Chinese Capital Flows Into India as Xi Jinping's New Delhi Visit Approaches
Summary
India is carefully resuming economic engagement with China amid improving diplomatic relations, with over $500 million in Chinese-linked investment entering the country within three months of partial relaxation of post-Galwan investment restrictions, marking the strongest such revival since 2020. The thaw coincides with high-level diplomatic activity, including NSA Ajit Doval's Beijing visit and Foreign Minister Jaishankar's talks with Wang Yi covering market access, supply chains, and trade imbalances, alongside Xi Jinping's anticipated attendance at the BRICS summit in New Delhi. In May 2025, India significantly modified Press Note 3 — introduced in April 2020 following the Galwan Valley clash — by allowing investors with non-controlling Chinese ownership of up to 10% to invest through the automatic route and introducing time-bound approval frameworks for certain sectors. As a result, 29 investment proposals worth approximately ₹4,900 crore have been approved across IT, AI, manufacturing, pharmaceuticals, and data centres, channelled through entities in multiple third countries. India has nonetheless maintained that border peace along the Line of Actual Control remains a fundamental prerequisite for broader normalisation of ties.
Key Takeaways
- 1. **Strategic Conditionality Maintained:** India continues to link economic engagement directly to border stability along the LAC, ensuring military and diplomatic leverage is not surrendered in exchange for investment flows
- 2. **Calibrated, Not Unrestricted Reopening:** The relaxation of Press Note 3 is deliberately selective, preserving government scrutiny over strategic sectors and sensitive ownership structures rather than reverting to pre-2020 openness
- 3. **Diplomatic-Economic Linkage:** The simultaneous progress on military disengagement, direct flights, border trade resumption, and investment liberalisation signals a coordinated, whole-of-government approach to managing the China relationship
- 4. **Supply Chain Vulnerabilities Acknowledged:** India's manufacturing ambitions in electronics, EVs, and renewable energy remain structurally dependent on Chinese technology and supply chains, forcing a pragmatic policy recalibration despite security concerns
- 5. **BRICS Summit as Strategic Inflection Point:** Xi Jinping's expected visit to New Delhi represents a significant diplomatic milestone that could further accelerate bilateral normalisation, raising questions about the pace and limits of India's strategic guardrails