Politics Elephant-dragon tango: Modi’s visit to China signals improving ties — will the bonhomie last?

Foxconn’s removal of several hundred engineers from its Indian operations last month—reportedly at the instruction of Chinese authorities to curb technology transfers—was a sharp reminder of the persistent mistrust between the region’s two largest economies.

Yet both Beijing and New Delhi now face mounting tariff pressure from Washington, a shared challenge that is creating space for limited dialogue. That opening will be tested in Tianjin this weekend, when Indian Prime Minister Narendra Modi meets Chinese President Xi Jinping during the 25th Shanghai Cooperation Organization summit. The trip will be Modi’s first to China since 2018 and comes in the shadow of the deadly 2020 Galwan Valley clash.

The Indian foreign ministry has left open the possibility of talks on the summit’s sidelines, but analysts caution against assuming any lasting thaw. “The suspicion of China runs deep in India,” said Amit Bhandari of Gateway House, while noting that changing trade patterns and supply chain shifts are prompting pragmatic engagement.

During a two-day stop in Delhi, Chinese Foreign Minister Wang Yi called for the two nations to see each other as “partners” instead of “threats.” Still, Bhandari said a relationship of the depth India maintains with Russia or the United States is improbable.

India’s trade position reflects ongoing strain: a $45.8 billion surplus with the United States in 2024 contrasts with a widening gap with China, where the deficit reached $99.2 billion in the year to March 2025—up from roughly $85 billion—on record imports of $113.45 billion. The Indian embassy in China has described the problem as “two-pronged”: the absolute size of the deficit and its steady expansion, adding that talks on market access are ongoing.

Security concerns persist as well. Research by the Stockholm International Peace Research Institute shows China supplied arms to 44 states between 2020 and 2024, with Pakistan receiving 63% of those exports. Over the same period, China met 81% of Pakistan’s arms demand, compared to 74% in 2015–2019.

India has sought to attract manufacturers looking to reduce reliance on China, and in the second quarter overtook its neighbour as the leading exporter of smartphones to the U.S., according to Canalys. China’s share of that trade dropped to 25% from 61% a year earlier. But Priyanka Kishore of Asia Decoded noted that potential “China Plus One” destinations often remain dependent on Chinese raw materials and components until domestic capabilities expand.

Ajay Srivastava of the Global Trade Research Initiative said Chinese suppliers provide 70% of India’s chemical-based pharmaceutical ingredients and almost 90% of its biosimilar APIs, as well as key electronics, machinery and organic chemicals. Electric vehicles are another area of reliance: India’s goal is for EVs to make up 30% of new sales by 2030, up from 7.6% in 2024 (Niti Aayog data), but most manufacturers depend on China for essential elements such as rare earth magnets. Bhandari warned that the auto sector has been placed in a position of vulnerability through reliance on Chinese lithium and cobalt supplies.

During his recent visit, Wang Yi pledged cooperation on rare earths, tunnel-boring equipment and fertilizers. For Chinese companies, improved access to the Indian market could help offset slowing consumption at home. India’s ban on certain Chinese tech firms remains in place, but sectors such as electric vehicles are viewed as growth opportunities. Build Your Dreams is reportedly interested in an Indian plant, especially following Vietnam’s VinFast gaining approval. Kishore noted Chinese firms face overcapacity and need new outlets as U.S. demand falls.