Thaw in Diplomatic Relations Between India and China Gains Momentum, But Business Relations Are More Prudent

While India and China appear to be on the brink of establishing better diplomatic relations, the same does not apply to their business ties.

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China’s President Xi Jinping is expected to make his maiden visit to India this weekend to attend the annual BRICS summit. However, Beijing has not confirmed the visit so far, nor announced any bilateral meetings between the two leaders, President Xi and India’s Prime Minister Narendra Modi. 

As the relations between the two nations seem to stabilize after several years of tension, it remains challenging for both parties due to restrictions on investment, visas, and regulation of business equipment. 

Ties Improving after Years of Tension 

Ties between India and China were in deep freeze following the border clash of 2020 which killed 20 Indian and 4 Chinese troops. 

Ties have been improving in recent times, especially following Modi’s visit to China last year. Both nations are facing a tense relation with the US, further complicating matters. 

The leaders had a brief meet in a regional conference in Kyrgyzstan early this month. 

India had relaxed some of the investment barriers imposed on China after the 2020 border clash in March. The relaxation was in industries such as electronics, capital goods and solar cells. 

India is considering quick clearance of joint ventures between Indian and Chinese companies in some sectors. 

Dixon-Vivo Project Gets the Green Light But Bigger Involvements Elude 

Some investments have already been made in this environment of change. 

India has cleared the manufacturing partnership of Dixon Technologies and Chinese mobile phone brand Vivo Mobile. 

However, this alone has not been enough to make some bigger Chinese companies who had shown interest in making investments in India return. 

Chinese auto brands BYD and Great Wall Motor have decided against making the planned investments because of regulatory scrutiny in India, as reported by a government official in India in the report. 

Not only is there scrutiny being faced from New Delhi; China too is giving its Chinese projects in India a second look, especially those involving sophisticated manufacturing and advanced technology. 

Alipay+ and Xiaomi Highlight Continuing Regulatory Concerns 

Recent developments show how security and regulatory concerns continue to shape commercial relations. 

India has declined to approve a proposal involving Alipay+, a platform linked to China’s Ant Group, and India’s instant payment system. National security concerns were cited in connection with the proposal. 

The Indian government is also considering a recommendation from the Serious Fraud Investigation Office for an investigation into Xiaomi over alleged irregularities in its Indian business and possible breaches of foreign investment laws. 

Xiaomi has said it complies with Indian laws and has not received communication from the SFIO. 

These developments illustrate the gap between improving diplomatic engagement and the level of caution that still surrounds Chinese companies operating or investing in India. 

Indian Companies Face Their Own Hurdles in China 

The difficulties are not one-sided. 

Chinese authorities have asked companies not to sell certain critical technologies and infrastructure to India, according to an Indian source cited by Reuters. These include port equipment, solar panels and equipment used in mobile manufacturing. 

Equipment and components manufactured in China and required by India in sectors such as electronics, solar energy and infrastructure have also faced delays at Chinese customs this year. 

Some large boring machines intended for major Indian infrastructure projects have been held up for more than a year. 

Visa access has emerged as another sticking point. 

India and China resumed direct flights last year, while New Delhi eased visa procedures for Chinese business professionals. More recently, however, some Indian businesspeople seeking to travel to China have encountered difficulties obtaining visas. 

China’s foreign ministry said visas are issued to Indian nationals with a genuine need to travel in accordance with its laws and regulations. 

Economic Relationship Still Carries a Trust Gap 

China’s foreign ministry has described India and China as partners rather than competitors and said the two countries represent opportunities rather than threats to each other’s development. 

The commercial relationship, however, continues to carry the weight of political and security concerns built up over several years. 

Investment approvals, technology transfers, equipment supplies and visas remain areas where those tensions are still visible. 

A meeting between Modi and Xi, if it takes place during the BRICS summit, could provide another opportunity to address some of these barriers. For now, though, the improving diplomatic atmosphere has yet to translate into a comparable reset in business relations between the two countries.