China is now ready to address trade concerns with India
The Union Commerce and Industry Minister held talks with China's Commerce Minister on bilateral economic and trade relations.
The discussions followed an earlier understanding reached at the leaders' level to treat each other as development partners rather than rivals, and to work toward resolving structural trade imbalances, supply-chain issues, and predictable market access.
The Chinese side indicated willingness to work with India to address trade concerns and expand mutually beneficial cooperation.
The engagement comes against a backdrop of a widening India-China trade deficit and non-tariff restrictions affecting Indian exports.
India-China Trade Imbalance
A trade deficit occurs when a country's imports from a partner exceed its exports to it. China has been India's largest trading partner in goods for several years, but the relationship is structurally imbalanced: India largely exports raw materials and low-value-added goods to China, while importing high-value manufactured and intermediate goods (electronics, machinery, active pharmaceutical ingredient precursors), keeping the deficit persistently large and a recurring subject of bilateral talks.
The ministerial talks explicitly cited addressing the structural trade imbalance as an agenda item.
Non-Tariff Barriers (NTBs) and Export Restrictions
Non-tariff barriers are trade restrictions that do not take the form of a tariff, including quotas, licensing requirements, technical/sanitary standards, and export-approval delays. Unlike tariffs, NTBs are harder to quantify and challenge, and disputes over them are typically raised at the WTO under agreements such as the Agreement on Technical Barriers to Trade (TBT) or the Agreement on Import Licensing Procedures.
Key Details
- China has restricted export approvals for rare earth magnets critical to Indian electronics, EV, and defence manufacturing at various points, easing them partially amid diplomatic engagement.
- China has also restricted imports of some Indian agricultural goods (e.g., rice, chilli) at various times, citing standards-related grounds.
- The WTO's Most Favoured Nation (MFN) principle under GATT Article I requires members to extend equally favourable trade terms to all WTO members, but does not prevent standards-based or licensing-based NTBs, which is why such measures remain contentious rather than clearly WTO-illegal.
Predictable market access, cited by both sides as a goal, is directly about reducing the unpredictability created by such non-tariff measures.
Rare Earth Elements and Import Dependence
Rare earth elements (REEs) are a group of 17 chemically similar metallic elements used in permanent magnets for electric vehicle motors, wind turbines, electronics, and defence equipment. China dominates global REE processing and magnet manufacturing, giving it outsized leverage over supply chains that India and other countries depend on, which is why REE export policy is a recurring flashpoint in India-China trade discussions.
Key Details
- China accounts for the large majority of global rare earth processing capacity, though extraction is more geographically dispersed.
- India has rare earth reserves (monazite sands) but limited domestic processing capacity, making it import-dependent for finished magnets.
- India's response includes the National Critical Mineral Mission (announced 2025) aimed at securing critical mineral supply chains, including rare earths.
Rare earth magnet export approvals have been a specific irritant discussed in recent India-China economic engagement.
- India-China total bilateral trade: reported at a record high, around $151 billion in the year ending March 2026.
- India's trade deficit with China: reported near $100-112 billion range in 2026 estimates.
- India's imports from China in H1 2026: approximately $80 billion.
- China remains among India's largest single-country trading partners despite the deficit.