Modi and Xi Revive India-China Business Ties at BRICS, Opening Door to FDI Normalisation

The Quick Take

• Indian PM Modi and Chinese President Xi pushed for expanded business cooperation and border peace at BRICS sideline talks
• The bilateral meeting marks a significant warming of India-China relations following the 2020 Galwan Valley clash that froze economic ties
• Normalisation talks open potential for Chinese FDI resumption in India's electronics, EV battery, and consumer sectors

The Modi-Xi bilateral meeting on the sidelines of BRICS marks a meaningful shift in India-China diplomatic relations, which had been severely strained since the June 2020 Galwan Valley confrontation that resulted in casualties and triggered sustained economic decoupling from New Delhi. The diplomatic warming comes as India has been actively diversifying manufacturing and trade relationships away from China-linked supply chains, creating a nuanced backdrop where business normalisation discussions occur within a continued strategic competition framework that neither side has formally abandoned.

The market implications of India-China business normalisation are substantial: Indian manufacturers in sectors where Chinese investment had been blocked — electronics, semiconductors, green energy — could see resumption of capital inflows, reducing the supply chain cost premium that Indian producers have absorbed since 2020. Chinese companies seeking market access to India's fast-growing consumer base have been effectively frozen out, and any policy relaxation would benefit Indian telecom equipment procurement, EV battery supply chains, and consumer electronics assembly. Singapore's role as a structured mediation hub for India-China business would be reinforced by any formal normalisation.

The critical signal is whether this diplomatic warmth translates into specific bilateral trade agreements or investment approvals in the months following BRICS. India's Ministry of Commerce restricts Chinese FDI under security review processes established post-2020 — any relaxation would be the clearest market indicator of genuine normalisation rather than diplomatic optics. Macro variable: US tariff policy on China, which creates a strategic incentive for India to quietly position itself as a neutral supply chain bridge between China and Western markets while leveraging improved bilateral relations.

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