‘All options open’: India may consider easing restrictions on FDI from China; improved ties in focus

India may consider relaxing certain restrictions on foreign direct investment from China as ties with Beijing show signs of thawing, a senior government official said. “If need be, we can take a relook at Press Note 3,” the official was quoted as saying ET. “All options are open.”The Press Note 3 requires prior government approval of all investment proposals from countries that share a land border with India. Last month, Niti Aayog recommended removing the requirement for mandatory prior approval for Chinese FDI up to 24 percent. Relations between India and China have warmed in recent months, marked by bilateral visits of ministers and officials. Resumption of direct flights, increased tourist exchanges, and intensified dialogues to resolve border disputes have also helped in easing tensions. This rapprochement has been further accelerated by the impact of US President Donald Trump’s tariff measures, with 50% tariffs on Indian goods that took effect from August 27.Under current regulations, all investments from Chinese entities require security clearance from the Indian government. These restrictions were first introduced in July 2020, when India barred companies from countries sharing a land border from participating in government procurement contracts, citing national security concerns and the need to prevent hostile takeovers.The Economic Survey 2024 also suggested a measured relaxation of restrictions on Chinese FDI, noting that it could enhance India’s integration into global supply chains and support higher export growth.Union commerce and industry minister Piyush Goyal said last week that a review of restrictions on Chinese foreign direct investment (FDI) could be considered if circumstances warrant.Speaking at The ET World Leaders Forum, he explained that Press Note 3 was introduced to safeguard Indian ownership in strategic sectors amid declining valuations during the Covid crisis. “It does not ban FDI from anywhere; we only take a cautious approach and there is pre-approval. We have given approvals to many companies… wherever we find that the industry, technology or supply in question aligns with vision of India, we have been regularly giving approvals. Same process will continue. When times change, situations change, decisions can be made to suit the times,” Goyal said, responding to a question on a possible review of norms following the recent easing of visa and flight restrictions with China.