As part of its multi-alignment strategy, the Centre has relaxed rules for investments from land border sharing countries — read China. The other LBCs are Bangladesh, Pakistan, Nepal, Myanmar, Bhutan, Afghanistan. Press Note 3, issued in April 2020, in the wake of the Galwan clash, was meant to prevent Chinese takeovers and acquisitions, and actively discouraged investment from Chinese entities — particularly those with a 10 per cent stake or more, situated either in LBCs or elsewhere. On Tuesday, the Centre has made some notable changes, in a bid to attract Chinese capital.
According to the modified rules, firms with a ‘non-controlling’ Chinese stake of up to 10 per cent can invest under the automatic route, with the sectoral caps applying to them. Even for those with a stake above 10 per cent, PN3 provisions have been relaxed. As opposed to being put through the rigours of ‘government approval route’, these firms may become eligible for fast track nod. But to qualify for the latter, the investment should pertain to specified sectors such as capital goods, electronic capital goods, electronic components and polysilicons and ingot wafers. The proposals may be considered fit for clearance in 60 days, if they are capital intensive and technology-heavy segments”. Majority stake will remain with Indians. It appears that a good number of Chinese investment proposals will now effectively be fast-tracked. The move is significant for geo-political and economic reasons.
It must be analysed for the reasons underlying it and its possible effects. As for the first, the global context is truly compelling. The uncertainty unleashed by the Trump administration has forced a relook at economic and geopolitical alliances. India has been casting its net wide for quite a while in a low profile way. It relaxed professional visas and flights with respect to China late 2025. Meanwhile, US’ tariff and war tantrums have roiled India’s currency and capital flows. Chinese investment in important sectors, with Indian control over management, is certainly not a bad idea.
However, the question is whether China will invest in response to this overture. China’s investments so far in India are just about $3 billion. For that to change, India’s manufacturing and logistics ecosystem will have to look up. Some amount of trust-building will have to happen, with both sides agreeing not to ratchet up hostilities that could translate into a sudden change of rules and regulations. India’s imports of electronic components, chemicals and other intermediaries should ideally reduce with that translating into investments here, with some technology transfer. China may want higher management control to be interested, while we need more than turnkey investment. Finally, our ties with China and Russia on the one hand, and US on the other can work as offsets, economically and geo-politically. As the adage goes, ‘there are no permanent friends or enemies, only permanent interests’.
Published on March 12, 2026