Indian Prime Minister Narendra Modi will visit China for the SCO summit from August 31 to September 1, his first in seven years
India and China are preparing to open a new chapter in trade relations during Prime Minister Narendra Modi’s visit to Beijing for the Shanghai Cooperation Organisation (SCO) summit from August 31 to September 1.
An Economic Times report suggests that discussions on a potential trade package covering critical rare earth magnets, fertilizers, and pharmaceuticals are likely. Currently, supplies of rare earth magnets and certain fertilizers from China to India are suspended.
It will be Modi’s first visit to China in seven years.
US Tariffs Drive Asian Powerhouses Closer
The talks gain importance in light of the 50% tariff Trump has imposed on Indian exports, while granting China a temporary 90-day tariff reprieve. The move could signal a tentative thaw in bilateral relations, even as tensions with the US escalate and Indian industry pushes for faster imports of essential inputs from China.
Modi’s visit to China and his talks with Russian President Vladimir Putin during his India visit should potentially signal any realignment in Asia’s trade corridors.
Key Commodities: Potential Trade Resumption?
India imports nearly 90% of its rare earth magnets from China. On April 4, China announced export controls on a broad range of rare earths and related magnets as a response to US President Donald Trump’s broader tariffs on goods. The decision disrupted global supply chains vital to automakers, aerospace firms, semiconductor makers, and military contractors.
While China has now resumed shipments to the US, Europe, and Southeast Asia, Indian suppliers have yet to receive export licences. This is primarily because India currently requires government clearance for investments from neighbouring countries, a policy aimed largely at China, following years of border tensions and its close ties with Pakistan.
China halted urea and other shipments to India over the past three months but has recently begun easing restrictions on urea. State trading enterprises have started floating tenders for limited imports. However, specialty fertilisers such as calcium nitrate and mono ammonium phosphate, 80% of which India sources from China, remain restricted, the report said.
Pharmaceutical trade is another concern, as both countries look to overcome the bottlenecks caused by Trump’s proposed 250% tariff on finished drugs over the next 18 months. The Indian commerce ministry has called a pre-SCO meeting with top pharmaceutical representatives to explore deeper cooperation with China and strategies to offset the impact of US tariffs.
According to a Bloomberg report, both countries are looking to restart trade via designated points on their shared border, and the matter is currently under bilateral discussion.
China’s Ministry of Foreign Affairs said that Beijing is “willing to step up communication and coordination with India” on the matter, as a response to a query from Bloomberg News.
According to India’s Ministry of Commerce and Industry, the country exported goods worth ₹14.25 billion to China in FY24-25, while its imports of Chinese goods stood at ₹113.46 billion.
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