The Reported Solutions for Allowing Chinese Investment in India
All the suggested modifications to PN3 in one post
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Every few weeks, we come across a news item suggesting that the Indian government is reviewing its stance on Chinese FDI. The existing status is that any investment by China (and other countries sharing land borders with India) requires the explicit approval of the union government. Since every investment decision is to be made on a case-by-case basis, it means that Chinese FDI is effectively disallowed except in some cases where the companies have managed to secure the government’s approval after long delays.
Now, given the unfavourable geopolitical situation that accompanies a difficult global trade environment, India has been reconsidering this stance for quite some time. Every few months, newspapers carry reports (often quoting anonymous government officials) about a new way forward.
I thought it might make sense to list all these proposals in one place, in descending order of their apperance in the media.
| Date | Proposal | Details |
|---|---|---|
| 1 Jan 2026 in Mint | Exempt investments up to 26% from screening in non-sensitive sectors | Caveat being that “foreign entity should not exercise management control and not have a seat on the company board” |
| 24 November 2025 in Business Standard | “High-level committee on non-financial regulatory reforms” proposes two options | Option 1: withdraw the “Press Note 3”. Option 2: allow up to 49% cummulative investment from China in non-strategic sectors, subject to approval by a committee headed by the Cabinet Secretary and allow any single Chinese investor with <10% holding through automatic route |
| 18 July 2025 in Reuters | NITI Aayog proposes allowing up to a 24% stake without additional security clearance | No details on whether this is across most sectors as for other countries or only in non-sensitive sectors |
| July 2024 in the Economic Survey of India | Allow FDI from China | “focusing on FDI from China seems more promising for boosting India’s exports to the US, similar to how East Asian economies did in the past. Moreover, choosing FDI as a strategy to benefit from the China plus one approach appears more advantageous than relying on trade.” |
The government department in charge was supposed to decide on this issue by December 31. As of now, it is not clear what its decision is, but the trend seems to be towards relaxing the PN3.
Moreover, the “non-sensitive” sectors definition will be contentious because many in the government might consider electric vehicles as a “strategic sector” when the investment source is Chinese, because of fears over remote kill switches. I personally think such concerns should be managed by hardware supply chain security mechanisms and not investment bans.