China and India to restart border trade and direct flights

Recently, there have been important signs of détente in China-India relations, with the two sides reaching a number of consensus through high-level visits, among which the resumption of border trade and direct flights is seen as a key initiative to break the stalemate. This breakthrough not only reflects the political wisdom of the two countries to manage their differences, but also reflects India's strategic adjustment in the complex international environment.

I. Core elements of a breakthrough agreement

During Foreign Minister Wang Yi's visit to India in August, China and India signed a 10-point consensus, with core outcomes including:

1. Border trade fully restartedThe three traditional border markets of Rinchenggang-Changu, Poulan-Gongji, and Juba-Nanga have been opened. These markets have historically borne the cross-border circulation of wool, spices, handicrafts and other specialty commodities. The import and export volume of Rinchingang Border Crossing reached 73.56 million yuan in 2019, and the annual transaction volume of Pulan Border Crossing exceeded 66 million yuan. After the restart, it will directly drive the pastoralists in the border areas of southern Tibet and Ali to increase their income, which is expected to increase the per capita annual income of local border people by more than 3,000 yuan.

2. Resumption of direct flights and visa facilitation: The two sides agreed to resume direct flights between India and China as soon as possible, revise the civil aviation transportation agreement and provide visa facilities for people in the fields of business, tourism and media. This will end the five-year hiatus in direct flights since 2020 and significantly reduce the cost of travel between the two countries.

3. Upgrading of border control mechanismsIn addition to the existing general-level talks in the Western Sector, a regularized dialogue mechanism has been set up for the first time in the Eastern Sector and the Central Sector, forming a control system covering the entire 3,500-kilometre borderline. At the same time, an expert group on border demarcation was set up to explore the possibility of advancing border negotiations in areas where conditions are ripe, and this is the first time in 60 years that a roadmap for border demarcation has been clearly defined.

II. The strategic game of multiple drivers

1. U.S. Tariff Pressure Reversal: The Trump administration, citing India's purchase of Russian oil, has imposed 50% tariffs on India in August 2025, covering key export sectors such as steel and pharmaceuticals. India has been forced to diversify its markets, with China, its largest trading partner ($136.2bn bilateral trade in 2024), as the preferred partner. With the re-launch of border trade, India can cushion the tariff impact through re-exports, while gaining access to strategic resources such as Chinese rare earths.

2. Changes in the geopolitical environment: As the US strategic focus in South Asia shifts towards Pakistan, India faces the risk of marginalization in the Quad mechanism. By reaching a compromise with China on the border issue, India can avoid pressure on two fronts and at the same time enhance its voice in the SCO and other platforms. Modi's announcement that he will attend the SCO summit in Tianjin in September marks a significant shift in India's approach to regional cooperation.

3. Driven by economic complementaritiesThe new energy and traditional Chinese medicines in Tibet and the wool and herbs in northern India are natural complementarities. The Phulan border crossing has already formed the model of mutual market between Chinese, Nepalese and Indian borders, with the annual turnover accounting for 48% of the total border trade between China and India. after the resumption of direct flights, the two sides plan to double the scale of pilgrimage of Indian janitors to Tibet in 2026, which will further activate the cross-border culture and tourism economy.

III. Strategic value and potential challenges

1. A critical step in building mutual trust: Through the dual-track mechanism of economic cooperation and security dialogue, China and India have for the first time realized a virtuous cycle of "development for security". The establishment of the Panel of Experts on Boundary Demarcation has provided a new path for resolving the core disputes over the McMahon Line in the eastern sector and Aksai Chin in the western sector.

2. Regional economic integrationnew pivot pointThe reopening of the three border markets could facilitate the alignment of the Belt and Road policy with India's "Eastward Movement" to build a cross-border economic corridor from Tibet to the Bay of Bengal. Research by Tsinghua University shows that if the three markets are fully operational, China-India border trade could grow by 200% in three years.

3. Increased discourse on global governanceThe cooperation between the two sides in areas such as flood reporting and ecological protection of transboundary rivers provides an example of South-South cooperation. The sharing of emergency hydrological information on the Brahmaputra River will enable India to provide flood warning 48 hours in advance, directly benefiting 120 million people downstream.

However, the implementation of the agreement still faces real challenges:

1. Infrastructure bottlenecks: The road upgrading at Renqinggang Border Crossing needs to be completed by September, and the logistics and storage capacity of Phulan Border Crossing is only 60% of the design value.

2. Security control pressure: The Kyuba-Nanga crossing in the eastern sector is adjacent to the disputed area of southern Tibet and requires the establishment of a new type of joint patrol mechanism.

3. Political trust deficit: There are still forces within India that oppose deeper cooperation with China and demand toughness on the issue of troop presence on the border.

Overall, the resumption of border trade and direct flights between China and India is a pragmatic choice for the two countries to seek strategic balance in a complex international environment. This "economy first, security second" model not only builds mutual trust for resolving historical issues, but also provides a new paradigm for the global South to cope with external pressures. Although there are still bumps in the road ahead, a new chapter in the dance of dragons and elephants has quietly begun.