Border Spat Sidelined as China’s Li in India for First Trip

India and China sought to draw a line under a military standoff along part of their disputed border, agreeing to accelerate talks on a settlement and boost trade that they said would help drive the world economy.

The potential for conflict along the Himalayan frontier, scene of a brief 1962 war, was highlighted last month as India alleged Chinese troops had crossed into Indian-held territory in northern Ladakh, triggering a three-week confrontation that ended with an agreement negotiated by army commanders.

The two countries “took stock of lessons learned from the recent incident,” Indian Prime Minister Manmohan Singh told reporters in New Delhi after talks with Chinese Premier Li Keqiang. While current “mechanisms proved their worth, we have tasked our special representatives to consider further measures that may be needed to maintain peace and tranquility,” he said.

Leaders of both countries have sought to raise bilateral trade and investment as discussions on a formal border pact continue. Singh and Li, who chose to make India his first overseas destination after taking office in March, today pledged closer cooperation to link India’s economy to Chinese and Southeast Asian markets. They also agreed to step up the sharing of information on river projects, following Indian concerns over dams China is constructing on the Brahmaputra.

“The two big powers in the region are giving signals that they can sort out their problems through dialogue and they will maintain stability so that the Asia story will continue to unfold,” said Alka Acharya, director of the New Delhi-based Institute of Chinese Studies. “Boosting economic and commercial ties is also getting priority.”

Frank Talks

Negotiators would meet again soon to push border talks along, Singh said today, adding that he had accepted an invitation to visit China. No date was set.

The Hindu newspaper, an Indian daily, reported that Singh told Li during “frank” discussions last night that it would be difficult to maintain improvements in ties if there were further provocations along the border, citing officials present at the meeting whom the paper didn’t name.

“We do not deny there are some problems,” Li, 57, said today in the Indian capital. “We need to appropriately manage and resolve our differences.”

Commenting on Li’s decision to make India his first port of call as premier, Indian Foreign Ministry spokesman Syed Akbaruddin said at a May 18 briefing with reporters that the government in New Delhi thought “very highly” of the gesture.

Li also met today with Indian Foreign Minister Salman Khurshid and Sonia Gandhi, president of the ruling Congress party. Tomorrow, he will meet business leaders in Mumbai.

‘New Engines’

India and China, home to more than a third of the world’s people, have vowed to raise commerce to $100 billion by 2015, from Indian Commerce Ministry estimates of $75.6 billion in the year to March 31, 2012.

By ensuring an amicable relationship, China and India will provide “new engines for the world economy,” Li said today.

China has said it is addressing Indian concerns over access to the Chinese market. India exported goods worth $9.7 billion to China in the nine months to December 2012, a quarter of the $41.2 billion of imports from its northern neighbor, according to data from India’s Commerce Ministry.

India accuses China of occupying 38,000 square kilometers of territory in Jammu and Kashmir, while the government in Beijing says 90,000 square kilometers of land in Arunachal Pradesh, a state in India’s northeast, belongs to China. Fifteen rounds of talks have failed to resolve the dispute.

Afghan Signal

Military relations between the two countries were suspended in August 2010 after China issued a visa to an Indian army officer in charge of forces in Kashmir without stamping his passport, an act seen as questioning India’s rule over the disputed Himalayan territory. China has a close alliance with Pakistan, which has waged two wars with India over Kashmir.

By visiting India ahead of Pakistan, Li may be signaling concerns over regional stability, said Michal Meidan, a London-based analyst with Eurasia Group. “Beijing has grown increasingly disenchanted with Pakistan’s failure to contain the flow of arms, militants and narcotics from the Afghanistan-Pakistan border into China,” she said in an emailed analysis.

Both India and China have made major investments in Afghanistan, likely placing insecurity there at the top of today’s agenda, Meidan said. Mistrust and the “deeply asymmetric” nature of the India-China relationship in favor of Beijing will slow progress in easing strategic disputes, she said.

China opposes Tibet’s spiritual leader, the Dalai Lama, who campaigns for Tibetan autonomy and human rights from exile in northern India. After India, Li will travel to Pakistan, Switzerland and Germany.

Before it's here, it's on the Bloomberg Terminal.