The globe’s two biggest emerging economies are squaring off over their shared border while the world has focused on North Korea.

A hot spot for increasing military tension in recent months has been China and India’s borderlands, though geographically desolate and inhospitable. Given that both are equipped with nuclear weapons, the situation could escalate even as the two giants are wrestling more broadly for hegemony in Asia.

“Both sides stand to lose tremendously, economically speaking, should this boil over into an actual war,” wrote Asia analysts Shailesh Kumar and Kelsey Broderick at consulting firm Eurasia Group.

The dispute reflects how China and India posit themselves within the pecking order in Asia, says Gareth Price, senior research fellow on the Asia program at Chatham House. “China (wants) to be primary hegemonic power,” in the region, he said, but India challenges this and “wants to be treated as an equal.”

Chinese and Indian troops were involved in a tussle in the western Himalayas, Reuters reported Tuesday. Chinese soldiers attempted to enter Indian territory in Ladakh, Jammu and Kashmir state, sources in New Delhi said.

But since June of this year, on a plateau known as Donglang in China and Doklam in India, armed forces have been locked in a stand-off on their border further east. Following a disagreement over the Chinese building a road in territory disputed between itself and Indian ally Bhutan, both countries have amassed troops in the area.

India was “strong enough to overcome those who try to act against our country”, said Prime Minister Narendra Modi, in a speech marking the India’s 70th anniversary Tuesday since it gained independence from the British.

China’s expansion in Asia has made India uncomfortable. Price spoke of “India’s vociferous objection to the Belt and Road initiative,” China’s infrastructure development program spanning across the continent and further around the globe.

Chinese state news platform Xinhua said that India’s involvement in the Doklam area was “an offense to China’s sovereignty”, in an editorial entitled “India must not flirt with disaster” published August 8.

Ultimately for Broderick and Kumar, “The headline risk, at the moment, is greater than the actual risk of war.”

Whereas Chinese President Xi Jinping “has already consolidated enough power that he doesn’t need to beat his chest in an external conflict to further his domestic goals,” a conflict would stem the foreign investment that’s critical for India.

The ongoing border dispute is a “conflict that China has created”, said Alyssa Ayres, senior fellow for India at the Council on Foreign Relations. Strategically, the “Chinese military has more to lose” and should the conflict move against its favor, this would mean “a very embarrassing loss of face”, she added.

While India has been locked into a territorial dispute with Pakistan over Kashmir for many years, China has been playing a seminal role in the North Korea nuclear stand-off and accused of aggravating its nuclear neighbors over South China Sea islands, and hence both China and India are juggling other foreign policy headaches. China and India last directly clashed over their border in 1962, with the latter country ceding some territory.

Price argued that regardless of the potential for conflict, “China’s biggest foreign policy concern is making a success of Belt and Road.” Because they “include multiple actors and the domestic economy”, China’s North Korea and South China Sea concerns take precedent, said Broderick and Kumar.

(Adapted from CNBC)