The potential for a trade war between the US and China has Beijing exploring other possible sources for the products it imports. One possible alternative? India. 

China is facing the possibility of import tariffs on up to 150 billion dollars worth of its goods by the Trump administration. The reason in part: China’s 375 billion US dollar trade surplus with the United States.

The US-China scenario could be an opportunity to push trade with India. One of the major roadblocks to the trade relationship between India and China is the trade deficit in favor of China. Both the countries have already decided to work on reducing the deficit, but one way to do that would be increasing Chinese investment in India.

The bilateral trade between China and India reached 84.4 billion US dollars last year. That’s a historic high – but still below a target of 100 billion US dollars set by both countries for 2015. Sino-Indian trade for years was stagnant at about 70 billion US dollars. The increase is being seen as a sign of a promising future, as the growth happened despite political tensions between the two neighbors. 

For India, its major concern is similar to the US. It has a trade deficit of 52 billion US dollars with China something that both the nations haven’t been able to address.

“Total Chinese investment in India is about 4.3 billion US dollars. So there is a lot of scope of Chinese investment in India. President Xi Jinping, when he came to India in September 2014, promised 20 billion dollars investment, but from that day till so far, it is 1.2 billion US dollars investment we have seen from the Chinese side. Overall, while India-China relations are improving, there is also a scope for the Chinese products to be sold more in India,” said Srikanth Kondapalli, professor of Chinese Studies at Jawaharlal Nehru University.

Analysts say, investment in areas like infrastructure could lower the trade deficit, while China could open up more to India’s strengths in information technology and pharmaceuticals. Both countries have contributed to an evolving international economic order that prioritizes safeguards for developing nations.

Economist Santosh Mehrotra said, “India and China are already partners in many respects. They are partners, in BRICS, in the BRICS banks and Asian Investment Bank that the Chinese government had supported and it’s perfectly possible to leverage these sources of funds to perhaps bidding jointly in third countries but we have to wait to see to what extend this can be taken forward.”

China is India’s largest trade partner but the relationship is unbalanced. Analysts say now might be a good time to look toward Chinese Internet companies. They could potentially play an important role in Prime Minister Narendra Modi’s Digital India project, especially after the success of Chinese mobile phone companies in India. Xiaomi recently overtook Samsung which was India’s most sold smartphone brand in terms of shipments. The company is not stopping and is continuing its journey in India at an even faster pace in the next few months. 

Indian Prime Minister Narendra Modi is expected to travel to China in June for the Shanghai Cooperation Organization Summit. Other high-level bilateral visits between China and India are also expected this year. Analysts say, both countries need to work for mutual benefit in trade by keeping their political and territorial disagreements aside.