Global Trade Tumult Requires India to Strike a Delicate Equilibrium
In 2025, the India-China relationship is marked by a complex interplay of economic interdependence, ongoing geopolitical tensions, and cautious diplomatic engagement. This dynamic is particularly evident in their trade relations, which, despite challenges, continue to be substantial and essential to both economies.
Bilateral trade between the two nations reached approximately $138 billion in 2024-25, with China remaining India's largest trading partner. Chinese exports to India amounted to about $120 billion, while Indian exports declined slightly to around $18 billion. This trade imbalance is largely due to India's reliance on Chinese imports for industrial inputs, electronics, machinery, and specialty fertilizers.
However, Indian exports to China have faced headwinds from global economic challenges and India's increasing protectionism, contributing to a decline in exports. Although there hasn't been a formal imposition of tariffs as a broad trade war measure, China has exercised economic coercion through administrative barriers, such as delaying fertilizer exports critical to Indian agriculture and restricting Chinese labor and equipment movement to India’s manufacturing sectors.
The India-China border dispute remains unresolved but shows signs of partial de-escalation. In October 2024, mutual agreements on troop withdrawal and reviving limited cross-border trade were achieved through the 31st round of border talks, reflecting a cautious diplomatic thaw. However, broader geopolitical tensions persist, with China continuing to support Pakistan and using economic leverage to maintain a competitive posture vis-à-vis India.
High-level diplomatic engagements, such as the July 2025 visit of Indian External Affairs Minister S. Jaishankar to Beijing and planned meetings at the SCO Summit, aim to restore bilateral trust and stabilize relations. India is pursuing a "managed rivalry" approach to its trade and broader relations with China, combining safeguarding national security and geopolitics with pragmatic economic cooperation in selective sectors like electronics and digital infrastructure.
The Indian government is slowly easing restrictions on Chinese investments in specific areas, indicating an effort to calibrate the economic relationship without compromising strategic interests. However, India has not yet been able to negotiate on irritants like the withholding of key minerals and equipment due to China's strategic position.
The complexities in the India-China relationship extend beyond trade, with global diplomacy also impacted. Pakistan's actions have complicated diplomacy, and China's trade with India results in a near $100 billion surplus for China. Furthermore, China is now considered an enemy by India due to its active participation in Pakistan's military defense, and these power blocs may be diametrically opposite of those serving US interests.
As the deadline for India's trade deal with the US approaches on August 1, the future of India-China relations remains uncertain. Yet, diplomatic efforts in 2024-25 have brought cautious optimism, and the partnership remains a complex balance of economic dependency and geopolitical rivalry.
- Amidst the global news landscape, updates on the India-China relationship often involve discussions about politics, trade, and crime-and-justice, with the latter being attested by China's economic coercion through administrative barriers in trading practices.
- In the realm of general-news, the India-China border dispute remains unresolved, but political developments like mutual agreements on troop withdrawal and reviving limited cross-border trade suggest a partial de-escalation, reinforcing the ongoing complex dynamics in the political sphere.
