Examine the asymmetries in India-China trade relations and the policy tools (export controls, investment screening) each side uses to protect its interests.

Bilateral trade has grown even as political ties froze after Galwan, but the relationship is structurally lopsided — India's goods deficit with China crossed $100 billion in 2025-26 [3]. Both sides now protect their interests less through tariffs than through regulatory instruments, making trade itself a strategic arena.

Nature of the asymmetries

• Scale: imports from China far exceed India's exports, making China India's largest source of the merchandise deficit [3].
• Composition: India buys capital and intermediate goods — electronics, telecom equipment, machinery, APIs — while exporting largely ores and low-value commodities, so the deficit reflects a manufacturing gap, not a tariff gap.
• Dependence: China supplied the bulk of India's rare earth permanent magnet imports (roughly 85–90% by quantity, 2022-25) [2], a chokepoint over EV, electronics and defence supply chains.
• Investment: Chinese capital seeks entry into India's large market; Indian investment in China is negligible — the vulnerability runs one way here too.

China's instrument: export controls

• 2025 curbs on rare earth magnets created supply-chain bottlenecks for Indian EV and electronics manufacturers, acknowledged in Parliament [2].
• Restrictions extending to fertilisers and tunnel-boring machines show controls used as diplomatic leverage; their easing is India's principal ask in the Goyal–Wang Wentao track at the Delhi BRICS Summit [1].

India's instrument: investment screening

• Press Note 3 (April 2020) routed all FDI from land-border countries through prior government approval, guarding against opportunistic takeovers [4].
• Its March 2026 relaxation — automatic route for non-controlling stakes up to 10% with defined timelines [4] — answers China's core ask [1], calibrating openness against security.
• Structurally, the National Critical Mineral Mission (₹34,300 crore) seeks to reduce the dependence that makes export controls potent [5].

The asymmetry is therefore one of composition and leverage, not merely of numbers. Sustainable rebalancing requires deepening domestic manufacturing and mineral security while keeping negotiation channels open, so that economic interdependence becomes stabilising rather than coercive.