As China's growth strategy shifts from speed to quality, economies worldwide are adapting to a new landscape. China's decision to set a reduced GDP growth target of 4.5-5.0% for 2026 marks another step in its structural transition, with policymakers presenting it as a deliberate pivot toward high-quality growth emphasizing productivity, technological upgrading, and comprehensive development. This transition creates both opportunities and challenges for India, as trading partners face a China that is simultaneously slowing overall while becoming more competitive in selected industries, with investment flowing into advanced manufacturing, clean energy, and digital technologies.
India's rupee declined by over 20% between January 2022 and February 2026, making it the highest among comparator countries during this period. According to reports from Business Standard, this decline occurred despite central bank sales of over 45% of foreign currency assets, also the highest among these countries. The Reserve Bank of India's forward intervention exceeded $60 billion during this timeframe, yet foreign investors continue sending signals of doubt about India's medium-term prospects. This currency weakness occurs as global trade patterns shift, with China's share of exports destined for the United States falling from 19.2% in 2018 to 11% in 2025, while trade with emerging markets including ASEAN, Latin America, Africa and Central Asia has expanded more than 10% annually since 2021.
India's labour-intensive manufacturing performance has been poor over the last 15 years, with the country experiencing a declining global market share from already low levels. As reported by Business Standard, the Trump tariffs and geopolitical uncertainty have only added to this long-term weakness, reinforcing doubts about India's ability to exploit the China Plus One opportunity and revive its manufacturing sector. While India has managed to reinvigorate its electronics sector through luring Apple, this success risks being an isolated case rather than opening the floodgate to manufacturing investment. The global manufacturing landscape is further reshaped by China's transition, with Chinese firms occupying leading positions in global markets in sectors such as electric vehicles, batteries and solar power, while the transport sector's share of BRI engagement fell to its lowest ever at 6.2% in 2025 from a peak of 28% in 2018.
Private investment has declined significantly, dropping from 17% of GDP in the early 2000s to half that amount today. According to Business Standard, there was a brief post-Covid blip but this has since faded. The government has taken action to reduce business costs through reforms including labour law simplification, opening up to foreign direct investment, and negotiating a free trade agreement with the European Union. However, investors' doubts remain unaddressed, with concerns about the impact of AI on India's successful services sector, where iconic companies that drove the early IT boom have been shedding labour. For service and knowledge economies with strengths in education, healthcare, financial services and professional services, China's transition creates genuine new demand, as an ageing Chinese population, a more affluent middle class and a technologically upgrading economy create expanding markets for precisely these services.
The analysis identifies several government instincts affecting business confidence, including tilting the regulatory playing field in favor of large corporate houses at the expense of other investors, domestic and foreign. As reported by Business Standard, these challenges also include tilting the playing field in favor of some states against others, weaponising the state's coercive apparatus to target political opponents and businesses, and over-zealously implementing tax laws. The government could signal more fundamental change by becoming more open about acknowledging ongoing challenges and recruiting fresh talent for independence rather than loyalty. For countries considering settling bilateral trade in Renminbi, the practical implication is lower transaction costs and reduced dollar exposure in trade with China, but limited ability to deploy Renminbi balances freely in third markets.
