As we approach harsh winter in Ladakh, the risk of current situation escalating into a war is at its highest.
And current scenario has similarities with what happened in 1962. Back then, Nehru followed a Forward Policy - of creating observation posts to monitor Chinese activity on their side of the LAC. And the Chinese objected to these observation posts. As winter approached, China gave an ultimatum to India to vacate these posts - and India refused. China started the war with limited objective of clearing the observation posts - but it soon spread.
We have almost exact same scenario today - with India having occupied the higher mountains in Eastern Ladakh. This gives us a vantage position - but creates a ego issue for the Chinese.
Post December, neither side can hold positions, because the weather gets really unpredictable and dangerous. Which means, if India holds its stance till then, China faces severe loss of face amongst its own population.
Already HK protesters are taunting China by waving Indian flags - and China is getting pushed to a corner which they won’t stay in for long.
India can’t withdraw its troops as well, as it will be extremely problematic from political perspective.
This means, there are no face-saving ways for the Chinese to de-escalate things. Anything short of war will be loss of face for them.
Timing wise, mid-October is the greatest chance of hostilities breaking out - even in 1962, war started on 20th October and went on for a month.
What role other countries will play will also matter a lot. Pakistan could stir up trouble on Western front, whereas US could step in to help India.
We can hope that better sense prevails - but we have to anticipate significant downside risk for markets.
And current scenario has similarities with what happened in 1962. Back then, Nehru followed a Forward Policy - of creating observation posts to monitor Chinese activity on their side of the LAC. And the Chinese objected to these observation posts. As winter approached, China gave an ultimatum to India to vacate these posts - and India refused. China started the war with limited objective of clearing the observation posts - but it soon spread.
We have almost exact same scenario today - with India having occupied the higher mountains in Eastern Ladakh. This gives us a vantage position - but creates a ego issue for the Chinese.
Post December, neither side can hold positions, because the weather gets really unpredictable and dangerous. Which means, if India holds its stance till then, China faces severe loss of face amongst its own population.
Already HK protesters are taunting China by waving Indian flags - and China is getting pushed to a corner which they won’t stay in for long.
India can’t withdraw its troops as well, as it will be extremely problematic from political perspective.
This means, there are no face-saving ways for the Chinese to de-escalate things. Anything short of war will be loss of face for them.
Timing wise, mid-October is the greatest chance of hostilities breaking out - even in 1962, war started on 20th October and went on for a month.
What role other countries will play will also matter a lot. Pakistan could stir up trouble on Western front, whereas US could step in to help India.
We can hope that better sense prevails - but we have to anticipate significant downside risk for markets.