Opinion | How Modi-Xi Meet May Impact Manufacturing, Trade, Technology & Dollar | Opinion News

Last Updated:September 04, 2025, 13:06 IST

The Modi-Xi engagement is a component of a larger transformation in global economics and geopolitics that could redefine the rules of international trade, finance, and security

PM Narendra Modi and Chinese President Xi Jinping (File Image: X/@narendramodi)

Despite historical border tensions, the Modi-Xi meeting signals a pragmatic shift to deepen bilateral economic ties. Both leaders talked peace and mutual respect, with an emphasis on cooperative development rather than rivalry. This detente offers key opportunities for India’s manufacturing sector, particularly as it pursues its ambitious Make in India and Production Linked Incentive (PLI) campaigns aimed at transforming the country into a global manufacturing hub.

China’s dominance in manufacturing and supply chains remains critical for India’s ambitions. India relies on Chinese components, machinery, and technology as it integrates into global supply chains, acknowledging that short- and medium-term cooperation is essential despite geopolitical friction.

The “China Plus One” diversification strategy, previously favoured by western corporations to reduce dependence on China, is evolving into an “India Plus Two” scenario where India takes centre stage alongside China and Russia, leveraging their combined strengths. This shift promises enhanced trade and investment flows, especially as both countries move to reduce visa restrictions and aviation connectivity resumes, easing people and goods movement.

The renewed focus on technology and research cooperation, including joint ventures in electronics and eased foreign direct investment norms, offers India access to advanced knowledge and capital. However, challenges remain, such as China’s export restrictions on critical machinery and rare earths that India needs for industrial growth. Nonetheless, the Modi-Xi engagement sets the stage for gradual improvements in these areas, catalysing India’s manufacturing, and technological advancement.

Geopolitical & Economic Realignment Amid US Sanctions & Tariffs

The toughening of US trade policies toward India, marked notably by the imposition of a 50 per cent tariff on Indian goods, largely in retaliation to India’s strategic oil purchases from Russia, has created new external pressures. These tariffs threaten key Indian export sectors such as textiles, gems, and leather, with projected impacts of GDP reductions and export value declines. The tariffs have compelled India to accelerate its push for self-reliance and diversification of markets, emphasising domestic production and championing the “Made in India” brand.

Amid these pressures, India’s diplomatic engagement at the Shanghai Cooperation Organisation (SCO) summit in Tianjin, alongside President Xi and Russian President Vladimir Putin, displayed renewed efforts to strengthen trilateral ties. This India-China-Russia troika (RIC) envisages a collective geopolitical and economic counterbalance to Western, particularly US, dominance in global affairs. The alignment plays on their complementary strengths: China’s manufacturing capacity, Russia’s energy resources, and India’s service economy and strategic location.

Discussions at the SCO and direct bilateral interactions have emphasised maintaining peace, economic cooperation, and multilateralism, seeking to reduce trade frictions and foster regional stability. The three countries’ combined GDP, population, military spending, and energy consumption signify a shifting centre of global influence toward Eurasia, challenging the West’s unipolar dominance.

Challenging Dollar’s Dominance and Oil Trade Dynamics

One of the most consequential aspects of this trilateral cooperation is the concerted effort to break the dominance of the US dollar in global trade and oil transactions. India has taken pioneering steps with the introduction of Special Rupee Vostro Accounts (SRVA), enabling trade settlements directly in rupees with countries like Russia, bypassing the US dollar system. This mechanism helps insulate these countries from the impact of US sanctions and expands the use of local currencies in international trade.

The collaboration between India, China, and Russia includes energy cooperation, where India benefits from cheaper Russian oil imports, while China and Russia also seek payment alternatives that reduce reliance on the dollar. This monetary realignment facilitates Eurasian-led restructuring of trade routes and payment systems, stabilising the trio’s economies against external financial pressures.

The drive for de-dollarisation also reflects a broader geopolitical ambition, to assert greater economic sovereignty and create a multipolar global financial architecture that better represents emerging economies interests. By promoting trade in their currencies and developing independent financial infrastructures, these countries aim to diminish Washington’s economic hegemony.

Implications for the New World Order

The Modi-Xi meeting, alongside strengthening ties with Russia, points toward a nascent multipolar world order where power and influence are more distributed. The new alignment leverages economic complementarities and shared interests to build strategic resilience against the uncertainties of US foreign policy shifts, including sanctions and tariffs.

Functionally, this means redrawing global supply chains, enhancing Eurasian connectivity, and cultivating regional trade partnerships that are less vulnerable to Western coercion. India, by positioning itself as a significant hub in this revamped landscape, can attract investments, enhance technological capabilities, and ensure energy security, propelling its long-term development goals.

Moreover, the challenge to the US dollar’s primacy in oil trade and global finance could lead to greater financial stability and reduced volatility for these nations as they expand bilateral and multilateral trade frameworks. However, significant hurdles persist, including enduring trust deficits, border disputes, and economic imbalances among the trio, which require careful navigation to realise the full potential of this alignment.

PM Modi’s visit to China symbolises a pragmatic, forward-looking approach to managing India’s complex relationships amid a rapidly shifting global environment. The focus on manufacturing, trade, technology, and research cooperation with China, coupled with growing ties with Russia, is reshaping regional and global power equations. This will affect the China-Pakistan ties and its impact at the India-Pakistan border. China can be assured of the safety of its One Belt One Road project among peace between India and Pakistan.

Together, India, China, and Russia present a formidable challenge to Western economic dominance, particularly through efforts to bypass the US dollar in trade and oil transactions. This trilateral dynamic represents a foundational step towards a more multipolar economic world order, promising new opportunities for growth, stability, and strategic autonomy in an uncertain global landscape.

The Modi-Xi engagement, therefore, is not merely bilateral diplomacy but a component of a larger transformation in global economics and geopolitics that could redefine the rules of international trade, finance, and security in the coming decades. India’s ability to balance its relations, leverage its strengths, and assert its interests within this new framework will be crucial in shaping the future trajectory of the region and the world.

Gopal Goswami, PhD, is a Researcher, Columnist & Social Worker. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18’s views.

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