The recent move to fast-track direct flight services between India and China marks a quiet but significant thaw in bilateral ties—one that comes alongside active diplomatic backchanneling on critical trade issues, particularly rare earth magnets essential for electric vehicles, clean energy, and high-tech manufacturing.
As part of efforts to stabilise relations, the two countries have agreed to launch a series of functional-level dialogues, including on trade and economic cooperation. The timing is significant, with the US and China moving closer to resolving parts of their own trade dispute, prompting India to reassert its own strategic position.
A key concern for New Delhi is Beijing’s April decision to impose tighter export controls on several rare earth elements—a move that has triggered uncertainty in India’s auto and electronics sectors, which are highly reliant on these materials. China controls over 80% of the global rare earth refining capacity. While India holds reserves, it lacks large-scale processing and magnet-making capability.
During a two-day visit that concluded Friday, Chinese Vice Foreign Minister Sun Weidong held talks with Indian Foreign Secretary Vikram Misri in New Delhi. According to people in the know, India urged China to ensure greater predictability and transparency in rare earth exports, calling for adherence to international trade norms.
“India and China’s trade relationship has been strained for some time. Resuming direct flights signals a shift—potentially the beginning of easier movement not just of people, but of goods and services,” said Nirupama Soundararajan, co-founder and chief executive officer of the Policy Consensus Centre.
However, such asks could come with expectations. In return, China may press for Indian concessions: a review of Press Note 3, which mandates prior approval for FDI from neighbouring countries; a possible re-entry of Chinese mobile firms into India’s 5G rollout; or the reinstatement of banned Chinese apps.
While India is not currently moving to ease Press Note 3, officials suggest there could be targeted approvals for Chinese investments in strategic sectors, provided they meet national security and manufacturing goals under close regulatory scrutiny.
“How far this quid pro quo extends will depend on the outcome of ongoing trade diplomacy,” Soundararajan said.
Diplomatic tensions have run high between the two countries since the Galwan Valley clash in 2020, which froze high-level political exchanges and halted direct air connectivity. The current reset — starting with flights — suggests both sides may be open to rebuilding limited cooperation in areas of mutual benefit, such as trade and connectivity.
China remains one of India’s top trading partners, with bilateral trade crossing $118 billion in fiscal 2024. Yet the absence of direct flights had disrupted business travel, forcing reliance on longer and more expensive third-country routes.
Beijing is also keen for India to participate in the upcoming Shanghai Cooperation Organisation summit in Kazakhstan. However, New Delhi has not yet confirmed its participation, reflecting continued caution amid unresolved border tensions.
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