Chinese President Xi Jinping’s much-anticipated visit to New Delhi this week, his first to India in seven years, is expected to advance a cautious diplomatic thaw between the two Asian giants. Yet beneath the improving political rhetoric, business ties remain constrained by suspicion, regulatory barriers and competing strategic interests.
Xi is widely expected to travel to Delhi for the annual BRICS summit, although Beijing has yet to formally confirm his visit. Nor has there been confirmation of whether he will meet Indian Prime Minister Narendra Modi. Such a meeting would be closely watched because it could help determine whether the recent improvement in relations develops into a broader political and economic rapprochement.
For businesses, however, the diplomatic thaw has so far produced limited results. Investments remain stalled by regulatory scrutiny, some Chinese industrial equipment has been delayed, and Indian business people have faced difficulties obtaining visas for China. The obstacles point to a widening gap between political engagement at the highest level and the realities confronting companies on both sides.
The relationship has long been shaped by strategic mistrust. China and India fought a brief war in 1962, establishing the backdrop for decades of wary relations. Tensions deteriorated sharply after a 2020 border skirmish in which 20 Indian and four Chinese soldiers were killed.
Relations have improved in recent years, particularly following Modi’s visit to China last year, while both governments have also had to manage increasingly volatile relationships with the United States. But the diplomatic recovery has not eliminated the deep uncertainty surrounding economic cooperation.
“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 was unlikely.
Harsh Pant, vice president at New Delhi’s Observer Research Foundation think tank, said the “trust deficit” between the two countries remained high. Yet he argued that China’s economic weight could provide an opportunity for Beijing to position itself as a more reliable partner, particularly as both countries are affected by US trade policies.
There have been some signs of movement from New Delhi. In March, India eased some restrictions on Chinese investment imposed after the 2020 border clashes, particularly in electronics, capital goods and solar cells. The government is also considering faster approvals for joint ventures between Indian and Chinese companies in selected industries.
Several significant projects have since received approval, including a manufacturing venture between India’s Dixon Technologies and Chinese smartphone maker Vivo Mobile.
But these measures have not been sufficient to bring back some of the largest Chinese companies that had considered investing in India. Vehicle manufacturers BYD and Great Wall Motor shelved planned investments after facing heightened scrutiny from New Delhi, according to an Indian government source.
Both companies declined to comment.
The restrictions are also not entirely a one-way story. Chinese companies seeking to invest in India are themselves facing increased scrutiny from Beijing, particularly in sectors involving sophisticated manufacturing and high-end technology, according to two people familiar with the matter.
That creates a particularly complicated environment for companies caught between two governments that increasingly regard technology and industrial capacity as matters of strategic importance.
China’s Foreign Ministry told Reuters that Xi and Modi viewed the two countries as “partners, not competitors” and that they represented “opportunities, not threats” to each other’s development.
India’s trade and foreign ministries did not respond to requests for comment.
At the same time, New Delhi continues to apply its own security-based restrictions. India has declined to approve a proposal by Alipay, a platform related to China’s Ant Group, to connect with India’s instant payments system, citing national security concerns.
The Indian government is also considering a recommendation by its Serious Fraud Investigation Office that Chinese cellphone maker Xiaomi be investigated over alleged irregularities in its Indian business and possible breaches of foreign investment laws. Xiaomi has said it complies with all local laws and has not received any communication from the SFIO.
Beijing, meanwhile, appears to be imposing its own limits on what Chinese companies can provide to India. One Indian source said Chinese authorities had instructed companies not to sell critical technology and infrastructure to India, including port equipment, solar panels and mobile manufacturing equipment. China’s Commerce Ministry did not respond to a request for comment.
The contradictions are particularly visible in areas where India remains dependent on Chinese equipment and components.
India and China resumed direct flights last year, while New Delhi also eased visa procedures for Chinese business professionals. Yet some Indian business people with interests in China have recently experienced difficulties securing visas, according to an Indian source and an industry executive.
China’s Foreign Ministry said it issues visas to “Indian nationals who have a genuine need to visit China” in accordance with its laws and regulations.
Meanwhile, Chinese-made equipment and components required by India’s solar, electronics and infrastructure sectors have reportedly been held up at Chinese customs. Some large boring machines required for major Indian infrastructure projects have remained delayed for more than a year, according to an Indian government official.
For Ajay Srivastava, founder of the New Delhi-based Global Trade Research Initiative and a former Indian trade negotiator, such delays go beyond routine bureaucracy.
The hold-up of visas and equipment, he said, “reflects more than administrative friction” and demonstrates China’s willingness to use India’s trade and technology dependence as leverage.
That interpretation highlights the central difficulty facing the two governments. Diplomatic gestures can ease tensions, but they cannot by themselves erase strategic mistrust embedded in investment approvals, technology transfers, supply chains and commercial access.
A meeting between Modi and Xi could nevertheless provide an opportunity to address some of these barriers. If the two leaders meet and the encounter produces concrete commitments, the political thaw could begin to acquire an economic dimension.
Anup Wadhawan, a former senior Indian trade official, said any meeting between the two leaders would “always afford opportunities to better align political and economic interests”.
But he also pointed to the limits of diplomacy. Commercial ties, he said, are driven by the mutual economic interests of citizens in both countries, while bilateral discussions can help create the conditions for those interests to develop.
That distinction may prove crucial during Xi’s expected visit. India and China may now be seeking a more stable political relationship, but their businesses continue to operate in an environment where security concerns, regulatory scrutiny and strategic dependence remain powerful forces.
The essential test of the thaw, therefore, may not be whether Xi and Modi can produce warmer rhetoric in New Delhi, but whether their governments can translate that rhetoric into fewer barriers for companies on both sides. Until that happens, diplomatic rapprochement and economic confidence will remain two very different propositions.
