India's modified China-linked FDI rules get an encouraging response

The government's modified rule that allowed global companies with minor Chinese participation to make investment in the country gets significant response. The policy has allowed foreign companies upto 10% Chinese shareholding to make investment in India through the automatic route.

According to the government data, 29 FDI proposals got a total inflow of Rs 4895 crores (over US $500 million) under this provision. The investment covered a wide range of industries including artificial intelligence, data centres, manufacturing, IT and transport services.

The new policy doesn't open India's doors to unrestricted Chinese investment. Rather it removes an unintended barrier for global companies and investment funds who are having a non-controlling Chinese stake.

Before May 2026, the FDI proposals by individuals or firms from a country sharing land border with India required to get government approvals. Such a restriction was made to control unnecessary takeover of Indian firms by cash rich companies from neighbouring countries especially China.

The change allowing foreign companies up to 10% Chinese shareholding to make FDI in India under the automatic route was made due to demand from business corporate.

Under the FDI framework, the automatic route allows a foreign investor to invest without obtaining prior approval from the government. Still, the investor must comply with all applicable sectoral, pricing and reporting requirements.

This means that foreign companies with up to 10% Chinese or Hong Kong shareholding are eligible to invest in India subject to the sectoral FDI norms.

At the same time, the relaxed FDI rules will not be applicable to companies listed in China or Hong Kong.