Any amount of Chinese investments in India to require gov’t nod

Any amount of Chinese investments in India to require gov’t nod. (Photo courtesy: Indian Express)

(, Oct20’20) – As the Ladakh border dispute and faceoff continues to simmer, India has further hardened its economic ties with China, requiring Foreign Direct Investment (FDI) with even the smallest Chinese holding to require government approval. New Delhi has thereby abandoned its earlier plan to set a floor for “significant beneficial ownership,” reported the Oct 19.

The report noted that in April, when the Cabinet approved the plan for screening of FDI proposals from countries bordering India, the government had discussed the option to set the threshold at either 10%, the provision in the Companies Act, or 25%, the prescription in the Prevention of Money Laundering Act.

However, after six months, and following multiple rounds of discussions, the view has changed. “The (Cabinet) decision did not mention a minimum or maximum limit. So, even if it is a small fraction, it will be covered,” the report quoted a government official as saying.

The report said a threshold for “significant beneficial ownership” was meant to ensure that Chinese companies did not enter India via third countries such as Singapore or Mauritius.

Several start-ups in India, ranging from Paytm to Zomato to BigBasket, which have Chinese investment, were reported to be watching the government move closely. Several proposals were stated to be also pending government approval.

The report said Taiwanese investments were expected to be exempted from the requirement of mandatory clearance.

The report noted that the move to tighten rules for investment flows from China followed the tension at the Ladakh border and the growing influence of Chinese companies such as Tencent and Alibaba in the Indian start-up ecosystem. Over the years, the government had adopted a sectoral view with only sensitive areas requiring approval, irrespective of the source of FDI flow, the report said.


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