When a Chinese president and an Indian prime minister sat across a table from one another and spoke of numbers for trade, it was a farfetched idea; six years ago, soldiers from two nuclear powers could be seen beating each other to death with clubs wrapped in barbed wire on a desolate ridge above the Galwan river. That's exactly what happened in New Delhi on Saturday when Xi Jinping came to India for his first visit in seven years to to attend the BRICS summit and hold bilateral talks with Narendra Modi. The optics were carefully managed, the language diplomatic, and the message both capitals couldn't have been clearer: Two of the world's largest economies have determined they can no longer simply treat one another as enemies, though they have not yet come to a point of trusting one another.

It helps to recall how far the relationship has fallen to grasp why this moment is important. In June 2020, the Indian and the Chinese troops came face to face in the Ladakh sector in an altercation, using fists, rocks and homemade weapons, following complaints about the Chinese troops crossing over what India claimed as its own land. In a first combat death on that frontier in the past four and a half decades, 20 Indian soldiers and at least four Chinese troops were killed. New Delhi's reaction was immediate and all-encompassing. Visits to China were nightmarish, business visas were hard to obtain, dozens of popular Chinese apps were banned outright, and direct passenger flights between the two countries were cut. Meanwhile, Beijing blamed India for creating the crisis and took measures to ensure that there was no movement of journalists and businessmen across the exchange on its side. The situation languished for four years, the high terrain in each case occupied by the two armies and the relationship between them frozen as well.

The thaw wasn't a big step. It started with a level of simple, technical unengagement. Both sides signed a deal to withdraw troops from the remaining hot spots in the eastern Ladakh in October 2024 and the withdrawal operation was fully completed by December 2024. What followed was not spectacular, but gradual: data sharing went back up, some of the border trading posts were reopened, and after five years of interruptions, direct flights were reintroduced between the two countries. The processing of Chinese business visas increased. None of that was a solution for the territorial issue, but it has given sufficient space for the commerce to get back on its feet, and here it is.

And business is back in force. The value of bilateral trade between India and China crossed a new record high of $151.1 billion in FY 2026, making China India's single largest trading partner. Yet, among all that headline figure, lurks another far less palatable one for New Delhi: the trade imbalance with Beijing has also reached a record high, reaching $112.16 billion, up from $99.21 billion the year before. In that time China was India's biggest source of imports with goods valued at about $132 billion, with over one hundred categories of goods that India's government itself considers critical for its manufacturing.

India's ambitious plans for battery storage, solar power and EVs rely heavily on Chinese parts, and that gives Beijing a form of leverage, on a smaller scale than the pressure the Chinese have brought to bear on other components of their trade dispute with Washington. Under every “friendly” photograph lies the uneasy maths of India's dependence on China to keep its factories humming while it fears becoming a strategic basket case.

There's also an argument for why Beijing would want to keep the peace here as well. The domestic economy is the source of a huge debt load that is partially concealed in China, which has been estimated by independent observers at about eight trillion dollars, and in some international evaluations, over eleven trillion dollars. As the property market falters and domestic demand remains weak, Chinese authorities have all the reason to refrain from waging fresh battles overseas as they strive to balance that sheet. In that respect, it is not about being generous, it's about being economically prudent.

None of these have inhibited the more difficult debates. Arunachal Pradesh is a sore point, Beijing keeps referring to it as Zangnan and asserting its control over the state as part of southern Tibet, a claim India strongly denies. The Chinese government is Pakistan's biggest supplier of fighter aircraft and missile systems, and it was not an accident that Pakistan and India went to war last year, only briefly, and with a significant amount of mutual mistrust, over the issue of Kashmir, as Beijing has maintained close ties with Islamabad that are an integral part of its broader China policy. Industry executives on the ground keep on pointing to delays in visas and bureaucratic road blocks to get Chinese equipment, while India continues to be tight-fisted on Chinese funds in sensitive industries such as finance, defence and telecom.

So what came out of Delhi this weekend is not a reconciliation but rather a negotiated cohabitation between two governments that have come to the realization, on their own and on their own merits, that it is easier and cheaper to live in peace than to have perpetual war. Trade will continue to increase as both economies require it to. Both sides will keep their troops on the border, for lack of trust for each other.