Border Control: India Approves Just One Chinese FDI Proposal in FY26

New Delhi maintains stringent screening protocols under Press Note 3, restricting direct mainland capital while clearing thirteen proposals from Hong Kong.

During the 2025–26 financial year, the government of India approved a solitary foreign direct investment (FDI) proposal originating from mainland China, valued at Rs 1 crore. According to official data released by the Department for Promotion of Industry and Internal Trade (DPIIT), the administration simultaneously cleared 13 investment proposals from Hong Kong, collectively worth Rs 610.42 crore. These regulatory decisions underscore New Delhi’s continued caution regarding capital inflows from jurisdictions sharing land borders, maintaining stringent oversight to safeguard domestic industries.

Regulatory Framework and Press Note 3 Background

The strict evaluation of capital movements stems from Press Note 3, introduced by the DPIIT in April 2020 during the peak of the COVID-19 pandemic. The policy mandates prior government approval for any foreign direct investment originating from countries that share a land border with India—namely China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan. Regulators implemented these measures specifically to prevent opportunistic takeovers and corporate acquisitions of vulnerable Indian businesses.

Key context and policy details include:

• Broad Approval Figures: Across all global jurisdictions, the government approved 63 FDI proposals totaling Rs 10,292.67 crore ($1.18 billion) through the official approval route during the April 2025–March 2026 period.

• Top Investing Nations: Singapore emerged as the leading source of approved FDI by value, securing clearance for five proposals worth Rs 3,259.88 crore ($382.52 million). The United Kingdom followed with five proposals valued at Rs 2,477.67 crore ($283 million), while Thailand secured approval for two projects worth Rs 1,600 crore.

• Partial Norm Relaxations: Earlier in March, the government eased specific provisions of Press Note 3, permitting automatic-route investments for entities where beneficial ownership from land-border countries does not exceed 10% without controlling rights.

• Exclusion of Greater China: Authorities explicitly clarified that these recent relaxations do not apply to entities incorporated in mainland China or Hong Kong, which remain fully subject to mandatory prior government clearance.

Historical Inflows and Economic Impact on Markets

Historical data highlights that direct mainland Chinese investment has consistently remained low relative to global inflows. Between April 2000 and March 2026, China ranked 23rd among foreign investors, accounting for a marginal 0.32 percent of cumulative FDI equity inflows into India, totaling $2.51 billion (Rs 16,162.25 crore). Conversely, Hong Kong positioned 15th over the same timeframe, contributing $4.91 billion (Rs 31,220.30 crore), or 0.62 percent of total equity inflows.

For domestic corporations, strategic investors, and foreign partners, these figures signal that regulatory bottlenecks for mainland-linked capital remain firmly in place, even as overall inbound investments from Western and Southeast Asian partners expand steadily.

Why It Matters

Maintaining stringent oversight on cross-border capital flows directly affects how foreign enterprises structure corporate expansion into South Asia. By limiting exposure from select bordering territories while encouraging diverse investments from nations like Singapore and the United Kingdom, policymakers aim to protect domestic commercial ecosystems from external market vulnerabilities.

Key Facts at a Glance

• Reporting Period: Financial Year 2025–26 (April 2025 to March 2026).

• Chinese FDI Approvals: Exactly 1 proposal approved, valued at Rs 1 crore.

• Hong Kong FDI Approvals: 13 proposals cleared, with a combined value of Rs 610.42 crore.

• Regulatory Framework: Press Note 3 guidelines enforced by the DPIIT.

FAQ Section

Why did India approve only one Chinese FDI proposal in FY26?

Investments from nations sharing a land border with India are strictly regulated under Press Note 3, requiring exhaustive prior government screening to prevent opportunistic takeovers.

Are Hong Kong investments subject to the same restrictions?

Yes. Entities registered in Hong Kong and mainland China remain explicitly excluded from recent automatic-route relaxations and require rigorous case-by-case government clearance.

Which countries led approved FDI inflows by value during FY26?

Singapore led total approved investment values with five proposals worth Rs 3,259.88 crore, followed closely by the United Kingdom and Thailand.

Where can stakeholders review official guidelines on foreign investments in India?

Comprehensive regulatory notifications and policy updates are accessible via the Department for Promotion of Industry and Internal Trade (DPIIT) portal.

Source: Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, The Economic Times, Business Standard