India Eases Restrictions on Direct Investment from China and Other Neighboring Countries

India recently eased restrictions on Chinese investment in its domestic companies. This indicates that relations between the two countries, which deteriorated following the deadly border clashes of 2020, are continuing to improve.

The Indian government will now have 60 days to decide on investment proposals from neighboring countries, covering sectors such as production materials, electronic components, polysilicon for photovoltaic panels, and silicon wafers for semiconductors.

Control of the companies receiving investment must be held by Indian companies or individuals. However, investments from neighboring countries with a stake of less than 10% will not require government approval.

Previously, regulations implemented in April 2020 required Indian government approval to prevent foreign capital from taking advantage of the chaos caused by the COVID-19 pandemic to acquire Indian companies. This measure came against the backdrop of the People’s Bank of China (PBOC) increasing its stake in HDFC Bank, India’s largest private bank, from 0.8% to 1.1%, which initially sparked opposition within India.

In a statement, the Indian government emphasized that easing restrictions will promote foreign direct investment (FDI) and integration into global supply chains, enhancing India’s competitiveness as a manufacturing base.

The government also stated, “The inflow of FDI increases or supplements domestic capital, supporting the goal of ‘Self-Reliant India’ (Atmanirbhar Bharat) and accelerating overall economic growth.”