Xi Jinping Poised for First New Delhi Visit in Seven Years; Diplomatic Thaw Cannot Mask Structural Economic Distrust Between China and India

According to The Hindu, Chinese President Xi Jinping is expected to arrive in New Delhi this weekend to attend the BRICS summit, marking his first visit to India in seven years. Beijing has not officially confirmed the trip, and neither side has announced whether Xi will hold a bilateral meeting with Indian Prime Minister Narendra Modi on the sidelines of the summit.

There are indeed signs of warming on the diplomatic front. Modi visited China last year, the two countries resumed direct flights, and India eased business visa procedures for Chinese nationals. Earlier this month, the two leaders had a brief meeting at a regional forum in Kyrgyzstan. China's Foreign Ministry said Xi and Modi considered their countries "partners rather than rivals, and opportunities for each other's development rather than threats."

But at the industrial level, the limits of the thaw are clearly drawn. The 2020 border clash, which killed 20 Indian soldiers and 4 Chinese soldiers, prompted India to impose restrictions on Chinese investment. In March, New Delhi partially relaxed restrictions on Chinese investment in the electronics, capital goods and solar cell sectors, and approved a joint manufacturing project between India's Dixon Technologies and Chinese smartphone maker Vivo. However, BYD and Great Wall Motors have shelved their investment plans in India amid heightened scrutiny; both companies declined to comment.

Beijing's reciprocal restrictions have tightened in tandem. According to sources cited by The Hindu, Chinese authorities have instructed companies not to sell key technology and infrastructure to India, covering port equipment, solar panels and mobile manufacturing equipment. Since the beginning of this year, some Chinese equipment and components intended for Indian solar, electronics and infrastructure projects have been detained by Chinese customs, and multiple large tunnel boring machines for critical infrastructure projects have been held up for over a year. China's Foreign Ministry gave only a general response on visa matters, saying it issued visas according to laws and regulations to "Indian citizens with genuine needs to travel to China"; the Commerce Ministry did not respond to requests for comment; India's Trade Ministry and Foreign Ministry likewise did not respond to requests for comment.

The visa channel is also narrowing. After India eased business visa procedures for Chinese nationals last year, some Indian businessmen with commercial interests in China have recently still found it difficult to obtain visas. India has also rejected, on national security grounds, a proposal by Ant Group, an affiliate of China's Ant Group, to integrate Alipay into India's instant payment system, and is reportedly considering opening an investigation into alleged violations by Xiaomi in its India business. Xiaomi said it complies with all local laws.

"The detentions of visas and equipment have gone beyond the realm of administrative friction," said Ajay Srivastava, founder of the New Delhi-based think tank Global Trade Research Initiative and a former Indian trade negotiator, "It shows China is willing to use India's trade and technology dependence as leverage against it." Lin Minwang, a South Asia expert at Fudan University and a former Chinese diplomat at the embassy in New Delhi, said: "China certainly hopes to improve relations, but we are waiting to see how far India is willing to go in improving them."

The shock from U.S. trade policy constitutes a common external variable. Harsh Pant, vice president of the Observer Research Foundation in New Delhi, argued: "China has economic weight, and there is a good opportunity to leverage that weight to become a reliable partner, especially as both countries are buffeted by U.S. trade policy." He also acknowledged that the "trust deficit" between the two countries remains high. Anup Wadhawan, a former senior Indian trade official, said the leaders' meeting would "provide an opportunity to better align political and economic interests." But with tunnel boring machines still stuck in Chinese customs, BYD and Great Wall Motors shelving investments, and Ant Group's access application rejected, whether this "opportunity" can be transmitted to the industrial level remains to be seen.