterweight to China’s rise and influence, it also acknowledges that India maintains a degree of strategic autonomy in its foreign policy, refusing to align too closely with any single power. Such strategic autonomy is reflected in its engagement with all major poles of international relations. For instance, whilst India is an active member of the Quad—an alliance aimed at strengthening security cooperation with the US and other US-allied states—it also maintains strong ties with Russia, serving as its second-largest supplier of technology for the war in Ukraine, behind only China. Similarly, India’s neutral stance is evident in its participation in the AIIB, a Chinese-led counterpart to the World Bank, where India is the second-largest investor and the largest borrower. As is India’s central role in the BRICS organisation. This balanced approach illustrates that India has never been explicitly US-centric or entirely aligned with the liberal status quo established by the US, nor has it fully embraced a ‘revisionist’ stance seeking to overturn the existing order as China is doing. Instead, India’s foreign policy is driven by pragmatism and self-interest, allowing it to navigate the complexities of great power dynamics effectively. Therefore, India’s optimal scenario appears to be maintaining an interest-driven balancing act between the US and China. This approach allows India to maximise strategic benefits while avoiding over commitment to either side. One possible reason for India’s recent efforts to ease border tensions with China may lie in shifting economic and business dynamics that signal potential changes in US-India relations, incentivising India to reconsider its ties with China. In November 2024, federal prosecutors in Brooklyn charged Gautam Adani, the head of India’s largest conglomerate and one of its wealthiest individuals with fraud, conspiracy, and corruption. This represents a significant setback for India, as the Adani Group has been a key player in the renewable energy sector, particularly in advancing solar energy initiatives. Adani’s close ties with Indian Prime Minister Narendra Modi, dating back to the early 2000s, have been well-documented, with the two often appearing together publicly and the Adani group securing numerous government contracts. The charges against Adani, coupled with his longstanding association with Modi, raise questions about whether this legal action could represent a subtle form of pressure or an indirect challenge from the US toward India’s leadership. Such developments may influence India’s economic and diplomatic strategies moving forward, particularly in its balancing act between the US and China.

What does Washington think?

India’s somewhat neutral stance holds strategic importance not only for revisionist groups but also for the US as the world’s unilateral leader. Strengthening ties with the US, however, is not necessarily an unequivocally positive development for India. Trump, as a volatile leader, is expected to adopt a US-centric approach. Tensions with India, which have already started in the economic sphere with Adani, are now escalating with Trump issuing warnings to the state. Trump has consistently expressed frustration over what he perceives as India’s unfair trade practices, particularly its high tariffs on US goods. In his first term in office, he withdrew India’s preferential trade treatment under the Generalized System of Preferences (GSP), a move that significantly impacted Indian exports. Now, with his warnings of imposing reciprocal tariffs in response to what he considers India’s ‘tariff abuse’ , Trump appears ready to escalate economic pressure on India further during his second term. These developments highlight growing friction between the two countries. Overall, Trump’s unpredictable leadership style and his focus on pursuing America-centric policies may push India to seek alternative economic partnerships, including closer ties with China. If tensions with Washington continue to rise, India might prioritise balancing its foreign policy to maintain strategic autonomy, further complicating its relationship with the US.

Opportunities & Risks

To retain New Delhi as a partner, Beijing should prioritise resolving the longstanding border disputes that have strained Sino-Indian relations, and avoid actions that could be perceived as threats to each India’s sovereignty or regional influence, such as military manoeuvres near contested borders or aggressive involvement in South Asian countries. For its part, India must ensure it does not become overly dependent on China, maintaining its strategic autonomy. To do so, New Delhi should balance its relationship with Beijing while preserving strong ties with the US and other key partners. By pursuing a multilateral approach and diversifying its international engagements, India can mitigate the risks of over-reliance on any single power.

In light of a potential Sino-Indian realignment due to New Delhi feelings it has not greatly benefitted from its recent partnerships with with Washington and partly spurred by Trump’s protectionist policies targeting Indian imports, the US would benefit from recalibrating its strategy. Offering more favourable trade agreements and reinstating India’s GSP status could help solidify US-India ties, ensuring that India does not lean too heavily towards Beijing, particularly if China introduces more attractive economic and trade initiatives. To foster deeper cooperation, the US should respect India’s strategic autonomy and avoid coercive measures, such as economic sanctions, which could undermine trust and push New Delhi further toward Beijing.

Conclusion

In conclusion, this paper has explored how China is strategically building economic partnerships, particularly with India, to challenge U.S. dominance. Through active engagement with international organizations like the AIIB and expanding its influence in the Global South, China offers an alternative to US-led structures. The Sino-Indian case study demonstrates how shifting geopolitical dynamics, especially US political developments, have driven both countries to seek rapprochement as a counterbalance to American influence. As China continues to grow its strategic footprint, this partnership highlights its ability to shape its external environment and challenge the prevailing unipolar order. However, this realignment also underscores the fragility of global power structures, suggesting that future Sino-Indian relations will be shaped not only by mutual interests but also by the ongoing competition between China and the United States. This evolving dynamic could have far-reaching implications for global stability and the balance of power in the Indo-Pacific region.