India-China trade relations - statistics & facts
India and China have a dynamic relationship not only based on cooperation but also competition since establishing diplomatic ties in 1950. Both Asian countries have fostered economic and trade relations despite challenges from the disputed Himalayan border. In 2020, ties between the two countries froze due to conflict at the disputed Sino-Indian border, resulting in a military clash. Following this, the Indian government increased surveillance on investments from China and banned popular Chinese apps and products.
After almost five years, direct flights between India and mainland China will be resumed and both countries have agreed to bring their strained relationship back to normalcy. Amid years of frozen ties, the two countries have determined to improve bilateral collaboration and investments in the future.
However, a significant fluctuation in the investment flows between the two Asian giants has been seen. The annual flow of FDI investments from China to India has decreased lately. The factors responsible for the declining investments are ongoing geopolitical tensions and changes in India’s FDI policy.
Even though the trade relationship between India and China is characterized by a significant imbalance, India is seeking to strengthen ties with other Western and Asian economies, promote FDI inflow from China, and boost the manufacturing sector. Despite being some of the largest global economies, enhanced strategic communication and collaboration can foster mutual benefits and promote economic growth for both countries.
After almost five years, direct flights between India and mainland China will be resumed and both countries have agreed to bring their strained relationship back to normalcy. Amid years of frozen ties, the two countries have determined to improve bilateral collaboration and investments in the future.
India-China’s evolving trade relationship
Overall bilateral trade between the two nations was worth over 115 billion U.S. dollars in 2023, making China the prime trading partner of India. The northern neighboring country is the significant provider of electronics, machinery, and chemicals to India. Meanwhile, the predominant exports from India to China consisted of iron ore and marine products. Increased FDI inflows from China are likely to boost exports and India’s involvement in the global supply chain.However, a significant fluctuation in the investment flows between the two Asian giants has been seen. The annual flow of FDI investments from China to India has decreased lately. The factors responsible for the declining investments are ongoing geopolitical tensions and changes in India’s FDI policy.
India-China trade tension
India is currently in a cumulative trade deficit with China, with imports exceeding exports. Exports from India to China have fallen by over 22 percent while imports from China have increased by 15 percent, reflecting India’s dependency on its neighboring country. Due to the easy availability of inexpensive Chinese products, most MSMEs in India have closed or reduced operations and have struggled to grow. Furthermore, this has had an impact on job opportunities and on the economic growth of the country. India has enacted a number of tariffs and non-tariff measures to protect domestic manufacturing units and industries. This includes the implementation of production-linked incentive (PLI) programs, quality control measures, and anti-dumping duties.Even though the trade relationship between India and China is characterized by a significant imbalance, India is seeking to strengthen ties with other Western and Asian economies, promote FDI inflow from China, and boost the manufacturing sector. Despite being some of the largest global economies, enhanced strategic communication and collaboration can foster mutual benefits and promote economic growth for both countries.
