Despite political tensions, India-China trade relations flourished in 2023, reaching $136.2 billion, reflecting deep economic interdependence.
China's recent diplomatic gestures towards India, including increased visas and cooperation in key sectors, indicate a strategic recalibration amidst economic pressures.
Deep dives
Impact of US-China Tariff War on Trade Relations
The ongoing tariff war between the US and China is reshaping global trade dynamics, influencing various geopolitical alliances, including the relationships between India and China. Despite political tensions stemming from incidents like the Galwan clash, economic ties remain strong, with bilateral trade reaching record highs of $136.2 billion in 2023. Key imports from China to India involve critical sectors, such as machinery and pharmaceuticals, where over 70% of India's active pharmaceutical ingredients originate from Chinese suppliers. As China seeks alternative partners to offset its reliance on the US market, the complexity of trade relations with India continues to evolve, reflecting both economic dependencies and diplomatic negotiations.
China's Strategic Incentives in Strengthening Trade with India
China's pursuit of improved trade relations with India appears driven by its need to stabilize its economy amid internal challenges and external pressures. The recent issuance of a significant number of visas to Indian nationals and adaptations in Chinese firms' organizational structures indicate a willingness to foster cooperation. While the intricacies of the trade imbalance present challenges, particularly India's limited access to Chinese markets, mutual interests are emerging as China seeks to navigate its economic difficulties. This strategic pivot showcases the potential for India to emerge as a key player in diversifying China's trade landscape.
Future Prospects and Diplomatic Developments
The future of India-China relations hinges on multiple geopolitical factors, including China's attempts to expand its participation in the Indian market while respecting India's conditions. Recent diplomatic gestures, such as the resumption of the Kailas Mansarovar Yatra and potential high-level meetings, signal a thawing of relations, albeit under cautious conditions. Despite China's pressing need to find new markets and India's reluctance to serve as a dumping ground for Chinese goods, sectors like technology could become collaborative fields without compromising national security. These interactions highlight a complex relationship where the potential for cooperation exists, yet underlying tensions remain unresolved.
As global tensions intensify from tariffs to terror the question arises: Are India-China relations quietly warming beneath the surface? Despite diplomatic frost after the Galwan clash, trade tells a different story. In 2023, bilateral trade reached a staggering $136.2 billion, with China remaining one of India’s top partners. From telecom to pharma, Chinese components power critical sectors of the Indian economy. China has even begun sending positive signals issuing over 85,000 visas to Indians in just four months and allowing Indian leadership in Chinese firms’ local operations. So, is this economic interdependence a path to reconciliation or just strategic convenience? Even as New Delhi curbs Chinese apps and investments, the flow of goods and even visas continues. Host Anirban Chaudhury talks to Wendong Zhang, Professor and Economist at Cornell University; Ashok Kantha, India’s former ambassador to China; and ET’s Dipanjan Roy Choudhury about why, as China faces a bruising tariff war with the US, India may be more economically indispensable than it appears. Is this economic pragmatism a sign of strategic recalibration?
