Context: Recently, India and China engaged in their first deadly conflict in at least 45 years, resulting in 20 deaths on the Indian side at Galwan Valley in eastern Ladakh.
About Chinese claims

• The Chinese People’s Liberation Army (PLA) accused India “of going back on its word” and “violating commitments” reached by both sides at Corps Commander-level talks.
• China Claims that the sovereignty of the Galwan Valley region has always belonged to China, something India has always contested.
• Indian Ministry of External Affairs said “the Chinese side departed from the consensus to respect the Line of Actual Control (LAC) in the Galwan Valley.” With China trying to “unilaterally change the status quo”, both sides “suffered casualties that could have been avoided” had China stuck to what had been agreed.

Background to the Current situation

• The standoff had begun with a scuffle in the Pangong Tso area on the intervening night of May 5/6, resulting in serious injuries on both sides.
• The two sides were engaged in discussions to pull back troops, amassed over weeks.
• The cause for this was China objecting to a road that India was building on the banks of the Pangong Tso Lake in Ladakh.
• This is the first time in 45 years that the neighbouring countries have shed blood, however, there was no firing during the face-off.
• Therefore, there have been no firings on the India China border since 1975.

Significance of Galwan Valley Region

• The Galwan River flows from the Aksai Chin region to Ladakh of India and is one of the upstream tributaries of the Indus River.
• The Galwan river is to the west of China’s 1956 claim line and in the Indian side of the border in Aksai Chin.
• However, in 1960 China advanced its claim line to the west of the river along the mountain ridge adjoining the Shyok river valley. India continues to claim the entire Aksai Chin plateau.
• The Galwan river is the highest ridgeline and it allows the Chinese to dominate the Shyok route passes, which is close to the river.
• Chinese are keen on controlling this area as they fear that the Indian side could end up threatening their position on the Aksai Chin plateau by using the river valley.
• Based on satellite imagery, the Chinese had built a road until the middle point of the Galwan valley by 2016. And since then, they have managed to extend this to some point closer to the LAC in the sector.
• The Chinese build-up along the Galwan River valley region overlooks, and hence poses a direct threat to the Darbuk-Shyokh-Daulat Beg Oldie (DSDBO) road.

Impact on India – China Trade

• India’s border tensions with China may not have an immediate impact on business and trade relations.
• China had a surplus of more than $45 billion in trade with India in the first 11 months of FY20.
• Small retailers have called for a boycott of goods made in China and the promotion of local products instead to reduce this gap.
• Key imports from China were electronics, organic chemicals and machinery.
• New Delhi has not been keen to continue its engagement with China in the Asia Pacific Trade Agreement (APTA) the only operational trade pact linking India and China.
• China was a key factor behind India’s exit from negotiations on the Regional Comprehensive Economic Partnership (RCEP) trade agreement in 2019 as it feared further opening up of trade with the country would dramatically increase the trade deficit.