Will Chinese companies now be able to invest in India without government approval? What are the new conditions in the decision of the Finance Ministry?

India FDI Policy 2026: The Finance Ministry has taken an important decision regarding Foreign Direct Investment (FDI), which has made it easier to invest in India to some extent, especially for institutions from countries like China and Hong Kong, for which earlier the avenues for foreign investment were quite limited.

The government has made it clear that if Chinese or Hong Kong entities have up to 10% equity stake in a foreign company, then that company is allowed to invest in India. This investment will be done through the automatic route, which means that there is no need to obtain separate, special government approval for each case of investment. However, this facility is applicable only to specific sectors where FDI is already permitted and where the investing enterprises comply with the applicable regulations.

When and under what conditions was this change completed?

According to PTI, this change was actually completed in March 2026, when the central government approved amendments to the previous 2020 rules (specifically, Press Note 3). Subsequently, the Department for Promotion of Industry and Internal Trade (DPIIT) issued a notification in this regard vide Press Note 2 (2026); The Finance Ministry has now implemented this change by making necessary amendments in the scope of the Foreign Exchange Management Act (FEMA).

However, this relaxation is not applicable everywhere. It does not apply to entities that are directly registered in China, Hong Kong, or any other neighboring country of India. In other words, if a company is located in one of these specific areas, it will still need to obtain prior government approval, as was the case under the previous system.

What was the previous situation?

Earlier, if any institution from these specific countries owned even a single share in a foreign company, it had to obtain full government approval before investing in India. Now the rules have been relaxed somewhat. Now the focus will be on the beneficial owner i.e., the ultimate or real owner of the investment. If any person or institution holds more than 10% stake, he will be considered to have a significant interest.

The government has also said that these restrictions will not apply to international banks or funds of which India is a member just because a big country (like China) is a member. As a result, investment coming into India through such funds will be made easy and systematic.

The government had imposed strict rules during the COVID-19 pandemic

In fact, during the COVID-19 pandemic in 2020, the government had imposed strict rules to prevent foreign companies from opportunistically buying stakes in Indian companies. Now that the situation has become normal, these old restrictions are being relaxed gradually and in a phased manner. If we look at the statistics, China’s FDI in India is not very high; It is just around 0.32%. In this context, this change is being seen as a step towards promoting investment.

The post Will Chinese companies now be able to invest in India without government approval? What are the new conditions in the decision of the Finance Ministry appeared first on Latest.