India-China trade is best described as imbalanced. China runs large deficits with only a few partners such as Australia and Brazil, but with India it records a surplus exceeding $100 billion. This did not begin in 2025, nor will it end with the latest data. It reflects a long arc of rising dependence: first on Chinese capital goods and intermediates, later on electronics, telecom equipment, pharmaceutical inputs and, more recently, green technologies. What is striking is not just the size of the gap, but how little India exports to China reveal about the depth of its manufacturing and export ecosystem.
Chinese customs data for 2025 show bilateral trade at a record $155.62 billion, with India’s deficit widening to $116.12 billion. Indian exports rose to $19.75 billion, up 9.7% year-on-year. Oil meals, marine products, spices and some telecom instruments found incremental space in the Chinese market. These gains matter, but they do not materially alter the imbalance.
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Chinese exports to India grew faster, rising 12.8% to $135.87 billion. Beijing sells finished goods and high-value intermediates embedded deep within Indian supply chains. India exports a basket still dominated by low- and medium-value primary or semi-processed products. The arithmetic is unforgiving. Even when Indian exports rise, the deficit remains structurally large.
China’s export juggernaut looks unstoppable
China’s broader trade position helps explain why. Despite tariff escalation under US President Donald Trump, China posted a global trade surplus close to $1.2 trillion in 2025 on exports of $3.77 trillion. Market diversification, sustained industrial subsidies and steady movement up the value chain cushioned external shocks. Slower demand in the West has pushed Chinese firms harder into emerging markets. With access to scale finance and state support, they can undercut prices that domestic producers in India struggle to match.
An often overlooked constraint lies outside trade policy altogether. China’s export competitiveness is reinforced by macro price conditions that India does not control at the border. A managed exchange rate, low industrial energy costs and sustained credit support compress export prices even when margins thin. India’s real exchange rate, by contrast, has remained relatively firm for long stretches, weakening price competitiveness in precisely those manufacturing segments where substitution is most feasible. Anti-dumping duties and quality controls cannot offset this differential. Without addressing cost structures that shape export pricing, industrial expansion alone will not translate into deficit correction.
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Delhi’s responses have been largely defensive. Diplomatic engagement, anti-dumping duties, quality controls, and after 2020, restrictions on Chinese investment and apps, have reduced strategic exposure. They have not altered the trade equation. Tariff escalation would mainly raise costs for Indian industry and consumers, without narrowing dependence.
India-China trade deficit
The deficit cannot shrink without domestic competitiveness. Dependence is highest in electronics, electrical machinery, chemicals and pharmaceutical intermediates. Production-linked incentive schemes have helped expand electronics assembly, particularly mobile phones. But assembly alone does not reduce vulnerability. Backward integration does.
As long as Indian factories import displays, semiconductors, battery cells and specialised components from China, import bills will remain elevated. Scale manufacturing, technology acquisition and logistics reform are not optional add-ons. Without them, Make in India risks becoming import substitution with limited export payoff.
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Market access remains another fault line. India has long sought entry for IT services, pharmaceuticals and agricultural products, sectors where it has comparative strength. Progress has been slow, constrained by regulatory opacity and non-tariff barriers. Broad demands have yielded little. Narrow, product-specific negotiations anchored in safety standards, quality benchmarks and commercial reciprocity may prove more effective.
There is also a limit to what bilateralism can deliver. China’s export resilience rests on deep integration into regional and global value chains. India’s reluctance to join large trade agreements has restricted access to these networks. That posture is beginning to shift, but re-engagement cannot be symbolic. It must be aligned with domestic reform.
Strategic caution is understandable. Yet diversifying export destinations reduces pressure to extract concessions from a single, difficult market. Trade outcomes are shaped by network access as much as by bilateral bargaining.
Trade and politics between India and China remain tightly coupled. Diplomatic thaws can smooth commerce; border tensions harden regulatory positions overnight. A minimum level of stability is a prerequisite for any sustained effort to rebalance trade.
The 2025 numbers are neither a failure nor a turning point. They are a reminder of scale. Balance will not come from a single policy tweak or a dramatic negotiation. It will emerge, slowly, from domestic capability and the recognition that in a world of shifting supply chains, trade outcomes are determined as much at home as across the border.