India and China to Resume Direct Flights, Visas, and Mansarovar Pilgrimage

In a significant move to rebuild bilateral ties, India and China have agreed in principle to resume direct flights, visa issuance, and the Kailash Mansarovar Yatra for pilgrims, marking the first steps toward normalizing relations that had been strained since the 2020 border clashes. The announcement follows a two-day visit to Beijing by India’s Foreign Secretary Vikram Misri, signaling renewed diplomatic engagement between Asia’s two largest economies.

Economic and commercial implications

The resumption of direct flights between India and China is poised to rejuvenate business ties and people-to-people exchanges. Before the pandemic, nearly 500 monthly flights facilitated seamless travel for business executives, students, and tourists. The absence of these connections disrupted trade, investments, and workforce mobility. Restoring air connectivity will ease logistical bottlenecks, boosting trade volumes and facilitating new investments, especially as both nations aim to stabilize their economic relations.

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The decision to address long-standing trade disputes and barriers carries significant economic implications. India has raised concerns over Chinese restrictions on exports of Active Pharmaceutical Ingredients (APIs) and high-tech equipment, while China has sought a level playing field for its investments in India. The promise of “long-term policy transparency and predictability” signals a potential thaw in restrictive trade practices, benefiting sectors like pharmaceuticals, technology, and infrastructure development.

The reopening of the Mansarovar Yatra, an important cultural and religious pilgrimage, will not only enhance tourism but also foster goodwill between the nations. Resuming hydrological data-sharing on trans-border rivers is another critical step, addressing India’s concerns over China’s infrastructure projects on the Brahmaputra River.

In its press release, the Ministry of External Affairs noted: “The two sides recognize that 2025, being the 75th anniversary of the establishment of diplomatic relations between India and China, should be utilized to redouble public diplomacy efforts to create better awareness about each other and restore mutual trust and confidence among the public. The two sides will conduct a number of commemorative activities to mark this anniversary.”

A step toward reconciliation

The bilateral talks, which included Chinese Foreign Minister Wang Yi, reflected a shared commitment to reducing mutual suspicion and estrangement. Both sides emphasized the importance of diplomacy in resolving political and trade disputes, with Chinese officials highlighting the role of improved ties in advancing the interests of the Global South.

India’s Foreign Secretary also extended support for China’s chairmanship of the Shanghai Cooperation Organisation (SCO), showing a pragmatic approach to multilateral cooperation despite lingering border tensions. However, Indian officials remain firm that true normalization of ties will depend on sustained peace along the Line of Actual Control (LAC).

Challenges and opportunities

While these measures signal progress, challenges persist. Addressing India’s concerns over Chinese military infrastructure near the LAC and continued restrictions on foreign investments will require sustained dialogue. Meanwhile, China seeks assurances on equitable treatment for its companies operating in India. The road to reconciliation will demand mutual concessions, trust-building, and a focus on shared economic and geopolitical interests.

This renewed engagement comes as both nations navigate shifting global dynamics, including the spillover effects of a new Trump US presidency, impetus for supply chain diversification, and competition for strategic influence in South Asia. Strengthened bilateral relations could unlock significant economic opportunities, particularly in trade, technology, and infrastructure.

GTRI report: How India must respond to China’s informal export restrictions

India must address China’s informal restrictions on critical exports vital for the electronics, solar, and EV sectors by diversifying supply chains and collaborating with nations like Japan and South Korea, according to a report by the Global Trade Research Initiative (GTRI). The report emphasizes the urgent need to boost domestic manufacturing and reduce dependence on China.

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The disruptions are impacting key companies such as Foxconn, which produces iPhones in India, and Tata Electronics, an Apple partner. Global suppliers like Pegatron, Compal, Jabil, as well as major brands like BYD and Lenovo, are also facing delays in securing essential components. Industry reports, backed by the Ministry of Electronics and Information Technology (MeitY), highlight challenges in sourcing equipment, parts, and skilled manpower from China.

While China has not officially imposed export restrictions, the constraints appear to be retaliatory, likely in response to India’s restrictions on Chinese investments and visas. The report warns that these actions reflect escalating geopolitical tensions and could signal the onset of a trade war. As the U.S. adopts a more aggressive stance on China with higher tariffs and tighter export controls, further disruptions in global supply chains are anticipated.

To mitigate these risks, India must focus on long-term solutions, such as lowering production costs, improving the ease of doing business, and fostering local value addition. Strengthening partnerships with Japan and South Korea will also help India secure high-quality components and build robust, resilient supply chains, the GTRI report recommends.

What companies in India should watch out for

The resumption of India-China ties presents opportunities, but businesses in India must navigate the complexities of this evolving relationship cautiously. Some key factors Indian companies should watch out for:

1. Policy uncertainty and trade barriers

While both nations have pledged greater transparency and predictability in trade policies, Indian companies should remain vigilant about potential shifts in regulations. China’s history of imposing restrictions on critical exports, such as APIs and high-tech equipment, could still pose risks. Companies in pharmaceuticals, electronics, and manufacturing should monitor policy announcements and diversify supply chains to mitigate dependency on Chinese imports.

2. Market access challenges

Despite record bilateral trade levels, Indian companies face hurdles accessing the Chinese market. Tariffs, complex regulatory requirements, and intellectual property protection issues are ongoing challenges. Businesses looking to expand into China should seek legal and trade advisory support to navigate these barriers and safeguard their interests.

3. Geopolitical sensitivities

Border tensions and political disputes can quickly escalate, affecting trade and investments. Companies with significant exposure to China should develop contingency plans to manage disruptions, such as exploring alternative markets and suppliers. Maintaining a neutral stance in business dealings is critical to avoid being impacted by geopolitical tensions.

4. Competitive landscape

Chinese companies, particularly in technology and manufacturing, have a competitive edge in pricing and scale. Indian businesses need to innovate and leverage government initiatives like “Make in India” and the PLI (Production-Linked Incentive) scheme to enhance their competitiveness. Collaborating with Chinese firms in areas of mutual interest, such as green technology and advanced manufacturing, could also open up new avenues.

5. Cybersecurity risks

Given the historical backdrop of strained ties, cybersecurity remains a concern. Businesses in critical sectors, including telecom, banking, and technology, must strengthen their IT infrastructure to protect against potential cyber threats. Close adherence to government advisories on Chinese-origin technology and apps is advisable.

6. Investment restrictions

India’s current policy requiring prior clearance for investments from China and other bordering countries is unlikely to change in the short term. Indian companies seeking Chinese investments or partnerships should prepare for extended timelines and additional scrutiny. Engaging with local trade associations or leveraging government matchmaking services can help navigate these challenges effectively.

7. Intellectual property (IP) risks

Indian companies entering China or collaborating with Chinese firms should ensure robust contracts with clear IP protections and consider seeking assistance from international arbitration bodies for dispute resolution, if needed.

By proactively addressing these challenges, Indian companies can position themselves to leverage the renewed diplomatic ties while safeguarding their interests in a complex and dynamic environment.

Conclusion

The resumption of direct flights, visas, and cultural exchanges could trigger a much-needed thaw in India-China relations that has stayed frosty in recent years. While challenges remain, these initiatives are key precursors to constructive economic and diplomatic cooperation. As Asia’s two largest economies work to rebuild trust, their partnership could play an important role in shaping regional stability and global economic growth.

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