Foreign Direct Investment Regulations Eased for Companies with Up to 10% Chinese Ownership

India Eases FDI Rules for Overseas Companies with Chinese Shareholding

The Indian government has relaxed foreign direct investment (FDI) rules for overseas companies with Chinese shareholding, allowing them to invest in the country under the automatic route. The change, which comes into effect from May 1, was notified by the Finance Ministry under the Foreign Exchange Management Act (FEMA).

The decision is a result of amendments made to the press note 3 of 2020 of the Department for Promotion of Industry and Internal Trade (DPIIT) in March. As per the amendments, foreign companies with a Chinese or Hong Kong shareholding of up to 10 per cent will be eligible to invest in India in sectors where FDI is permitted under the automatic route, subject to sectoral conditions.

However, the relaxed rules will not apply to entities registered in China or Hong Kong, or other countries sharing a land border with India. Earlier, foreign firms with shareholders from these countries owning even a single share had to seek mandatory approval to invest in India in any sector. India's strategic neighbors that share a land border with the country include China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, and Afghanistan.

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The restrictions will now apply only to beneficial owners. The Department of Economic Affairs (DEA) has defined the term "beneficial owner" as per the Prevention of Money-laundering Act, 2002, and the Prevention of Money-laundering (Maintenance of Records) Rules, 2005.

According to the DEA's notification, controlling ownership interest means ownership of or entitlement to more than 10 per cent of shares or capital or profits of the company. The notification also clarified that a multilateral bank or fund, of which India is a member, will not be treated as an entity of a particular country, nor shall any country be treated as the beneficial owner of the investments of such bank or fund in India.

China's share in India's total FDI equity inflow from April 2000 to December 2025 stands at 0.32 per cent, with a value of $2.51 billion, ranking 23rd in the list.

In a separate development, the Finance Ministry has also notified 100 per cent foreign direct investment (FDI) in the insurance sector under the automatic route. However, the cap for Life Insurance Corporation (LIC) remains at 20 per cent, as per the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2026.

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Note: The table above shows China's share in India's total FDI equity inflow from April 2000 to December 2025.