Beijing has initiated informal efforts to address India’s growing concerns over a ballooning trade deficit that crossed a record $100 billion in FY25, signaling a willingness to increase Indian imports and ease market access.
The diplomatic move comes as China faces escalating trade tensions with the United States, including steep new tariffs.
According to people familiar with the matter, China has conveyed its readiness to remove tariff and non-tariff barriers to facilitate more Indian exports. These overtures are seen as an attempt to rebalance trade ties and improve its standing with New Delhi, especially as it navigates a worsening trade standoff with Washington, where the U.S. has imposed a sweeping 145% tariff on Chinese goods.
However, India has not officially responded to these signals, with officials emphasizing the importance of reciprocity in any trade negotiations. There is caution that easing bilateral barriers could inadvertently increase the influx of low-cost Chinese goods, potentially harming Indian industries.
Ambassador Signals Shift
Chinese Ambassador to India, Xu Feihong, recently echoed these sentiments in an interview with China’s Global Times, expressing Beijing’s intent to “strengthen practical cooperation” and import more Indian goods. Xu also encouraged Indian companies to explore opportunities in China and benefit from its economic growth.
Still, Indian officials remain skeptical. “China benefits from indirect access to the Indian market through other free trade agreements, such as with ASEAN nations. If direct trade barriers are lifted, it could flood the market further,” one official said.
India has been concerned about China’s aggressive pricing and export subsidies, which officials claim distort competition and have contributed to global trade imbalances. China currently maintains a trade surplus of nearly $1 trillion, including deficits with key economies such as the U.S., EU, Japan, and India.
Deficit Trends and Diplomatic Strain
India’s trade deficit with China has widened consistently in recent years. From $48.6 billion in 2019-20, it declined slightly during the pandemic but rose again to $85.08 billion in FY24. In the first 11 months of FY25, the gap has already surpassed $91 billion and is projected to cross $100 billion by year-end, according to data from the Directorate General of Commercial Intelligence and Statistics (DGCIS).
While China continues to push for better trade ties, New Delhi has maintained a guarded approach, particularly in the wake of the 2020 border standoff in Ladakh, which saw both nations deploy tens of thousands of troops along the Line of Actual Control (LAC). That incident prompted India to curb Chinese investments, ban numerous apps, and impose stricter scrutiny on Chinese firms.
Although both sides have made progress in disengaging troops and reviving diplomatic mechanisms, India has not yet relaxed its trade stance. External affairs minister S. Jaishankar has reiterated the need to apply national security filters to any foreign investment, especially in sensitive sectors.
Trade Data Snapshot
Commerce ministry figures for April 2024 to February 2025 reveal a 15.7% drop in Indian exports to China, totaling $12.74 billion. Meanwhile, imports from China rose over 10% to $103.78 billion, compared to the same period a year earlier.
The widening trade imbalance remains a key sticking point in bilateral ties, with Indian officials highlighting the need for long-term, stable trade arrangements that do not compromise domestic industry or economic security.
As the geopolitical and economic equations shift, India’s cautious yet strategic approach will likely shape the future course of engagement with China.
