In an interview last month, economist and part-time member of the Indian Prime Minister’s Economic Advisory Council, Rakesh Mohan called for India to have deeper economic integration with China. He cited geopolitical shifts and hardening US tariffs as reasons to open the doors for greater Chinese investments.
Restoring Economic Relations – A Gradual, Graded Process
Mohan is not the first Indian economist associated with the Indian government to adopt such a view. India’s Chief Economic Advisor, V. Anantha Nageswaran, through the Economic Survey 2023-24 had underlined that ‘to boost Indian manufacturing and plug India into the global supply chain’, the country ‘had to plug itself into China’s supply chain’. Over the last two years, normalization of bilateral relations after the disengagement of troops in Eastern Ladakh has been a work in progress in the form of leadership-level talks, and gradual restoration of some people-to-people engagements.
However, the economic component of the relationship has witnessed a graded response from New Delhi. The tough restrictions on Chinese investments imposed in 2020 were modified by the Indian government in March this year. The central government decided to expedite decisions on Chinese investments in select sectors like capital goods, electronic components and inputs in solar cell manufacturing, within a fixed period and approved joint ventures between Indian and Chinese firms for assembly of electronic devices. However, rather than completely opening up for investments from Beijing, New Delhi’s revised guidelines reflect a limited economic re-engagement, where India seeks to widen its strategic autonomy and development interests.
Missing from the Analysis – the Communist Party of China
Free trade economists, however, find such calibrated measures piecemeal and as hindering higher dividends possible in a less restrictive environment. According to Mohan, completely unhindered economic engagement is the pragmatic approach and one that treats economic security as part of national security. In fact, this author has been part of symposiums and conferences, where Indian economists have viewed counterarguments as protectionist.
Indian economists of this sort tend to insulate the Chinese economy and institutions from Chinese domestic politics. In doing so, the analysis elides the nature and workings of the ruling Communist Party of China (CPC) which is central to the country’s political economy. The CPC sets the country's political-economic direction and maintains substantial influence through state-owned enterprises, state-controlled banks, industrial subsidies, regulation, and strong Party organizations within all economic entities. Sustained economic growth is a major source of legitimacy for the CPC and under Xi Jinping, the Chinese Party-state’s grip on the economy has only deepened. The fusion of CPC and the Chinese state differs from liberal systems where elected governments and civil services are more institutionally separate from political parties.
Securitizing Economic Statecraft
Chinese foreign policy and external economic engagements are thus shaped by domestic imperatives and the Party-state’s political objectives like maintaining political stability, sustaining economic development, enhancing national security, and increasing China's international influence. This is best illustrated by the Belt and Road Initiative, which has created opportunities for Chinese firms and expanded Beijing’s global economic relations and by the Party-state’s weaponization of its economic and industrial dominance in global politics through export controls, denial of technological transfers and import restrictions. Since April 2026, China has strengthened its economic statecraft with three laws to ringfence its outbound investments and industrial supply chains, and deploy countermeasures against foreign entities harming Chinese interests.
These measures by China are aimed to counter geopolitical pressure and maintain its central role in global manufacturing and critical supply chains. Even though the primary focus of the three laws are on the USA in view of the conflictual bilateral trade relations with that country, such securitization also carry implications for India. The Indian market and its large base of consumers is alluring for Chinese companies to endure turbulences in India-China relations. However, Beijing has also exploited India’s short-to-medium term dependence on China to stymie the latter’s long-term capacity building in manufacturing and industrial development. Whether directly in the form of curbs on Chinese engineers and machinery to Foxconn factories in India, tunnel boring machines and fertilizers, or indirectly in the form of export controls on rare earth minerals that affect the clean energy sector. Last year, China – through the World Trade Organization – also challenged India’s incentives for its domestic EV sector.
Beyond economic data and statistical visualization, Indian economists calling for deeper economic engagement with China would do well to pay greater attention to the CPC’s control over and instrumental use of the Chinese economy and its levers. Treating this control and use as extraneous or irrelevant to India-China economic engagement will only lead to incomplete analysis and the wrong lessons for India.
This article was originally published in The Tribune as part of an arrangement with the Centre of Excellence for Himalayan Studies.