China has sent feelers on addressing India’s concerns on the trade deficit through higher imports of Indian goods by removing tariff and non-tariff barriers.
Beijing has signalled its intention to address India’s concerns about a growing trade deficit that was estimated at a record $100 billion in FY25, people close to the development said, with the aim apparently of placating New Delhi through more imports amid Beijing’s escalating trade war with Washington.
China has informally sent feelers about addressing India’s concerns on the trade deficit though higher imports of Indian goods by removing tariff and non-tariff barriers, at least three people aware of the matter said on condition of anonymity. The move comes at a time when China is grappling with US tariffs of 145% on all Chinese goods.
India hasn’t taken any formal position on the matter as yet because such bilateral talks involve the principle of reciprocity. New Delhi fears that easing trade barriers bilaterally could further aggravate the dumping of Chinese goods in India, thee people added.
In addition to the informal feelers, Chinese ambassador Xu Feihong recently spoke of the possibility of China buying more Indian goods and attracting investments from Indian firms. In an interview with state-run Global Times just before US President Donald Trump unveiled his reciprocal tariffs, Xu noted that India-China ties are at a crucial juncture and New Delhi should create a fair and transparent business climate for Chinese companies.
“The trade deficit was the main reason why the US imposed 125% retaliatory tariffs on Chinese imports,” the person added. With two-way trade in goods between the US and China worth $582.4 billion in 2024, America faced a deficit of $295.4 billion.
Similarly, India has witnessed a ballooning trade deficit with China for years, a second person said, citing official data. “In the pre-Covid period during 2019-20, India’s trade deficit with China was $48.65 billion. It fell marginally to $44 billion in 2020-21 due to the global economic slowdown. Thereafter, the deficit rose year after year,” he said.
India’s trade deficit with China was $73.31 billion in 2021-22, $83.2 billion in 2022-23 and $85.08 billion in 2023-24, according to the Directorate General of Commercial Intelligence and Statistics (DGCIS).
The people said the Indian side has flagged two major issues to China – the huge deficit and the lack of predictable trade arrangements. “While the massive deficit is a problem, there is also a need for long-term predictable arrangements. If politics is brought into trade, it isn’t helpful,” a third person said.
Chinese envoy Xu, in his recent interview, described development as the “greatest common denominator” between the two countries and hinted at addressing the deficit through greater imports.
“We are willing to work with the Indian side to strengthen practical cooperation in trade and other areas, and to import more Indian products that are well-suited to the Chinese market. We also welcome more Indian enterprises to cross the Himalayas and seek opportunities for cooperation in China, sharing the dividends of China’s development,” Xu said.
Xu expressed the hope that India will “create a fair and transparent business climate for Chinese companies, further expanding mutually beneficial cooperation and delivering more tangible benefits” to the two sides.
India virtually halted Chinese investments, banned scores of Chinese apps and imposed greater scrutiny of the operations of Chinese companies after the start of a military standoff on the Line of Actual Control (LAC) in April-May 2020. The face-off and the massing of about 60,000 troops by each side took bilateral relations to their lowest point since the 1962 border war.
Since the two sides reached an understanding last October to complete the disengagement of troops on the LAC and the top leadership revived several mechanisms to normalise relations, China has pushed for the easing of trade-related restrictions, including more visas for Chinese businesses and direct flights. The Indian side’s approach has been more cautious, and external affairs minister S. Jaishankar has even called for application of “national security filters” for investments.
According to commerce ministry’s provisional data, India’s exports to China fell in the first 11 months of 2024-25. India exported merchandise worth $12.74 billion during April 2024-February 2025, a 15.66% annualised dip. But Chinese imports in India surged by 10.41% in the same period to $103.78 billion, as compared to $93.99 billion during April 2023-April 2024.
China enjoyed a trade surplus of more than $91 billion in the first 11 months of FY25. It is estimated this number may touch $100 billion for the full financial year 2024-25.
Hindustan Times reported on February 24 that India’s goods imports from China would surpass $100 billion in February itself and most likely surpass the record of $101.73 billion seen in 2023-24. The Indo-China trade imbalance is set to continue as Chinese imports grow while India’s exports contract, leading to a widening trade deficit.
The deficit occurs because India imports more from China than it exports. Indian officials had flagged issues such as non-tariff barriers and difficulties in accessing Chinese markets long before the start of the LAC standoff. While China said it would address these issues, few practical steps were taken on the ground, they said.
Key imports from China include electronic components, computer hardware, telecom instruments, dairy machinery, organic chemicals, electronic instruments, electrical machinery, plastic raw materials and pharmaceutical ingredients. India exports iron ore, marine products, petroleum products, organic chemicals, spices, castor oil and telecom equipment to China.
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