China and India, demographically being the two largest countries in the world, are together accounting for more than a third of the world’s total population. This makes the Sino-Indian relationship critical not only for those living in China and India, but for the whole world. Regardless of a history filled with conflicts and a contemporary competition over regional influence have the two Asian powers managed to increasingly deepen their economic ties. Even though the relationship seems to be moving in a more peaceful direction of mutual understanding and cooperation, it is still a very fragile relationship. The focus of this research lies in the contemporary Sino-Indian relations, which aims to understand the role trade and cooperation have had in moving the attention away from security-related issues on to more positive fields. The empirical observations that will be tested in the case of Sino-Indian relations are the border dispute at Arunachal Pradesh and the political and economic interdependence. Together these will represent the empirical foundation of the research, which will be tested and interpreted by the neo-realist and neo-liberal perspective. The concluding remarks on the research is that trade and cooperation unlikely is the main factor in the Sino-Indian relationship, preventing or reducing attention from being given to security-related issues, but should rather be seen as the foundational source on which a process towards confidence-building measures, institutions, mutual interests and a political goodwill has been established.