India-China in 2023: Bilateral Trade and Investment Prospects

Posted by Written by Naina Bhardwaj Reading Time: 5 minutes

China has continued to remain one of India’s leading trade partners in recent years, with the balance of trade heavily skewed in favor of China. In 2022, the trade imbalance breached the US$100 billion mark for the first time, as per the latest data released by Chinese customs.  This exponential rise in trade is on account of an increase in the import of electronic goods, organic and inorganic chemicals, medicinal and pharmaceutical products, fertilizers, etc. from China. Moreover, investment flows from China to India have dampened over the last two years following India’s revised FDI policy in response to border skirmishes. In this article, we outline the latest trade and investment trends between the two Asian neighbors.

Commercial ties between India and China, that have been advancing since the early 2000s, peaked in 2008 when China emerged as India’s top trading partner. Ever since, China has joined the US to become one of India’s leading trade partners. Bilateral commerce between India and China increased by 75.30 percent between 2015 and 2021, growing by an average of 12.55 percent annually. The total merchandise trade with China surged by 34.06 percent year on year (y-o-y) to reach US$115.83 billion in financial year (FY) 2022, breaking the US$100 billion barrier for the first time.

India-China trade continues to expand in FY 2023; trade deficit at all time high

Trade between the two neighboring nations in FY 2023 – April to November – stood at US$77.80 billion, as per data by the Indian government. This exponential increase in overall trade, particularly over the past two years, has been on account of increase in imports from China.

The major goods imported from China included electronic goods, organic and inorganic chemicals, medicinal and pharmaceutical products, fertilizers, crude and manufactured and dyeing/ tanning/ coloring materials. As a result, the trade imbalance reached an all-time high of US$73.31 billion in FY 2022 and has already surpassed US$58.02 billion in the first eight months of FY 2023.

According to data released by Chinese customs on January 13, 2023, total India-China trade for calendar year (CY) 2022 stood at US$135.98 billion, 8.4 percent higher than the US$125 billion mark in 2021. At the same time, New Delhi’s trade deficit with Beijing also stood at an all time high of $101.02 billion, breaching the US$100 billion mark for the first time. 

The growth of this trade deficit with China could be attributed to following factors:

  • Narrow basket of commodities exported to China. Traditionally, India’s export basket has been dominated by of iron ore, cotton, copper, aluminum and diamonds/ natural gems. However, over time, these raw material-based commodities have been replaced by Chinese exports of machinery, power-related equipment, telecom equipment, organic chemicals, and fertilizers.
  • Market access impediments for most Indian agricultural products and the sectors which hold competitive advantage. These sectors include pharmaceuticals, information technology (IT) and information technology enabled services (ITeS), etc.

India has been working to reduce its dependency on China, the nation’s main supplier of imports, in recent years. In 2020, India also put restrictions on business and trade in the midst of ongoing border disputes. However, despite these restrictions, imports from China have significantly outpaced exports.

India China Trade Statistics FY 2018 – FY 2023 (April-November), (US$ Billion)


FY 2018

FY 2019

FY 2020

FY 2021

FY 2022

FY 2023 (April-November)

Exports from India to China







Imports from China to India







Total trade between India and China







Trade balance







India Exports to China FY 2018 - FY 2022 India Imports from China FY 2018 - FY 2022 India China Trade FY 2023

India-China investment flows

According to data from Statista, foreign direct investment (FDI) from China to India stood at US$279.46 million and US$205.19 in 2021 and 2020, respectively, witnessing a considerable decline from US$534.60 million in 2019. In 2015, FDI from China to India reached a high of $705.25 million. This drastic decline in FDI inflow can be attributed to India’s amended FDI policy for countries with whom it shares a border following the Sino-Indian border skirmishes in 2020. However, in mid-2022, New Delhi started giving approvals to individual proposals on a case-by-case basis. As per reports, as of June 29, 2022, as many as 80 China-linked FDI proposals out of a total of 382 had been approved by India. 

Indian investment in China for 2021 was US$6.32 million, down 47.4 percent y-o-y, while cumulative Indian investment in China by the end of 2021 stood at US$943.96 million, according to figures from the Chinese Ministry of Commerce.

Indian companies in China

With the expansion of bilateral trade between India and China over the past several years, many Indian businesses have started establishing operations in China to cater to both their domestic and international clientele there. Indian businesses with operations in China engage in manufacturing (pharmaceuticals, refractories, laminated tubes, auto components, wind energy, etc.), IT and IT-enabled services (including IT education, software solutions, and specific software products), trading, banking, and related activities. These businesses may be operating in China as representative offices, wholly owned foreign enterprises (WOFE), or joint ventures with Chinese businesses.

The Indian trade community is mainly concentrated in major port towns like Guangzhou and Shenzhen, but it is also widely dispersed in locations where the Chinese have established warehouses and wholesale markets, such Yiwu in Zhejiang. The majority of Indian businesses are present in Shanghai, the financial hub of China, while a small number have opened up shop in Beijing, the country’s capital.

Some of the prominent Indian companies in China include Dr. Reddy’s Laboratories, Aurobindo Pharma, Matrix Pharma, NIIT, Bharat Forge, Infosys, TCS, APTECH, Wipro, Mahindra Satyam, Dr. Reddy’s, Essel Packaging, Reliance Industries, SUNDARAM Fasteners, Mahindra & Mahindra, TATA Sons, Binani Cements, etc.

Chinese companies in India

As per data available with the Indian Embassy, more than 100 Chinese companies have established operations in India.

  • Machinery and infrastructure construction: Many large Chinese state-owned companies have established operations in Indian in this sector. These include Sinosteel, Shougang International, Baoshan Iron and Steel Ltd, Sany Heavy Industry Ltd, Chongqing Lifan Industry Ltd, China Dongfang International, Sino Hydro Corporation, etc.
  • Electronic, IT and hardware manufacturing: Chinese companies which have established offices in these sectors include Huawei Technologies, ZTE, TCL, Haier etc.
  • EPC projects in the power sector: These companies include Shanghai Electric, Harbin Electric, Dongfang Electric, Shenyang Electric etc.
  • Mobile manufacturing: Numerous Chinese mobile manufacturing businesses have experienced impressive growth in India in recent years. Businesses like Xiaomi, Huawei, Vivo, and Oppo now account for more than 80 percent of the Indian mobile handset market.

(This article was first published on January 10, 2023 and last updated on January 13, 2023.)

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