India's Firm Stance on Chinese Investments

Amid escalating global tensions and domestic apprehensions, the Indian government shows no signs of relaxing its stringent investment checks on Chinese companies. This decision comes at a time when there are growing calls to review Foreign Direct Investment (FDI) norms, reflecting the government's heightened vigilance towards investments originating from across the border.

Global and Domestic Pressures

The backdrop of US President Donald Trump's tariffs has further alarmed Indian authorities about the potential diversion of Chinese exports to India and other Asian markets. Meanwhile, the private sector in India has been advocating for a review of the investment regime, tightened post the 2020 Covid outbreak and the Ladakh standoff, which led to bans on several Chinese apps and restrictions on visas and government procurement.

Underlying Concerns

Government reservations stem from the opaque ownership structures of Chinese companies and their close ties with the Communist regime and military. Additionally, China's non-market economy practices, including subsidies to manufacturers and loan write-offs, viewed by some as indirect subsidies, exacerbate concerns over easing investment curbs.

Strategic Implications

Despite India's efforts to attract global manufacturing giants, Chinese policies have often sought to constrain these companies, from Apple's top suppliers to smaller component vendors. The Press Note 3 mechanism, requiring case-by-case approval for investments from countries sharing a land border with India, offers the government discretion in permitting investments, a tool previously used to block significant Chinese ventures.