India Eases FDI Rules for Chinese-Linked Firms
Companies with up to 10% Chinese ownership can now invest via the automatic route under revised FEMA norms.
The Government of India has relaxed foreign investment regulations, allowing foreign companies with up to 10% Chinese or Hong Kong shareholding to invest in India through the automatic route. The change, notified by the Ministry of Finance under the Foreign Exchange Management Act (FEMA), came into effect on May 1, 2026.
The decision was approved by the Union Cabinet in March 2026, modifying the earlier Press Note 3 (2020) issued by DPIIT. Previously, any level of investment linked to countries sharing land borders with India required prior government approval. The new rule removes this requirement for companies with only minor Chinese stakes, provided the sector allows FDI.
However, the relaxation does not apply to companies directly registered in neighboring countries such as China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, and Afghanistan. The concept of beneficial ownership remains key—only entities with more than 10% ownership will be treated as significant stakeholders.
According to official data, China’s share in India’s total FDI inflows between April 2000 and December 2025 was just 0.32%, amounting to $2.51 billion, ranking 23rd among investors.
Additionally, the government has allowed 100% FDI under the automatic route in the insurance sector, including intermediaries, while maintaining a 20% cap for LIC.
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