The spat between China’s ambassador in New Delhi and an Indian journalist is a good illustration of the conflicting factors shaping India’s relationship with Beijing.

Last week’s well-publicized spat between Zhang Yan, China’s ambassador in New Delhi, and a persistent Indian journalist is a good illustration of the contradictory forces shaping India’s relationship with the People’s Republic.

Zhang was at a media event highlighting the memorandum of understanding that the Tebian Electric Apparatus (TEA), a Chinese maker of power transformers, has signed to build a $400 million manufacturing facility in the western Indian state of Gujurat.  The move is being hailed as a landmark for Chinese investment in India.

The event was meant to showcase growing bilateral economic engagement.  Last year, China became India’s largest trading partner, with two-way trade amounting to $60 billion.  Two months ago, the two countries convened in Beijing for the inaugural session of their annual strategic economic dialogue and reiterated plans to elevate trade flows to the $100-billion mark by 2015.  And if a new report by the Associated Chambers of Commerce & Industry is right, Beijing and New Delhi could well form the world’s largest trading combination by 2030.

It’s also worth noting that the Indian central bank recently permitted companies to borrow up to $1 billion in Chinese yuan, a move that opens the gate for India’s struggling power sector to import much-needed plant equipment.  (For more on the sector’s dependence on China, read here.)

Yet instead of focusing on the bright side of the bilateral relationship, the headlines about the event were about festering differences.  The corporate brochures TEA circulated at the gathering depicted the state of Arunachal Pradesh – which Beijing insists is actually “South Tibet” – and parts of Ladakh as being with China’s borders.  An animated exchange ensued when an Indian journalist call out Ambassador Zhang on the issue, culminating in Zhang – one of his country’s most experienced diplomats – intemperately telling the fellow to “Shut up!”

(This was not the first time Mr. Zhang’s interactions with the freewheeling, sensationalistic Indian media have gone awry.  In the run-up to Premier Wen Jiabao’s state visit last December, Zhang intimated that the press was engaged in “a war of words” directed at Beijing and suggested that the Indian government do something to stop it.  It was left to then-Foreign Secretary Nirupama Rao to remind Zhang of the country’s tradition of press freedom.

And fresh off last week’s incident, the ambassador is now involved in a new face-off with New Delhi.  Beijing has nominated him to be the head of the United Nations’ Joint Inspection Unit, an internal watchdog agency, while New Delhi is aggressively campaigning for its own candidate, the current Indian ambassador to the UN institutions in Geneva.)

The map contretemps puts in stark relief the contending factors – increasing economic cooperation mixed with ulcerating historical animosities and an intensifying strategic competition – that tug at India’s relations with China.  This last element has lately been on full display.  New Delhi hosted two noteworthy state visits last month, both of which had significant implications for the emerging contest with Beijing over which country will be at the helm of the dawning Asian Century.

The first, by Vietnam’s president, Truong Tan Sang, underscored Indian determination, in the face of explicit even hyperbolic Chinese warnings, to begin hydrocarbon exploration in the South China Sea.  Beijing claims the resource-rich area in almost its entirety and it has emerged as a flashpoint for conflict with China’s neighbors, especially Vietnam and the Philippines.  The Tan Sang visit brought forth renewed bluster from Beijing, with the normally sedate China Energy News thundering in a front-page commentary that:

“India is playing with fire by agreeing to explore for oil with Vietnam in the disputed South China Sea.  India’s energy strategy is slipping into an extremely dangerous whirlpool…. Challenging the core interests of a large, rising country for unknown oil at the bottom of the sea will not only lead to a crushing defeat for the Indian oil company, but will most likely seriously harm India’s whole energy security and interrupt its economic development.”

During the Tan Sang visit, New Delhi and Hanoi agreed to set up a regular security dialogue.  Vietnam has also asked India for military assistance, including the training of fighter pilots and submariners, the transfer of warships and missile systems, as well as help in upgrading Nha Trang port near the strategically-located Cam Ranh Bay.  The deepening security relationship caused several Chinese news organizations last week to accuse New Delhi of throwing its lot in with others who are trying to contain China’s ambitions.

No sooner had the Vietnamese dignitaries left the scene than U Thein Sein, the president of Myanmar, showed up.  Beijing and New Delhi have long regarded Myanmar as an arena for geopolitical jousting, and Thein Sein’s visit came amid signs that his country has decided to extricate itself from China’s close embrace.  A few days before, Myanmar abruptly shelved a $3.6 billion dam project being constructed by the Chinese.  Seeing an opportunity to further dilute Beijing’s influence, New Delhi presented Thein Sein with $500 million in infrastructure loans and renewed its pledge to develop the deep-water port of Sittwe on the Bay of Bengal.  This landmark $120-million project, scheduled for completion in mid-2013, would directly link India’s isolated northeastern states to the booming markets of Southeast Asia, and so is significant for both commercial and geopolitical reasons.

The recent months also testify to the accelerating military competition between China and India along their long-contested Himalayan border.  In September, Defense Minister A.K. Antony declared that Beijing was “aggressively” building up its forces along the border, and General V.K. Singh, the army chief of staff, followed up by claiming that 3,000-4,000 Chinese personnel, including combat engineers from the People’s Liberation Army, had been deployed to the Gilgit-Baltistan region, which is controlled by Pakistan but considered by New Delhi to be an integral part of Kashmir.

Earlier this month, the defense ministry approved a plan to create four new divisions along the China-India border, including two that would form a mountain strike corps geared toward offensive operations.  New Delhi has further decided to station supersonic BrahMos cruise missiles in Arunachal Pradesh, the first deployment of offensive tactical missiles against China.  Reflecting the darkening suspicions about Beijing’s intentions, a respected think tank affiliated with the defense ministry has released a study examining the pathways by which military conflict could come about, including the possibility of Chinese preventative war.

The future direction of India’s relations with China will most likely come to mirror the present composition of U.S.-China relations.  Cooperative impulses emanating from deepening economic engagement will moderate the likelihood of outright military hostilities.  Yet the competitive dynamics of power politics will also ensure that the risk of conflict is ever present.

The key question in all of this is how the U.S.-China and China-India rivalries will intersect.  Here, too, recent events are indicative.  Amid the intensifying competition between Beijing and New Delhi, the Indian government is moving to purchase from the United States another six C-130J “Super Hercules” transport aircraft specially configured for special operations forces as well as 22 AH-64D Apache Longbow attack helicopters.  With contingencies against China in mind, the new C-130s will be based in eastern India.

The sense of disappointment in India permeates Washington these days, with some even debating whether New Delhi is or will ever be a true ally.  But if the events of the last few months are any guide, Beijing’s increasing strategic reach is ineluctably drawing the United States and India closer together.