Modi, Xi push for balanced trade ties, stress border stability at SCO Summit

India and China have moved closer to repairing a complex relationship battered by their 2020 border clash, as rising tariff wars and creaking supply chains foster an environment to rebuild bridges.

Prime Minister Narendra Modi on Sunday met Chinese President Xi Jinping in Tianjin, in Modi's first visit to the northern neighbour since 2018. The two leaders stressed the need to expand trade and investment ties with a political and strategic vision, while addressing New Delhi's concerns over its trade deficit with Beijing.

According to a statement issued by the Prime Minister's Office, Modi and Xi also pointed to the role of their economies in stabilizing global commerce, as leaders of the Shanghai Cooperation Organisation (SCO) met at the port city a couple of hours' drive from Beijing. Modi noted that India and China both pursue strategic autonomy, and that their relationship should not be seen through the prism of a third country.

Modi’s visit comes at a time when the two Asian giants face steep tariffs from Washington. Last week, the US raised tariffs on India to 50%, citing India's links to Russia that New Delhi defends. Meanwhile, trade talks with the US remain in limbo.

The SCO was founded in 2001 by China, Russia, and four Central Asian nations. The group's primary purpose is to address regional security threats, while also promoting economic and cultural cooperation among its members.

The leaders agreed to promote people-to-people exchanges, including direct flights, visa facilitation, and the resumption of the Kailash Manasarovar Yatra. Modi also expressed support for China’s SCO presidency and invited Xi to attend the Brics Summit in India in 2026. Xi thanked him for the invitation and assured support for India’s presidency.

The Tianjin talks come against the backdrop of New Delhi weighing easier rules for Chinese investments in select sectors. India is considering a relaxation of curbs imposed in 2020, with a proposal to allow 20-25% Chinese investments through the automatic route in sectors such as manufacturing, renewable energy, and auto components, Mint reported on 18 August. In return, India is seeking greater market access for its goods in China, particularly in areas like pharmaceuticals, IT services, and agriculture. India's trade deficit with China reached almost $100 billion in FY25 as imports surged to $113.45 billion, while exports stood at $14.25 billion.

“The international situation is both fluid and chaotic,” Xi said in a PTI video of the meeting. It is right for China and India “to be friends who have good neighbourly and amicable ties, partners who enable each other’s success, and to have the dragon and the elephant dance together,” he said .

The two leaders agreed that cooperation between their 2.8 billion people is essential for global growth, but also acknowledged that differences should not be allowed to turn into disputes. They stressed that addressing economic imbalances, alongside expanding investment, was key to building durable trust.

While trade formed the centrepiece of the discussion, Modi reiterated that peace and tranquility along the border remained a prerequisite for sustained progress in ties. The leaders welcomed the successful disengagement achieved last year and the continued calm along the Line of Actual Control (LoC), pledging to work towards a fair and mutually acceptable boundary settlement. They backed the decisions taken earlier this month by their Special Representatives and promised further support to that process.

Xi said India should not let border issues define their relationship, a Bloomberg report said, quoting Chinese news agency Xinhua, adding that the “right choice” is to be friends. “As long as the two countries remain partners rather than rivals, and see each other as development opportunities rather than threats, China-India relations will flourish and move forward steadily,” Xi said.

In a separate meeting with Cai Qi, a senior Politburo Standing Committee member, Modi shared his vision for bilateral relations and sought support in implementing the consensus reached at the leadership level. Cai conveyed China’s readiness to expand exchanges and strengthen cooperation, as per the PMO’s statement.

Experts note that India’s push to reduce the trade deficit reflects growing pressure at home to secure more equitable terms of engagement, even as both sides project partnership at multilateral forums.

“The discussions in Tianjin suggest that New Delhi is seeking to balance its call for greater trade access with its insistence on border stability, while Beijing is signaling openness to recalibrating ties after years of strain,” said Biswajit Dhar, a trade policy expert from the Delhi-based think tank, Council for Social Development.

India restricted Chinese investments after the deadly clash between the soldiers of the two nations in Ladakh’s Galwan Valley in 2020. Still, trade continued to grow as India relies on its neighbour for imports of pharmaceutical raw materials to electronic parts. India’s imports from China increased from $94.57 billion in FY22 to $113.45 billion in FY25. In contrast, exports to China declined from $21.26 billion in FY22 to $14.25 billion in FY25.

Inbound shipments from China during April–July 2025 stood at $40.66 billion, up 13.1% from a year earlier. Exports to China jumped 20% to $5.76 billion during the period.