India–China: A Strategic Balancing Act in a Shifting Order

India–China ties shaped by energy shocks, trade dependence, and strategic rivalry, with cautious cooperation emerging amid global uncertainty.

As global energy markets convulse under the weight of disruptions in the Strait of Hormuz and broader Middle East instability, India and China find themselves drawn into a mix of strategic rivalry and economic interdependence, driven by immediate energy security needs. Both nations, major importers of crude oil, have intensified their scramble for Russian energy supplies in recent weeks, with each securing roughly 1.6 million barrels per day in April amid constrained flows from traditional Gulf sources. This parallel pursuit highlights the structural dynamics shaping their bilateral relationship: economic ties persist even as border legacies, geopolitical alignments, and domestic priorities introduce friction.
India’s imports from China reached $131.63 billion in fiscal year 2025-26, a 16 percent increase from the prior year, while exports to China climbed 37 percent to $19.47 billion, widening the trade deficit to a record $112.6 billion. These figures highlight deep supply chain dependence, as Chinese raw materials, intermediate goods, and capital equipment underpin key Indian manufacturing sectors, including electronics, automobiles, and pharmaceuticals. A senior Indian government official emphasized that full decoupling remains unfeasible, with policy instead focused on building domestic capacity, diversifying suppliers from countries such as Taiwan, South Korea, Japan, and the European Union, and expanding exports through initiatives such as the Production-Linked Incentive scheme.
This measured approach aligns with broader signals of thawing tensions. For the first time in over five years, an Indian business delegation comprising eight companies, many startups in electric vehicle charging, battery solutions, and renewable energy, visited Shanghai and parts of Jiangsu province in late March and early April. The visit, organized by the PHD Chamber of Commerce and Industry, highlights India’s interest in Chinese technologies to bolster its energy security and support its ambitions to have electric vehicles comprise 30 percent of auto sales by 2030. Chinese officials and media outlets have welcomed such exchanges, noting their potential to foster technological complementarity and market access.
Diplomatic channels have also shown limited diplomatic progress. Indian and Chinese officials remain in contact to strengthen cooperation under the BRICS mechanism, with Beijing endorsing India’s current presidency of the group. Chinese Special Envoy Zhai Jun met with Indian Ministry of External Affairs Secretary Neena Malhotra during a visit to New Delhi, underscoring shared interests as major developing countries in addressing regional issues. Plans for Chinese Foreign Minister Wang Yi to attend BRICS foreign ministers’ meetings and for President Xi Jinping to visit India later this year for the BRICS summit further illustrate efforts to maintain dialogue, even as memories of the 2020 Galwan clash linger.
Yet the relationship operates within clear constraints. India’s strategic tilt toward the United States and its participation in groupings like the Quad have raised wariness in Beijing. At the same time, New Delhi maintains vigilance over border issues along the Line of Actual Control and concerns about Chinese investment. Recent policy adjustments, such as easing some restrictions on Chinese investments in select sectors and simplifying business visas, represent targeted easing measures rather than wholesale openings. Indian firms appear to favor technology-transfer partnerships and joint ventures over direct capital inflows, a stance that supports “Make in India” goals while mitigating perceived risks.
The Iran-related conflicts have amplified these dynamics. Disruptions in the Strait of Hormuz have slashed India’s and China’s crude imports through that route, pushing both toward alternative sources, primarily Russia. India, with more limited stockpiles and heavy reliance on Middle Eastern supplies, faces particular vulnerability, though it has avoided raising domestic fuel prices to curb demand. China, with larger reserves, maintains greater flexibility but still competes aggressively for discounted Russian barrels to sustain its export-oriented industries. Saudi Arabia, meanwhile, has directed more volumes toward China, reflecting established refinery ties. These pressures have underscored the limits of energy independence for both economies and the value of cost-driven sourcing shifts.
In the clean energy sphere, India and China are pursuing ambitious domestic agendas that could either foster collaboration or intensify rivalry. India’s National Green Hydrogen Mission, backed by subsidies exceeding $2 billion, targets annual production of 5 million metric tons by 2030, leveraging low renewable power costs to enhance energy security and reduce dependence on imported natural gas. China, investing heavily in green hydrogen projects such as the $2 billion Chifeng initiative in Inner Mongolia, aims to maintain leadership as the sector shifts away from coal-based production. Both countries are underwriting projects and steering demand to drive down costs, in contrast to a more restrained approach in parts of the West. There is potential for technology sharing and joint ventures in areas such as batteries and renewables, particularly as Indian delegations seek Chinese expertise.
Analysts and commentators from both sides have noted the limitations of zero-sum thinking. Cooperation is increasingly driven by cost advantages in sectors such as EV components, batteries, and industrial supply chains rather than grand strategic alignment. India requires access to mature, cost-effective technologies in electric vehicles, energy storage, and manufacturing components to accelerate industrialization and meet its growth targets. China seeks overseas markets to absorb excess capacity in advanced sectors. This complementarity could enhance the resilience of Asian supply chains, even as political caution persists.
Historical perspective offers context for the current trajectory. Nehru once envisioned India and China together ushering in an Asian golden age, a sentiment echoed by Singapore’s Lee Kuan Yew. Decades later, the two nations have evolved into asymmetric powers: China as a global economic force with extensive international investments, India as a rising player focused on domestic manufacturing and strategic autonomy. Trade volumes have grown dramatically since the late 1990s, yet imbalances and trust deficits remain. People-to-people ties lag, with visa hurdles and limited tourism flows—Chinese visitors to India number only in the tens of thousands annually—constraining deeper understanding.
Border management and multilateral forums provide arenas for managing differences. Both sides have engaged in disengagement processes along the Line of Actual Control and resumed direct flights. Within BRICS, opportunities exist to coordinate on issues such as multilateralism and multipolarity, though divergences over global conflicts, including the Iran situation, complicate consensus. India’s reluctance to fully align with certain BRICS partners on Middle East matters reflects its broader diplomatic balancing act.
Economic data further illustrate the stakes. India’s manufacturing push has shown results in sectors like mobile phones, where it has become the world’s second-largest exporter. This underscores India’s continued dependence on imported intermediates, and efforts to diversify supply chains face cost and quality challenges. For China, engagement with India offers a counterweight to external pressures and supports its export ambitions—recent bilateral trade growth of over 22 percent in early 2026 signals underlying momentum.
Observers caution that progress remains incremental and reversible. Indian policy continues to prioritize “de-risking” over decoupling, maintaining scrutiny of Chinese entities while selectively opening doors. Beijing, for its part, emphasizes win-win cooperation while navigating India’s security sensitivities. Public sentiment in India combines admiration for China's development achievements with unease over the bilateral imbalance and lingering border issues. Chinese perspectives highlight the potential for mutual benefit if both sides prioritize pragmatism.
In the near term, the interplay between global shocks and domestic imperatives will likely continue to shape the relationship. Energy volatility in the Middle East underscores the need for diversified energy sources and accelerated adoption of clean technologies. Trade imbalances test political will to address structural dependencies. Multilateral platforms such as BRICS and SCO provide venues for dialogue, even as bilateral mechanisms handle sensitive matters. Neither country can ignore the other’s weight in Asia’s economic architecture.
Overall, the outlook suggests cautious rapprochement rather than a full reset or open confrontation. The relationship is likely to evolve through compartmentalization—expanding economic cooperation alongside managed strategic friction. Progress will depend on sustained diplomatic engagement and commercially driven partnerships.

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