India may lower its Chinese trade wall

Ahead of Prime Minister Narendra Modi's visit to China, India is weighing easier rules for Chinese investments in select sectors, two people aware of the matter said, in another step to restore ties and bolster trade amid US tariff uncertainty.

- Dhirendra Kumar

The proposal under consideration is to identify nonsensitive areas such as specific segments of manufacturing, renewable energy, and consumer goods, where investment proposals from Chinese companies could be cleared through a faster and simplified approval process, said the first of the two people cited above.

“Talks are underway at the diplomatic level to find a workable solution, keeping sensitive sectors such as defence and telecom, and critical digital infrastructure to ensure that national security is not compromised even as economic benefits are realised,” said the second person. Both spoke on the condition of anonymity.

“As there is no plan to review Press Note 3, investments from China will be considered through the government approval route and not via the automatic route,” this person said. Under Press Note 3, investments from countries sharing a land border with India must be approved by the government first.

India restricted such investments after the deadly clash between the soldiers of the two nations in Ladakh’s Galwan Valley in 2020. Still, trade continued to grow as India relies on its neighbour for imports of pharmaceutical raw materials to electronic parts. India’s imports from China increased from $94.57 billion in FY22 to $113.45 billion in FY25. In contrast, exports to China declined from $21.26 billion in FY22 to $14.25 billion in FY25.