The development is significant as these are among the first such approvals in recent times given border tensions and the scrutiny that investments from China have been attracting in India.
Prominent names that have recently got approval include Chinese electronics major Luxshare, which is also a vendor for Apple, and a joint venture (JV) between Bhagwati Products (Micromax) and Huaqin Technology, in which the Chinese company will own a minority stake. Other proposals cleared include some Taiwan-based firms listed in Hong Kong or having investments from there.
“Some are Taiwanese companies which have one beneficial owner who has some interest in Hong Kong or is listed on the Hong Kong exchange while a few are genuine Chinese firms,” said an official on condition of anonymity.
Pressure from Industry
These clearances come amid increasing pressure from the electronics manufacturing industry to approve investments with Chinese links to help broaden and deepen supply chains in India.
Two rounds of meetings of the inter-ministerial panel have taken place so far and seven-eight proposals across all sectors have been cleared. A majority of these are in the electronics sector.
Queries and messages sent to Luxshare and Bhagwati remained unanswered at the time of going to press.
Indian companies have been pushing for a review of China trade ties, particularly Press Note 3. The Department for Promotion of Industry and Internal Trade (DPIIT) had in 2020 amended the foreign direct investment (FDI) policy to make prior government approval mandatory for inflows from countries sharing a land border with India through Press Note 3. This came in the backdrop of the India-China border clashes of mid-2020.
The government appears to now be slowly opening up for Chinese investment with proper safeguards in place, as it’s of the view that local value addition must increase for self-sufficiency in electronics manufacturing to become a reality.
Last month, ET reported that the government told industry it planned an inter-ministerial panel to expedite the approval of investment proposals by Chinese firms to operate in India or tie up with Indian companies if they meet certain criteria. That plan has been implemented and two rounds of meetings have been held, as reported above.
“The inter-ministerial panel is meeting every six-seven weeks to take stock of the situation and grant approvals after doing thorough checks,” an official said.
The conditions included clarifying that the investment and technology were critical to develop the local manufacturing supply chain in areas such as high-tech components. Also, no Chinese nationals could occupy key executive roles in any JV or foreign company operating in India. Besides this, the Chinese company could only hold a minority stake in a partnership with Indian firms as well as in foreign companies operating in the country.