Faced with a slowing economy and increasing geopolitical challenges, Beijing seems eager to seek a thaw with India
In a notable shift, the Chinese government has signalled its intent to recalibrate its ties with India following a series of disengagement measures along their disputed border. The thaw reflects both strategic considerations and economic imperatives as Beijing grapples with slowing economic growth and rising geopolitical challenges. After years of strained relations exacerbated by the 2020 Galwan Valley clash, which resulted in casualties on both sides, the disengagement at friction points offers a moment to ‘look into the future.’ Chinese officials and business leaders have expressed optimism about a potential reset in ties, framing peace and stability as prerequisites for deeper bilateral engagement. China’s economy has been under pressure from multiple fronts: sluggish growth, weakening consumer demand and the looming threat of escalating tariffs from the United States under Donald Trump’s proposed policies. Beijing has already announced two rounds of monetary and fiscal stimulus packages, with a third expected soon, aiming to rejuvenate its domestic economy and strengthen trade ties with key partners like India.
India, with its vast middle-class market and growing manufacturing sector, represents an attractive prospect for Chinese businesses.
Despite a persistent trade imbalance—India’s imports from China stood at $99.59 billion in 2023, dwarfing its exports of $16.23 billion—there is scope for collaboration. Chinese businesses see opportunities in India’s pharmaceuticals, services and burgeoning electric vehicle market. China’s business leaders and scholars have called for a pragmatic approach that separates border issues from economic and cultural ties. Influential figures in China’s economic hubs—Beijing, Shanghai and Shenzhen—have emphasised the benefits of collaboration. Companies like Shanghai Pharmaceuticals and carmaker BYD have expressed interest in leveraging the Indian market, highlighting areas like healthcare and electric vehicles as promising fields for cooperation. While Beijing appears eager to reset relations, New Delhi’s emphasis on resolving border disputes as a precondition for normalisation remains a sticking point. India is likely to continue leveraging its trade policies to address the trade deficit and ensure balanced economic ties. Additionally, mutual trust needs rebuilding after years of diplomatic and military standoffs. Indeed, the disengagement along the border is a significant step toward restoring confidence between the two nations. If both sides prioritise dialogue and economic cooperation, the thaw could lead to a more stable and mutually beneficial relationship. China’s acknowledgment of India’s potential as a key trade and investment partner, coupled with India’s focus on reducing its trade deficit and securing fair access to Chinese markets, could lay the foundation for a new era in Sino-Indian relations. Whatever the reasons behind China’s willingness to engage in dialogue, this is an opportunity that must be fully seized.
