Xi's India visit to help diplomatic thaw, but business ties bound by suspicion

Chinese President Xi Jinping's much-anticipated visit to New Delhi this week, his first to India in seven years, should further the diplomatic thaw between the giant neighbours, but there are few signs as yet that their business ties will improve.

Businesses in both countries continue to face hurdles, including investments stalled by regulations, visa delays and restrictions on industrial ​equipment, underlining the gap between diplomatic progress and economic ties, analysts say.

While Xi is widely expected to be in Delhi this weekend for the annual BRICS summit, Beijing is ‌yet to confirm his visit, and there is no word if he will have a meeting with Indian Prime Minister Narendra Modi, which will be crucial to set the future direction of bilateral ties.

China and India fought a brief war in 1962, setting the backdrop for a wary relationship since then, which soured after a 2020 border skirmish killed 20 Indian and four Chinese soldiers. Still, ties have improved in recent years, especially since Modi visited China last year and as both nations grapple with ​volatile relationships with the US.

"China certainly wants to improve ties, but we are waiting to see to what extent India is actually willing to improve them," said Lin Minwang, a South Asia ​expert with Shanghai's Fudan University and former diplomat at the Chinese Embassy in New Delhi, suggesting that any dramatic progress was unlikely.

Harsh Pant, vice president at New ⁠Delhi's Observer Research Foundation think tank, said the "trust deficit" between the countries was high.

He added: "China has economic heft and there is a good opportunity to use that and emerge as a reliable partner, especially when ​both nations are impacted by America's trade policies."

In March, India eased some of the restrictions on Chinese investment that it imposed following the 2020 border clashes, focusing on electronics, capital goods and solar cell sectors. It is also ​considering faster approvals for joint ventures between Indian and Chinese firms in some industries.

New Delhi has since approved a few significant projects, including a manufacturing venture between India's Dixon Technologies and Chinese smartphone maker Vivo Mobile.

But that has not been enough to attract back leading Chinese companies like vehicle makers BYD and Great Wall Motor, which shelved planned investments in India after facing heightened scrutiny by New Delhi, according to an Indian government source.

Great Wall Motor and BYD declined to comment.

Partners, not competitors

Chinese companies' ​proposed investments in India are facing more scrutiny from Beijing itself, including in sectors where sophisticated manufacturing and high-end technology may be involved, the source and another person said, both requesting anonymity as they were not ​authorised to speak to the press.

China's foreign ministry told Reuters that Xi and Modi, who briefly met this month at a regional forum in Kyrgyzstan, think the two countries are "partners, not competitors, and they represent opportunities, not threats, for each ‌other's development".

India's trade ⁠and foreign ministries did not respond to requests for comment.

New Delhi has declined to approve a proposal by Alipay, a platform related to China's Ant Group, to be linked to India's instant payments system, citing national security concerns, Reuters reported last week.

The Indian government is also considering a recommendation by its Serious Fraud Investigation Office that Chinese cellphone maker Xiaomi be investigated for alleged irregularities in its business in India and breach of foreign investment laws, Reuters has reported. Xiaomi said it complies with all local laws and has not received any communication from the SFIO.

At the same time, one of the Indian sources said, Chinese authorities have asked companies not to ​sell critical technology and infrastructure to India, including port ​equipment, solar panels and mobile manufacturing equipment. China's ⁠commerce ministry did not respond to a request for comment.

Last year, India and China resumed direct flights and New Delhi eased visa procedures for Chinese business professionals.

However, some Indian business people with interests in China have recently had trouble securing visas, according to one of the sources and an industry executive.

China's foreign ministry said it issues visas ​for "Indian nationals who have a genuine need to visit China" in accordance with the law and regulations.

This year, equipment and components made in China that ​India needs in key sectors such ⁠as solar energy and electronics as well as infrastructure development have been held up at Chinese customs, according to the industry executive and the two Indian sources.

Some massive boring machines from China for key infrastructure projects in India have been held up for more than a year, a third Indian source, a government official, said.

The hold-up of visas and equipment "reflects more than administrative friction" and shows China's willingness to use India's trade and technology dependence as leverage, ⁠said Ajay Srivastava, ​founder of New Delhi-based think tank Global Trade Research Initiative and a former Indian trade negotiator.

But a meeting between Modi and ​Xi could help dismantle some barriers, if it goes well.

Anup Wadhawan, a former top Indian trade official, said any meeting between the top leaders of the two countries will "always afford opportunities to better align political and economic interests".

"Of course, commercial ties are ultimately driven by ​the mutual economic interests of the citizens of both countries. Bilateral discussions can, however, work towards enabling these pathways to fructify."