PM Modi's China Visit In 7 Years Hints At Improving India-China Ties Amid US Tariffs; Will They Sustain?

When Foxconn recalled numerous Chinese engineers from its Indian factory last month, it highlighted the tense relationship between China and India. This move, reportedly directed by Beijing to limit technology transfer, underscores the complexities in their economic ties. Despite this, both nations face pressure from U.S. tariffs, potentially nudging them towards cooperation.

India's Prime Minister Narendra Modi is set to meet China's President Xi Jinping at the 25th Shanghai Cooperation Organization (SCO) summit in Tianjin. This meeting marks Modi's first visit to China in seven years, following the 2020 Galwan Valley clashes that strained relations. The summit might provide a platform for dialogue between the two leaders.

Trade Imbalance and Economic Challenges

India faces a significant trade deficit with China, which reached $99.2 billion by March 2025. In contrast, India enjoys a $45.8 billion trade surplus with the U.S. The Indian embassy in China has expressed concerns over this growing imbalance and continues to engage with China to address market access issues.

The trade imbalance is exacerbated by India's reliance on Chinese imports for various industries. For instance, China supplies 70% of India's active pharmaceutical ingredients (APIs) and nearly 90% of biosimilar APIs. Additionally, India depends on China for electronics, machinery, and organic chemicals.

China's Strategic Partnerships

China's close ties with Pakistan further complicate its relationship with India. According to the Stockholm International Peace Research Institute, China supplied 81% of Pakistan's arms imports from 2020 to 2024. This strategic partnership remains a point of contention for India.

Despite these challenges, there are signs of warming ties between India and China. Following Chinese Foreign Minister Wang Yi's visit to India last week, direct flights between the two countries are set to resume after being suspended since the pandemic began in 2020.

Opportunities for Cooperation

India aims to position itself as a manufacturing hub for global companies looking to diversify supply chains away from China. However, trade barriers have hindered India's ability to fully capitalize on this opportunity. Priyanka Kishore from Asia Decoded notes that countries aspiring to be "China Plus One" destinations need raw materials from China until they can develop domestic capabilities.

The electric vehicle (EV) industry is another area where India relies heavily on Chinese supplies. The Indian government aims for EVs to account for 30% of new vehicle sales by 2030. However, most Indian EV manufacturers depend on China for key components like rare earth magnets.

Future Prospects

The SCO meeting may not resolve longstanding disputes or transform India-China relations into a close partnership akin to those with Russia or the U.S., as noted by Amit Bhandari of Gateway House. Nonetheless, Modi's presence in Tianjin signals a willingness to explore common ground amid economic challenges.

Chinese companies also stand to benefit from improved trade ties with India. With domestic consumption slowing down and competition intensifying at home, access to the Indian market could provide growth opportunities for Chinese firms like BYD seeking expansion beyond their borders.

The evolving dynamics between these two Asian giants will be closely watched during the SCO summit as they navigate their complex relationship amidst global economic shifts.