Key facts
- Chinese President Xi Jinping's visit to New Delhi for the BRICS summit is expected to improve diplomatic ties.
- Business relations between China and India remain strained due to regulatory hurdles, visa delays, and equipment restrictions.
- India eased some investment restrictions in March for sectors like electronics, capital goods, and solar.
- Chinese firms BYD and Great Wall Motor halted investment plans in India due to heightened scrutiny.
- India cited national security concerns in rejecting Alipay's link to its instant payments system.
- China has reportedly asked companies to withhold critical technology and infrastructure sales to India.
Chinese President Xi Jinping's anticipated visit to New Delhi for the BRICS summit this week is expected to further a diplomatic thaw between the two neighboring giants, though business ties remain hampered by suspicion and regulatory hurdles. Businesses in both countries continue to face challenges including stalled investments, visa delays, and restrictions on industrial equipment, highlighting a disconnect between diplomatic advancements and economic relations.
The relationship between China and India has historically been wary, marked by a brief war in 1962 and a significant border clash in 2020 that resulted in casualties on both sides. Despite these tensions, ties have seen some improvement in recent years, particularly following Indian Prime Minister Narendra Modi's visit to China last year, and as both nations navigate complex relationships with the United States. Experts suggest China desires improved ties, but progress hinges on India's willingness to reciprocate, with a high "trust deficit" noted.
In March, India relaxed some investment restrictions imposed after the 2020 clashes, targeting sectors like electronics, capital goods, and solar cells, and is considering faster approvals for joint ventures. New Delhi has approved projects such as a manufacturing venture between India's Dixon Technologies and Chinese smartphone maker Vivo Mobile. However, leading Chinese companies like vehicle manufacturers BYD and Great Wall Motor have abandoned planned investments in India due to heightened scrutiny.
Further complicating matters, Chinese companies' proposed investments in India are reportedly facing increased scrutiny from Beijing itself, particularly in sectors involving sophisticated manufacturing and high-end technology. China's foreign ministry stated that Xi and Modi view the countries as "partners, not competitors," representing opportunities for each other's development. However, India has denied Alipay's request to link to its instant payments system due to national security concerns and is considering an investigation into Xiaomi for alleged business irregularities.
Simultaneously, Chinese authorities have allegedly asked companies to refrain from selling critical technology and infrastructure, such as port equipment and solar panels, to India. While direct flights and visa procedures for Chinese business professionals were resumed last year, some Indian business individuals have recently faced difficulties obtaining visas for China. Additionally, essential equipment and components from China for key Indian sectors have been held up at Chinese customs for over a year, a situation described as more than administrative friction, reflecting China's potential use of trade and technology dependence as leverage.
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