India–China Bilateral Trade Reaches Record $155 Billion in 2025

India and China recorded a historic milestone in 2025, with bilateral trade reaching a record $155.6 billion, reflecting a year-on-year growth of over 12 percent. The achievement was confirmed by Chinese Ambassador to India, Xu Feihong, and marks a significant rebound in economic engagement between the two Asian giants after years of strained relations following the 2020 military standoff along the Line of Actual Control (LAC).

The surge in trade underscores the resilience of economic ties despite persistent geopolitical complexities. It also highlights how commercial engagement continues to act as a stabilising factor in the broader bilateral relationship.

Image from The Hindu BusinessLine

Diplomatic Thaw Strengthens Economic Cooperation

The improvement in trade volumes follows a period of renewed high-level diplomatic engagement. A key meeting between Prime Minister Narendra Modi and Chinese President Xi Jinping in Tianjin in 2025 was widely described by officials as a “reset and fresh start” for bilateral ties. Since then, exchanges at multiple levels have increased, contributing to a gradual normalisation of relations.

Steps such as the resumption of direct flights, restoration of tourist visa processes, and revival of people-to-people exchanges have helped rebuild confidence and facilitated smoother business and commercial activity. These measures have played a critical role in unlocking stalled economic channels and encouraging stronger trade flows.

Indian Exports to China Show Encouraging Growth

A notable feature of 2025 was the 9.7 percent increase in India’s exports to China, with shipments rising to approximately $19.75 billion. This marks a rare and meaningful improvement after several years of limited growth in Indian exports to its largest trading partner.

Products such as marine goods, oil meals, telecom equipment, spices, petroleum products, aluminium, sulphur, and select agricultural items have gained traction in the Chinese market. Industry analysts also point to rising exports of electronics components and petroleum derivatives, indicating a slow but steady diversification of India’s export basket.

China has publicly expressed its willingness to import more Indian products, and global agencies such as Reuters have reported Beijing’s intent to deepen commercial cooperation as part of broader efforts to stabilise ties and rebalance trade.

Record Trade Deficit Highlights Structural Imbalance

Despite the positive momentum in exports, India’s trade deficit with China widened sharply in 2025, reaching a historic high of over $116 billion. Chinese exports to India rose to nearly $136 billion, driven by strong Indian demand for electronics, machinery, EV batteries, solar equipment, chemicals, pharmaceuticals intermediates, and industrial components.

This widening gap reflects India’s continued dependence on Chinese manufacturing supply chains. Economists and business leaders have repeatedly warned that such structural dependence poses long-term economic and strategic risks, particularly in critical sectors linked to technology and energy transition.

Multilateral Cooperation and Strategic Context

Beyond bilateral trade, both countries have reaffirmed cooperation within multilateral platforms such as BRICS, with China expressing support for India’s leadership role and shared priorities related to the Global South. Cultural and civilisational references — including China’s vision of global harmony and India’s principle of Vasudhaiva Kutumbakam — have also been highlighted to underline common ground.

At the same time, unresolved issues such as border stability, investment restrictions, and limited market access for Indian pharmaceuticals, IT services, and agricultural products continue to shape the pace and quality of economic engagement.

The MGMM Outlook

India–China bilateral trade touching a record $155 billion in 2025 reflects the resilience of economic engagement despite unresolved strategic and security challenges. The recent diplomatic reset, marked by high-level interactions and the gradual restoration of travel, visas, and people-to-people exchanges, has helped revive commercial momentum after years of strain following the LAC standoff. The growth also highlights how economic ties continue to act as a stabilising channel in an otherwise complex relationship, allowing trade to expand even when political trust remains limited.

At the same time, the sharp widening of India’s trade deficit to over $116 billion exposes a serious structural imbalance. While Indian exports to China have shown some improvement across sectors such as marine products, petroleum goods, spices, and select manufacturing components, China’s dominance in supplying electronics, machinery, energy equipment, and industrial inputs continues to deepen India’s dependence on Chinese supply chains. This trend underlines the urgent need for stronger domestic manufacturing, diversified export capacity, and improved market access in China, so that rising trade volumes translate into more balanced and strategically sustainable economic outcomes for India.

(Sources: The Hindu BusinessLine, Economic Times, Business Standard)