“We have ourselves decided to keep close tabs on Chinese investment, which was meant to discourage them, especially because of the takeover threat for our companies. Without our permission, they cannot invest a single yuan in India,” a government source said.
Officials said some investors may be keen to avoid scrutiny and may be waiting for the detailed clarifications to emerge, which will specify things like the definition of “significant beneficial ownership”. The new rules on FDI for neighbouring countries, put in place with an eye on Beijing, were meant to ensure that Chinese investors do not enter India via a third country.
While state-backed Chinese media suggested that FDI inflows will slow down due to Covid-19 as well as the border skirmishes, government officials were, however, dismissive, arguing that China accounts for 0.5% of FDI inflows into India.
Official data showed that China was at number 18 in terms of source of FDI with several other countries such as Singapore and Mauritius ahead of it.
A large number of Chinese investors, such as electronics goods maker Xiaomi, have entered India via Singapore and other countries, which do not reflect in the official numbers. A report by thinktank Gateway House estimated Chinese FDI at around $6.2 billion, with investment in Indian tech companies at around $4 billion. Even at this level, it will be lower than Singapore, Mauritius, US, UK, Germany, Netherlands and Japan, among others.
The official numbers suggest that of the $2.4 billion FDI from China in the last 20 years, close to $1 billion has gone into the auto sector.