All Foreign direct investment (FDI) proposals from Chinese companies have been put on hold for now as they are being screened by the Ministry of Home Affairs for security clearance.
As many as 175 proposals are awaiting approvals. Major firms whose FDI proposals await clearance include Great Wall Motors (GWM), petrochemical major Hengli and Foton China.
China’s largest SUV maker Great Wall Motors had in January acquired General Motors’ Talegaon factory in January for Rs 950 crore. It was part of Great Wall Motors’ $1 billion investment in India’s SUV market.
“The objective of the national security clearance is to evaluate potential threats, visible or embedded, in proposals received by the home ministry and to provide a national risk assessment. After a new FDI policy by the Department for Promotion of Industry and Internal Trade (DPIIT), a detailed review of the names of promoters, owners, and directors are conducted despite a self-declaration. As many as 175 such proposals are pending for approvals,” a senior government official said to the Economic Times.
According to a DPIIT statement: “An entity of a country, which shares a land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only through the government route.” The amendment in FDI rules issued in April this year further seeks to curb “opportunistic takeovers or acquisitions of Indian companies due to the Covid-19 pandemic”.
The scrutiny has increased further after the Galwan Valley incident which led to the death of 20 Indian soldiers. The border situation has remained tense between the two Asian neighbours ever since.
Last month, India banned 59 Chinese apps, including Bytedance’s TikTok and Tencent’s WeChat, due to threats to national security and public order. The move came after a violent border dispute between the armed forces of the India and China in eastern Ladakh on June 15.