In August 2025, Prime Minister Narendra Modi travelled to Tianjin for his first visit to China in seven years, meeting President Xi Jinping on the sidelines of the Shanghai Cooperation Organisation summit. The visit produced tangible outcomes — resumed direct passenger flights, reopened border trade passes, and facilitated business visas. It was presented, on both sides, as a diplomatic thaw after four years of frozen relations following the Galwan Valley clash of June 2020.
The thaw is real. But behind the diplomatic imagery lies a more complex and strategically consequential reality: India's deep economic dependence on China creates leverage that Beijing has demonstrated both the will and the capability to exercise.
The Scale of Dependence
China is India's largest trading partner. India's dependence is concentrated in sectors that are strategically sensitive. Pharmaceuticals: India relies on China for a significant proportion of the Active Pharmaceutical Ingredients (APIs) essential for drug production. Electronics: India's electronics manufacturing sector depends heavily on Chinese-made components. Solar energy: Seventy percent of India's solar power generation capacity relies on Chinese-made equipment. Critical minerals: China dominates global rare earth processing and has demonstrated willingness to restrict exports as a coercive tool.
How China Has Used Its Leverage
Following the 2020 Galwan clash, Beijing imposed calibrated restrictions: blocking sales of tunnel boring machines to Indian infrastructure projects, recalling Chinese technicians from Foxconn factories in India, restricting electric vehicle technology transfers, suspending fertilizer exports, and imposing partial restrictions on rare earth magnets. These were not random disruptions — they were signals.
"India's strategy is not friendship with China, nor confrontation. It is managed coexistence — maintaining dialogue and commerce while preserving the strategic flexibility to act independently."
India's Response: De-risked Interdependence
India has pursued what analysts describe as "de-risked interdependence" — maintaining economic ties where mutually beneficial, while erecting barriers in strategically sensitive areas. In March 2026, India approved limited easing of restrictions on Chinese investment in select manufacturing sectors. Simultaneously, partnerships with the United States, Japan, South Korea, and the Netherlands in critical technology sectors reflect India's effort to build alternative supply chains — of which the Tata-ASML semiconductor deal is a prime example.
What India Must Do
The path to reducing vulnerability to Chinese economic coercion runs through investment — in domestic manufacturing, research and development, supply chain diversification, and institutional frameworks that screen foreign investment without stifling it. The dragon's leverage is real. But leverage works only on those who allow themselves to remain dependent. India's trajectory over the next decade will be shaped significantly by how effectively it converts its growth ambitions into genuine economic and technological sovereignty.