Our Bureau
New Delhi
The Indian government has eased its foreign direct investment (FDI) rules for overseas companies that have up to 10% shareholding from China. The Finance Ministry notified the changes under the Foreign Exchange Management Act (FEMA) on May 2, 2026, allowing such firms to invest in India through the automatic route in sectors that already permit automatic FDI.
Under the new norms, companies with up to 10% Chinese ownership can now invest without prior government approval, amending a six‑year rule that had required screening for all FDI from countries sharing land borders with India. The change is tied to the definition of “significant beneficial ownership” under the Prevention of Money‑Laundering Act (PMLA), which caps controlling interest at 10%.
However, the relaxation does not apply to entities registered in China, Hong Kong or other land‑bordering countries; such companies must still seek government approval for their investments. The move comes after global investors, especially private equity firms with trace Chinese capital, complained that the old rules were slowing down deals and discouraging funds from routing money into India.
The government said the revision aims to boost FDI inflows, support production in key sectors such as electronic components, capital goods and solar cells, and help stabilise the rupee, which has been under pressure in recent months. Companies receiving these investments will have to report relevant ownership details to the Department for Promotion of Industry and Internal Trade (DPIIT) as part of the new reporting framework.
