The Strategic Investment Case for Cross-Border Partnerships Between India and China

The thawing of India-China relations since 2023 has unlocked a new era of cross-border collaboration, creating fertile ground for high-growth investments in electric vehicle (EV) manufacturing, rare earths, and digital infrastructure. As both nations recalibrate their economic strategies amid geopolitical realignments, investors are presented with opportunities to capitalize on policy-driven innovation, supply chain diversification, and strategic interdependence.

EV Manufacturing: A Policy-Driven Partnership

India’s Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) has emerged as a cornerstone of its EV ambitions, offering reduced customs duties for foreign automakers investing in domestic production. This policy has attracted global giants like Mercedes-Benz and Hyundai, while Chinese automakers such as Chery Automobile have formed joint ventures with Indian firms like JSW Group. For instance, JSW’s collaboration with Chery to license electric powertrain technology enables India to bypass costly R&D and fast-track EV development [2]. Similarly, the success of the JSW-SAIC Motor joint venture (MG Windsor) underscores the viability of leveraging Chinese expertise while adhering to India’s localization mandates [2].

However, challenges persist. India’s reliance on Chinese rare earth magnets for EV motors exposes it to supply shocks, as seen during China’s 2025 export curbs [3]. To mitigate this, India is accelerating domestic magnet production and investing in magnet-free technologies [2]. Investors should prioritize firms with diversified supply chains, such as those participating in India’s National Critical Mineral Mission or leveraging U.S.-India partnerships for rare earth processing [4].

Rare Earths: Strategic Interdependence and Diversification

Rare earth elements (REEs) remain a critical bottleneck for both nations. China, which controls over 90% of global rare earth processing, has recently eased export restrictions, signaling a pragmatic shift in its approach [3]. India, with the world’s fifth-largest REE reserves, is countering its dependency through initiatives like the $5,000 crore PLI scheme for rare earth magnet production and partnerships with the U.S. and Australia [4]. The India-US Advanced Materials R&D Forum, for example, is advancing joint research in recycling and refining technologies [4].

Despite these efforts, India’s reliance on China for processed inputs remains a strategic risk. Investors should focus on firms engaged in cross-border collaborations, such as Indian Rare Earths Limited’s partnerships with Japanese and South Korean companies, or those leveraging the India-Central Asia Rare Earths Forum (ICAREF) to access alternative supply chains [4].

Digital Infrastructure: A Hybrid Model of Cooperation

India’s Digital Public Infrastructure (DPI)—comprising systems like Aadhaar and UPI—has become a global exportable model, offering scalable, open-source solutions for digital governance and financial inclusion [5]. While India has cautiously excluded Chinese telecom firms like Huawei from its 5G infrastructure, it has subtly eased restrictions in sectors like electronics manufacturing, allowing Chinese firms to hold minority stakes in joint ventures [1].

China’s Digital Silk Road and 6G advancements continue to pose a challenge, but India’s strategic corridors—such as the India-Middle East-Europe Economic Corridor (IMEC)—are positioning it as an alternative hub for digital connectivity [5]. Investors should target firms involved in India’s National Manufacturing Mission or those leveraging rupee-based trade agreements to reduce exposure to U.S. tariff risks [1].

Geopolitical Catalysts and Risk Mitigation

The normalization of trade routes (e.g., Lipulekh, Shipki La) and resumption of direct flights have enhanced business connectivity, with bilateral trade reaching $138.48 billion in 2024 [1]. However, investors must hedge against risks like border disputes and rare earth volatility. Diversified portfolios combining Chinese EV suppliers (e.g., Chery) and Indian firms with strong localization strategies (e.g., JSW) offer a balanced approach [2].

Conclusion

The India-China rapprochement is not a zero-sum game but a strategic recalibration driven by mutual economic imperatives. For investors, the key lies in identifying sectors where policy incentives, technological interdependence, and geopolitical pragmatism converge. EV manufacturing, rare earths, and digital infrastructure present compelling opportunities—provided one navigates the complexities of supply chain dependencies and regulatory shifts with agility.

Source:
[1] India and China Signal Trade and Diplomatic Reset [https://www.china-briefing.com/china-outbound-news/india-china-trade-diplomatic-reset-2025]
[2] China-India EV Tech Collaboration [https://www.ainvest.com/news/china-india-ev-tech-collaboration-strategic-implications-global-ev-supply-chains-2507/]
[3] China Lifts Rare Earths Export Curbs [https://timesofindia.indiatimes.com/business/india-business/china-lifts-rare-earths-export-curbs-indias-electronics-sector-could-benefit-from-relaxations-what-industry-experts-have-to-say/articleshow/123444671.cms]
[4] India-US Critical Minerals Partnership [https://cen.acs.org/acs-news/acs-meeting-news/India-US-advance-rare-earth/103/web/2025/08]
[5] India’s Digital Infrastructure Exports [https://techpolicy.press/indias-digital-infrastructure-is-going-global-what-kind-of-power-is-it-building]