Will 'India-China Bhai Bhai' Nostalgia Save Business Realities?

China has expressed concerns over India's recent retaliatory military mission, Operation Sindoor, targeting 9 terror sites in Pakistan and Pakistan-occupied-Kashmir. China also called India's military retaliation "regrettable" in a statement released by its Ministry of Foreign Affairs on Wednesday.

“China expresses regret over India’s military actions this morning and is concerned about the current developments. China opposes all forms of terrorism. We call on both India and Pakistan to prioritise peace and stability, remain calm and restrained, and avoid taking actions that further complicate the situation,” the statement read.

"China finds India’s military operation early this morning regrettable… India and Pakistan are and will always be each other’s neighbours. They’re both China’s neighbours as well,” it added further.

Recently, Chinese Foreign Minister Wang Yi called on New Delhi and Beijing to work together and "take the lead in opposing hegemonism and power politics." Wang said that making the dragon and elephant dance is the only right choice. "Supporting, instead of wearing each other down, and strengthening cooperation, instead of guarding (against) each other, is in our fundamental interests," he added.

Can India-China Ties Improve?

While Wang Yi’s remarks may sound conciliatory, the reality on the ground tells a different story. Over the past five years, India-China ties have endured one of their most difficult periods since the 1962 war—marked by border skirmishes, military standoffs, and heightened economic rivalry. Militaries of both nations also had their first deadly confrontation after 45 years in June 2020 in Galwan Valley. Moreover, Wang's comment that “border issues should not define the overall relationship” downplays what New Delhi sees as a core matter of territorial integrity. Ultimately, both countries see it as a non-negotiable pact.

Tensions have also flared over Beijing’s stance following last month’s terror attack in Pahalgam. While China urged both India and Pakistan to de-escalate, it also reaffirmed its support for Pakistan’s “sovereignty and security interests.”

China’s deepening strategic embrace of Pakistan continues to fuel India’s concerns. From transferring nuclear technology and supplying conventional arms to constructing key infrastructure through disputed regions under the China-Pakistan Economic Corridor (CPEC), Beijing has steadily bolstered Islamabad's capabilities. It has also repeatedly blocked India-backed moves at the UN targeting Pakistan-based terrorists. Notably, a 2001 U.S. Department of Defence report accused China of helping Pakistan build nuclear weapons facilities—despite being a signatory to the Nuclear Non-Proliferation Treaty (NPT).

While recent reports from last year suggest a breakthrough with troops withdrawing from Depsang and Demchok, it is worth remembering that this came after four years of tensions, measures and counter-measures.

Against this backdrop, the nostalgic notion of an India-China Bhai-Bhai relationship feels more like history than hope.

Trade in Question

Beneath the diplomatic overtures lies a starkly unequal economic reality. India’s trade deficit with China has ballooned to record levels, despite efforts to curb dependency. India's exports to China declined nearly 3% in March and dropped over 14% across the financial year. In contrast, India's imports from China have grown rapidly and reached 25% in March alone to $9.6bn and over 11% year-on-year to $113.4bn. Overall, India’s trade deficit with China hit a staggering $99.2bn in FY2025—a record gap that reflects deeper structural dependencies.

Chinese goods continue to dominate Indian markets, while Indian exports face formidable non-tariff barriers—particularly in pharmaceuticals, IT services and agriculture. Chinese investment in India also nearly vanished since 2020, when India tightened FDI norms amid border tensions.

However, if India's relationship with China deteriorates, it would not only strain the economy but also disrupt global supply chains. India's efforts to bolster domestic manufacturing under initiatives like "Atmanirbhar Bharat" would face hurdles due to the sudden need to replace Chinese imports. A sudden halt in trade could lead to shortages, disrupt manufacturing and inflate costs for both consumers and industries. Losing access to India's market could exacerbate China's existing economic challenges amid global trade tensions as well. Conversely, China would need to find alternative markets for its exports, which could be challenging given the current global protectionist trade climate.