Chinese language President Xi Jinping and Indian Prime Minister Narendra Modi go to Daci’en Temple on Could 14, 2015 in Xi’an, China.
Sheng Jiapeng | CNSPHOTO | VCG | Getty Photographs
When Foxconn recalled a whole bunch of Chinese language engineers from a manufacturing unit in India final month, reportedly following Beijing’s instructions to curb know-how switch to its neighbor, it was a reminder of the uneasy ties between two of Asia’s largest economies.
However with each nations going through tariff warmth from Washington, may financial challenges push Beijing and New Delhi towards reluctant cooperation, reworking their adversarial relationship?
That chance will probably be examined over the weekend in Tianjin, the place India’s Prime Minister Narendra Modi is because of meet China’s President Xi Jinping for the twenty fifth Shanghai Cooperation Group summit. It is going to be Modi’s first go to to China in seven years, after the lethal Galwan Valley clashes between Indian and Chinese language troopers in 2020 soured relations.
New Delhi and Beijing may have interaction in talks in Tianjin, as India’s international ministry has flagged the potential of bilateral conferences on the sidelines of the summit.
India-China consultants largely don’t see the summit as the start of a long-lasting friendship between the 2 nations. “The suspicion of China runs deep in India,” stated Amit Bhandari, senior fellow, vitality, investments and connectivity, at suppose tank Gateway Home. However within the face of U.S. tariffs and shifting provide chains, China and India discover themselves edging towards one another.
Throughout his two-day go to to Delhi, final week, Chinese language International minister Wang Yi stated that India and China ought to view one another as “companions” fairly than “adversaries or threats.”
“It’s unlikely that Chinese language partnership will turn into just like the one India has with Russia or U.S.,” Bhandari stated.
India enjoys a items commerce surplus with the U.S, standing at $45.8 billion as of 2024. However, it has a widening deficit with China, one thing it has been attempting to curb however has been unable to do. India’s commerce deficit with China was $99.2 billion for the yr ended March 2025, up from about $85 billion the yr earlier than, with complete imports from Beijing touching an all-time excessive of $113.45 billion.
“Our commerce deficit considerations are two pronged. One is the precise dimension of the deficit. Two is the truth that the imbalance has constantly been widening yr after yr,” in keeping with the Indian embassy in China. “We proceed to interact the Chinese language facet for addressing market entry points.”
China’s shut relationship with Pakistan is one other sore level for India. In response to a report of Stockholm Worldwide Peace Analysis Institute, China delivered main arms to 44 states in 2020–24, with practically two-thirds of its arms exports, or 63%, going to Pakistan. China equipped 81% of Pakistan’s arms imports from 2020 to 2024, in contrast with 74% between 2015 and 2019, the report stated.
The SCO assembly is unlikely to resolve disputes or heal previous wounds between the 2 neighbors, in keeping with consultants. However Modi’s presence in Tianjin might be a sign of willingness to seek out widespread floor.
Financial necessity
New Delhi has sought to place itself as a producing hub for world corporations in search of to diversify provide chains away from China.
India, for example, surpassed China as the highest smartphone provider to the united statesin the second quarter, whereas China’s share of smartphone exports to the U.S. dropped to only 25% from 61% a yr earlier, in keeping with analysis agency Canalys.
Nonetheless, the nation has not been in a position to totally capitalize on the “China Plus One” alternative partly on account of commerce limitations between New Delhi and Beijing, stated Priyanka Kishore, principal economist at Asian economic system and policy-focused suppose tank Asia Decoded.
“International locations aspiring to be China+1 locations have to get their uncooked supplies or intermediate items from China till the time they’ll develop their very own capabilities at dwelling. Domestically India shouldn’t be in place to supply and supply all intermediate items and uncooked supplies,” she stated.
A number of industries in India are extremely reliant on China.
“For regular chemical-based APIs (energetic pharmaceutical components), China provides 70% of India’s necessities whereas for biosimilar APIs it provides nearly 90%,” stated Ajay Srivastava head of the International Commerce Analysis Initiative, including that China is India’s key provider of electronics, electricals, equipment and natural chemical compounds.
Electrical automobiles is one other trade the place India is extremely reliant on Chinese language provides.
With a objective to curtail their crude import invoice, the Indian authorities has set formidable targets for adoption of electrical automobiles. It goals EVs to account for 30% of latest automobile gross sales by 2030, up from 7.6% in 2024, in keeping with information from the Indian authorities coverage suppose tank Niti Aayog.
That is a tall ask given most Indian EV producers depend on China for provide of key parts akin to uncommon earth magnets. “Our authorities has pushed the auto trade able the place it depends on China for key elements like uncommon earth magnets, lithium, cobalt … So primarily a key manufacturing trade is susceptible to disruption,” Bhandari stated.
Final week, throughout his go to to India, the Chinese language international minister assured that his nation will tackle the India’s want for uncommon earths, tunnel boring machines and fertilizers.
China additionally stands to realize from strengthening commerce ties with its neighbor. India has banned a number of Chinese language companies from working within the nation. The ban has affected a various vary of corporations from e-commerce corporations akin to Shein to social media platform TikTok.
Entry to the Indian market could be a huge increase for Chinese language corporations at a time when there is a slowdown in home consumption. India’s EV market, for example, affords room for Chinese language corporations to develop as they face intense competitors at dwelling.
“BYD would like to open a manufacturing unit in India, now that Vietnam’s VinFast has already been allowed. Chinese language industries are coping with overproduction and extra capability and with the demand from US market shrinking they want different markets,” stated Kishore.
In additional signal of warming ties, following Wang’s go to, direct flights from India to mainland China, which had been suspended because the begin of the Covid-19 pandemic in 2020, are set to renew. Either side have agreed to reopen border commerce at three designated buying and selling factors.
Indian corporations akin to Reliance Industries and Adani Group are additionally pursuing partnerships with Chinese language corporations, The Financial Instances reported in July.
Whereas the indicators are optimistic, long-held suspicions and border disputes make it troublesome to see the 2 nations as shut companions. The SCO assembly will provide higher readability on how in-step will the elephant and dragon’s tango will probably be — and for a way lengthy.
