Whalesbook
Record Trade Volume Masks Growing Imbalance
Bilateral trade between India and China reached an unprecedented $155.6 billion in 2025, representing a substantial 12% year-on-year growth. Chinese Ambassador Xu Feihong highlighted this figure, attributing the positive trajectory to improved diplomatic relations following the "successful" meeting between Prime Minister Narendra Modi and President Xi Jinping in Tianjin in August 2025. This economic expansion occurred despite the lingering geopolitical tensions stemming from the June 2020 Galwan Valley clashes, which had severely strained ties. China's supportive stance on India's upcoming BRICS presidency and its commitment to advancing the Global South agenda were also emphasized, suggesting a strategic alignment aimed at mutual benefit.
Trade Deficit Surpasses $100 Billion Mark
Despite the headline trade growth, a critical concern remains India's escalating trade deficit with China. Projections and reported figures indicate the deficit widened to approximately $116 billion in 2025, with some estimates placing it at $99.2 billion for FY2024-25. This substantial imbalance is driven by India's heavy reliance on Chinese imports, which were valued at $113-114 billion in 2025, dwarfing India's exports of around $14.25 billion. China's strong export performance, growing 5.5% overall in 2025, contrasts with India's challenges in diversifying its export basket. India's exports to China, while rising 9.7% in 2025, are heavily concentrated in lower-value-added raw materials and commodities such as iron ore and oil meals, whereas imports from China are dominated by sophisticated electronics, machinery, and chemicals. This lopsided trade composition underscores India's industrial vulnerability and dependence on Chinese supply chains for critical sectors, including electronics and machinery.
Strategic Undercurrents in Economic Engagement
The renewed economic engagement occurs against a backdrop of ongoing strategic competition. While China has supported India's multilateral engagements, such as its BRICS presidency, and promoted cooperation within the Global South framework, analysts question the long-term sustainability of this trade surge amidst unresolved territorial disputes and significant power asymmetries between the two nations. China itself recorded a record trade surplus of $1.189 trillion in 2025, indicating a robust overall export performance that has shifted away from the US towards regions like ASEAN, the EU, and India. For India, the trade relationship with China remains complex, balancing economic necessity with strategic caution, particularly as the United States solidifies its position as India's largest trading partner with a significant trade surplus in India's favor. The diplomatic narrative of partnership, echoing shared philosophies like 'Vasudhaiva Kutumbakam,' is thus intertwined with the persistent reality of an asymmetric economic relationship that carries significant strategic implications.