Also Read: India eases FDI rules from bordering nations, unlocks path for Chinese investment
Press Note 3 reforms open the door slightly for Chinese money
The cabinet on Tuesday cleared amendments to Press Note 3, which had previously mandated prior government approval for investments from countries with land borders with India. These are, however, seen to be directed at China. The new rules allow entities with less than 10% non-controlling beneficial ownership from neighbouring countries to invest through the automatic route, subject to sectoral caps. Investments in specified manufacturing sectors such as capital goods, electronic components, polysilicon and ingot wafers will now be processed within 60 days.
The government emphasised that majority ownership and operational control must remain with resident Indians. “Amendments in the FDI policy aim to unlock greater inflows from global funds for startups and deep techs, and take forward the agenda of ease of doing business,” the official statement said.
While the policy technically extends to all bordering countries, including Bangladesh, Nepal, Bhutan, Pakistan, and Myanmar, the primary goal is to free up Chinese investments that had stalled since 2020. FDI from China dropped sharply from $163.8 million in FY20 to just $2.7 million in FY25, even as overall FDI into India increased to $50 billion.
Also Read: Make in India, funded by China? India can’t shut out Chinese cash
Bridging the components gap
Industry executives have long argued that India cannot scale up high-tech manufacturing without access to intermediate goods, tooling and process technologies dominated by China. Electronics manufacturers in India have advocated for minority joint ventures with Chinese firms, capped at 26% equity, to gain capital, technology and integration into global supply chains without ceding control.
“The proposed rejig is expected to usher in a wave of Chinese investments in form of key FDI capital to be deployed locally to build factories, create jobs, and integrate into global supply chains under the Make in India 3.0 framework,” said Amit Agarwal, partner at Nangia & Co.
Experts note that allowing Chinese capital to fund component production domestically is preferable to importing finished or intermediate goods. This approach builds local manufacturing capability, creates jobs and deepens value addition, while reducing dependency on imports that can be affected by tariffs, logistics issues or geopolitical tensions.
Time-bound approvals to spur collaboration
The 60-day approval window for targeted sectors is expected to accelerate partnerships between Indian and Chinese companies. Analysts anticipate a surge in brownfield projects, where Indian firms can rope in minority Chinese partners to access technology and scale production.
“The relaxations will help manufacturing in electronic components, capital goods, and solar cells,” the government said. Time-bound processing enables companies to enter joint ventures more efficiently, integrating Indian manufacturing into global supply chains.
The strategic logic behind opening up
India’s cautious relaxation of investment norms reflects both economic pragmatism and security awareness. Press Note 3 was initially introduced during the COVID-19 pandemic to prevent opportunistic takeovers, particularly by Chinese entities. Despite the reduction in FDI, bilateral trade has grown steadily. In FY26, exports to China rose 38.4% to $15.9 billion, while imports increased 13.8% to $108.2 billion.
Economist Sajjid Chinoy has argued that private capital expenditure in India remains constrained because companies lack demand visibility amid large imports from China. Allowing Chinese investment under controlled conditions would internalise parts of the value chain. “If Chinese firms invest and manufacture locally, jobs and capabilities are created on Indian soil, even if capital originates across the border,” he said.
The de minimis thresholds discussed in earlier reports were aimed at permitting small, low-risk investments to receive automatic approval without dismantling strategic guardrails. While the latest reforms do not specifically mention de minimis rules, the underlying principle remains the same — channel Chinese capital into India without ceding control of critical sectors.
Why Chinese companies want to put their cash in India
The interest is not one-sided. Chinese firms face slowing domestic growth and rising trade barriers in developed markets. India offers a large, expanding consumer base and an incentive-driven manufacturing policy environment. Chinese firms are seen as valuable partners in scaling production capacity. Minority joint ventures, capped stakes and structured collaborations provide them access to one of the world’s fastest-growing major markets without necessarily seeking controlling positions. Moreover, local manufacturing in India can help Chinese companies navigate tariff regimes and geopolitical tensions elsewhere. Investing in India becomes both a growth strategy and a diversification hedge.
A measured path forward
India’s approach balances strategic caution with industrial necessity. Majority control remains with Indian residents, while small Chinese stakes fund the production of components and intermediate goods domestically. This controlled opening ensures that the Make in India programme can scale rapidly, leveraging foreign capital to build local capability rather than continuing reliance on component imports from China.
By easing FDI rules in this targeted manner, India hopes to deepen local manufacturing ecosystems, strengthen global supply chain integration and move toward self-reliance in high-tech components, without compromising security or strategic autonomy. The latest measure shows how policy, industry demand and economic strategy converge to make Chinese FDI a tool for India’s domestic manufacturing growth rather than a geopolitical liability.