Recommendations for Investment Restrictions from China
A high-level committee led by NITI Aayog member Rajiv Gauba has suggested changes to the restrictions on investments from China. This could lead to significant adjustments in India's foreign investment approach, potentially integrating more closely with global value chains and boosting exports to China.
Committee Proposals
- The panel has recommended two major options for the government:
- Option 1: Withdraw the restrictions under 'Press Note 3', allowing foreign direct investments (FDI) from countries like China without limitations.
- Option 2: Permit investments from these countries under certain conditions, i.e., if the beneficial ownership is less than 10%. This would require defining a beneficial owner with a minimum threshold of 10%.
- Additionally, the committee suggests allowing up to 49% cumulative investment from land-bordering countries in non-strategic sectors, with approval from a committee led by the Cabinet Secretary, maintaining dominant Indian control.
Strategic and Non-Strategic Sectors
- Strategic sectors include telecom, power, space, defense, petroleum, and those crucial for national security.
Context and Background
- 'Press Note 3' was introduced in April 2020 to prevent opportunistic takeovers amid the pandemic, mainly targeting Chinese investments due to border tensions.
- Previously, investments from China could proceed without prior government approval.
Economic Survey and China's Strategy
- The Economic Survey of July 2024 highlighted a strategy to benefit from the 'China-Plus One' approach by either integrating into China's supply chain or promoting FDI from China.
- FDI appears more promising for boosting exports to the US, similar to past East Asian strategies, as opposed to relying solely on trade.
FDI Statistics
- In the first half of 2025, FDI from China was $0.91 million, compared to $28 million during the same period the previous year.
Conclusion
The NITI Aayog panel has presented its recommendations to the government, with a decision expected by December 31. The potential easing or withdrawal of restrictions could reshape India's investment landscape, fostering closer economic ties with China.
