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Many believe that 'outside China' means Tawang in Arunachal Pradesh where the 6th Dalai Lama came from, a Tibetan area controlled by India but claimed by China. This would greatly complicate the border demarcation between China and India.
If border dispute with Pakistan is grounds to disqualify India from permanent membership in the UNSC then China should also be disqualified as it has border disputes with Taiwan, South Korea, Bhutan, Myanmar & India and water disputes with Taiwan, South Korea, Japan, Malaysia & Philippines.