China’s New Caution: Why Beijing “Doesn’t Want to Repeat the West’s Mistakes” With India

India’s Chief Economic Adviser, V. Anantha Nageswaran, recently offered an important insight into the evolving dynamics between New Delhi and Beijing. He noted that China appears unwilling to make the same strategic errors that Western nations once made while dealing with China’s rise. His remark reflects a broader shift in the geopolitical and economic relationship between the two Asian giants — one marked by caution, controlled engagement, and a deep understanding of each other’s strategic ambitions.

India is unlikely to lift its ban on Chinese investments soon, according to Chief Economic Adviser V. Anantha Nageswaran.(PTI) | LiveMint

A Delicate Reset in India–China Economic Relations

India and China remain economically interconnected, yet political tensions and security concerns continue to shape the pace of engagement. Nageswaran explained that India will not immediately lift the investment restrictions imposed on Chinese entities after the 2020 border clashes. He described the current phase as a cautious process where both sides “cross the river by feeling the stones,” signalling incremental adjustments rather than dramatic shifts.

This measured approach has been driven by India’s intent to protect critical sectors, reinforce national security, and avoid overdependence on China — lessons drawn from global experiences with Beijing’s economic influence. The investment restrictions, which require government approval for Chinese FDI, are therefore expected to stay in place for the foreseeable future.

Why China Is Rethinking Its Strategy Toward India

Nageswaran’s observation suggests a deeper strategic recalibration underway in Beijing. For decades, China benefited immensely from Western openness — gaining access to technology, markets, and capital that accelerated its transformation. Today, it appears unwilling to allow India to replicate this trajectory at China’s expense.

This shift is evident in China’s selective approach to economic cooperation with India. While Beijing advocates stability and trade continuity, it remains cautious about enabling India’s rapid rise, especially in sectors where both nations compete for regional and global influence. This mindset has influenced Chinese positions in trade negotiations, technology partnerships, and regional diplomacy.

Trade Imbalance and Strategic Concerns

One of the biggest friction points between the two nations is India’s persistent trade deficit with China, which stands at several tens of billions of dollars annually. India has repeatedly flagged the asymmetry in market access and the dependence on Chinese industrial components, especially in electronics, pharmaceuticals, and manufacturing.

Efforts to address the deficit have faced limitations due to structural differences in the two economies. New Delhi continues to advocate diversification of supply chains, investment in domestic manufacturing, and stronger screening of high-risk imports. China’s reluctance to open its markets more broadly to Indian companies adds another layer to the tension.

Cautious Engagement Through Selective Openings

Despite strategic distrust, the relationship has entered a phase of pragmatic cooperation. Various industries in India, particularly electronics and renewable energy, have pushed for calibrated Chinese investment to support local manufacturing. These proposals often come with strict ownership caps or joint-venture requirements, demonstrating India’s attempt to balance economic needs with strategic oversight.

India has also begun easing certain operational barriers, particularly regarding the entry of skilled Chinese professionals. Steps to expedite visas for technical experts are seen as practical measures that support ongoing projects without altering the broader policy stance on investment restrictions. These moves indicate a willingness to cooperate in areas that serve mutual economic interests while keeping high-risk sectors tightly guarded.

The Path Ahead: Signals to Watch

The trajectory of India–China economic relations will depend heavily on domestic policy reviews, external geopolitical alignments, and the nature of negotiations around trade and technology. India’s strengthening partnerships with the United States, Japan, and Europe are likely to influence Beijing’s long-term posture toward New Delhi. Similarly, Chinese attempts to maintain regional influence will shape how Beijing approaches India’s economic rise.

For now, both countries appear committed to a model of compartmentalised engagement — one that allows cooperation where beneficial but maintains strong barriers where strategic rivalry dominates.

The MGMM Outlook

India’s evolving economic engagement with China reflects a phase of strategic caution shaped by the lessons of global experiences with Beijing’s rise. The Indian government continues to maintain tight investment curbs on Chinese entities introduced after the 2020 border clashes, ensuring that critical sectors remain protected and foreign dependencies are reduced. China’s growing hesitation to extend the same latitude that Western nations once offered it indicates a recalibrated strategy aimed at preventing India from accelerating its industrial and technological ascent using Chinese systems or partnerships. The imbalance in bilateral trade, limited market access for Indian companies, and China’s selective cooperation further reinforce the complexity of this relationship.

Even within this tense framework, both nations recognise the importance of pragmatic economic touchpoints. India’s industries continue to seek controlled Chinese participation in certain manufacturing segments, supported by strict regulatory filters, ownership limits, and enhanced scrutiny of sensitive technologies. Meanwhile, measured steps—such as smoother visa clearances for Chinese technical experts—suggest a willingness to facilitate essential collaboration without loosening broader restrictions. The dynamic ahead will be shaped by India’s deepening ties with the U.S., Japan, and Europe, and China’s determination to safeguard its regional influence, resulting in a relationship defined by compartmentalised cooperation, strategic restraint, and an ongoing contest for economic leverage in Asia.

(Sources: LiveMint, Firstpost, Times of India)