Xi Jinping’s India Visit: Diplomatic Thaw Faces Economic Hurdles
New Delhi/Beijing: Chinese President Xi Jinping’s much-anticipated visit to New Delhi this week, his first trip to India in seven years, is expected to give a fresh push to improving relations between the two Asian powers. However, despite signs of a diplomatic thaw, there are still limited indications that stronger political engagement will quickly translate into improved business ties.
Companies in both countries continue to face several obstacles, including regulatory restrictions, delayed visas and difficulties related to industrial equipment. These challenges highlight the gap between the recent improvement in diplomatic relations and the slower recovery in economic ties.
“China certainly wants to improve ties, but we are waiting to see to what extent India is actually willing to improve them,” said Lin Minwang, a South Asia expert at Shanghai’s Fudan University and a former diplomat at the Chinese Embassy in New Delhi. He suggested that dramatic progress in the relationship was unlikely in the immediate future.
Harsh Pant, vice president at New Delhi-based Observer Research Foundation, said the trust deficit between India and China remains significant. At the same time, he pointed out that China’s economic strength could provide an opportunity for the two countries to develop closer commercial ties.
Pant said China could use its economic influence to emerge as a more reliable partner, particularly at a time when both India and China are dealing with the impact of US trade policies.
India has already taken some steps towards easing restrictions on Chinese investment. In March, New Delhi relaxed certain investment rules introduced after the 2020 border clashes. The changes focused on areas such as electronics, capital goods and solar cell manufacturing.
The Indian government is also considering faster approvals for selected joint ventures between Indian and Chinese companies. The moves suggest that New Delhi is cautiously exploring ways to restore economic engagement without abandoning its concerns over national security and strategic dependence.
Since then, India has approved several significant projects. One notable development was the approval of a manufacturing joint venture between Indian electronics company Dixon Technologies and Chinese smartphone maker Vivo Mobile.
However, such approvals have so far failed to bring back some major Chinese companies that had earlier considered investing heavily in India. Automakers BYD and Great Wall Motor, for example, shelved planned investments after facing increased scrutiny from New Delhi, according to an Indian government source.
Both companies declined to comment on the matter.
Interestingly, Chinese businesses are also facing greater scrutiny from Beijing itself. Proposed investments in India are reportedly being examined more carefully, particularly when they involve advanced manufacturing or high-end technology, according to sources familiar with the matter.
This means that rebuilding economic confidence may require movement from both sides. While India wants greater investment and manufacturing partnerships, it also remains cautious about strategic sectors. China, meanwhile, appears interested in expanding commercial engagement but is also examining the risks surrounding technology and investment.
The diplomatic relationship has shown signs of improvement following years of tension after the 2020 border clashes. Xi and Prime Minister Narendra Modi also briefly met earlier this month at a regional forum in Kyrgyzstan.
China’s Foreign Ministry told Reuters that the two leaders view India and China as “partners, not competitors” and believe both countries represent opportunities rather than threats to each other’s development.
For businesses, however, the real test will be whether this diplomatic momentum leads to easier investment approvals, smoother movement of workers and better access to equipment. Until those practical barriers begin to fall, the economic relationship is likely to recover more slowly than the political one.
Xi Jinping’s visit: His first visit to India in seven years.
Diplomatic ties: Relations have shown signs of improvement after years of tension.
Major challenge: The economic relationship continues to lag behind diplomatic progress.
Business hurdles: Regulations, visa delays and restrictions on industrial equipment remain concerns.
India’s policy: Some restrictions on Chinese investment were eased in March.
Key sectors: Electronics, capital goods and solar cell manufacturing.
Major approval: Dixon Technologies and Vivo Mobile received approval for a manufacturing venture.
Chinese automakers: BYD and Great Wall Motor have not returned with planned investments.
Trust deficit: Analysts say mutual trust remains a major obstacle.
China’s position: Beijing describes India and China as partners, not competitors .