After six years of tensions in the diplomatic and commercial relations between India and China, India has made a significant move by shifting from a policy of restraint and containment to one of strategic thaw and economic growth. This policy of strategic thaw was initiated in April 2020, when India attempted “to increase the scrutiny of investments from neighboring countries to prevent opportunistic takeovers.”
The situation was taken to the boiling point in June 2020 due to the clash on the border that led to the killing of people. Therefore, India decided to ban Chinese apps for years. The environment led to the halting of major deals, including Great Wall Motor’s $1 billion investment in 2022 and BYD’s deal in 2023. However, the breakthrough agreement on patrolling the border between the two countries was reached in October 2024, following a four-year standoff.
However, as economic pragmatism became the new mantra in July 2025, NITI Aayog proposed a policy allowing Chinese companies to hold up to 24% of the stake in Indian companies without special security clearance. The policy was sealed in August 2025, when Prime Minister Narendra Modi visited China after a seven-year gap, as a clear attempt to shift focus away from the United States amid escalating tensions.
However, by the end of 2025, normalization of relations was evident through the resumption of direct flights between the two nations and the easing of restrictions on Chinese professionals’ business visas to address critical shortages of technicians in Indian factories. Lastly, in February 2026, the Indian government began easing restrictions on imports of Chinese equipment for the Indian public power and coal sectors.
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This is a result of a calculated move by the Modi administration to improve relations with China by prioritizing industrial output and stability over the prolonged diplomatic freeze following the 2020 border crisis.
