Interesting time for this very compelling story in the Wall Street Journal as we were just having this discussion in the past 2 weeks in one of our comment threads - the potential friction between India and China as they grow up. As Americans conflict is a great thing for us, as one of the last great export markets we still dominate is weapons. About a month ago I read a piece where US weapon sales were 60%+ of the entire market in 2008 - go Team USA! As long as world peace does not break out in the coming decades we'll still have one niche thriving.

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Since India and China are obviously going to be very important investment themes in the decades to come, a story worth your time.

  • In the brewing discord between two giant, ambitious nations, even a remote meadow in the Himalayas is worth fighting over. Some two-dozen Chinese soldiers converged earlier this year on a family of nomads who wouldn't budge from a winter grazing ground that locals say Indian herders had used for generations. China claims the pasture is part of Tibet, not northern India. The soldiers tore up the family's tent and tried to push them back toward the Indian border town of Demchok, Indian authorities say.
  • Chering Dorjay, the chairman of India's Ladakh Autonomous Hill Development Council, says he arrived on the scene with a new tent and Indian intelligence officers and urged the herders to stay put. The Chinese, it seems, are gradually taking our territory, he says. We will feel very insecure unless India strengthens its defenses.

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  • Dueling territorial claims along this heavily militarized mountain border, coupled with economic tensions between the two nations, are kindling a 21st-century rivalry. The budding distrust has created a dilemma for the U.S. about how to court one nation without angering the other.
  • China and India cooperate occasionally. But in recent years, they have competed vigorously over trade, energy investments, even a race to land a man on the moon.
  • Some Indians want their nation to move closer to the U.S. as a hedge against a rising China -- a strategic shift that's likely to complicate ties among all three. China is trying to become No. 1, says Brajesh Mishra, a former national-security adviser for India. This is the seed of conflict between China, India and the U.S.
  • The prime ministers of India and China are expected to meet this weekend at a summit of Asian leaders in Bangkok, following several weeks in which their nations traded barbs over trade and disputed territory.

An interesting pickle for the US - India is the more Western style country, with democratic government - yet China owns us... (largest creditor) Certainly one could see similar strategies to what the US has done before i.e. arm India as a deterrent to Chinese Pacific strength. Chinese analysts agree with me based on this article.

  • Next month, after a planned visit to China, President Barack Obama will host a U.S. visit by Indian Prime Minister Manmohan Singh, a meeting meant to highlight what the White House says is a growing strategic partnership. Commercial and military ties between the two countries have been getting stronger. Last year, the U.S. loosened restrictions to allow India to buy sensitive technology and nuclear equipment for civilian use. Soldiers from both countries are participating this month in a joint defense exercise.
  • Indian defense analysts say India needs closer U.S. ties to hedge against potential hostilities with China. If China's rise is peaceful, and it integrates into the global economy, everything should be fine, says retired Indian Brig. Gen. Gurmeet Kanwal, director of the Center for Land Warfare Studies, an army think tank. Should China implode, it's better to have a friend like the U.S.
  • At the moment, the biggest threat to India-China relations may be their competing claims for big swaths of territory along their border. In recent years, China has settled border disputes with a host of nations, including Russia, as part of what it calls its good neighbor policy. But China and India have made little progress, despite 13 rounds of meetings since 2003.
  • The 1962 border war, which India lost, complicated the boundary between the two countries. These days, Chinese and Indian forces in some border areas have agreed to go out on different days to patrol contested territory. We want to avoid an eyeball-to-eyeball conflict, says Gopal Pillai, India's secretary for the home ministry, which oversees the border police.
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And it's not just military - economic strains also bubble...

  • In addition to the defense concerns, trade friction is growing between India and China. India leads all members of the World Trade Organization in antidumping cases against China. India has banned imports of Chinese toys, milk and chocolate, citing safety concerns, and has launched investigations into export surges of Chinese truck tires and chemicals, among other products.
  • ....many Chinese resent any comparison with India, still a largely poor agrarian nation with only about one-third of China's per-capita income. And they're generally wary of India's warming ties with the U.S.
  • The Indian government has closely scrutinized proposals by Chinese companies to invest in India. It recently demanded that thousands of Chinese citizens in India convert short-term business visas into employment visas -- a move that effectively boots unskilled Chinese workers from the country.

Yet they also cooperate on some subjects:

  • India and China are intent on turning fast economic growth into national strength. When their interests have converged, they have proven a powerful combination. On Wednesday, they announced plans to cooperate at December's climate-change talks in Copenhagen, a pact likely to see both fighting carbon-emission caps proposed by industrialized nations. During global-trade talks, they both resisted Western pressure to open farm markets.

And you thought your marriage was complicated....

But always a silver lining... boo yah! Greed (or potential war) for the lack of a better word... is good:

  • U.S. defense contractors could benefit from India's desire to modernize its military. While the U.S. has banned weapons sales to China, it has ramped up such sales to India. Lockheed Martin Corp. and Boeing Co. are among the defense contractors competing to supply India's air force a new fleet of jet fighters -- a deal that could be valued at $10.4 billion.
  • Some Chinese analysts say friction between India and China are playing into what they say is a U.S. wish to contain China. If border tensions between India and China continue to simmer, I can't say the U.S. will be displeased, says Shi Yinhong, a specialist in Sino-U.S. ties at People's University in Beijing.