Before Xi's visit, Chinese money is pouring in

AI Summary

Ahead of President Xi Jinping's expected BRICS summit visit, Chinese capital is increasing investment in India following relaxed regulatory rules. Concurrent border talks between Indian NSA Ajit Doval and Chinese Foreign Minister Wang Yi aim to stabilize relations despite lingering security concerns post-2020 border clashes.

As National Security Adviser (NSA) Ajit Doval lands in Beijing on Monday for border talks with Chinese Foreign Minister Wang Yi and preparations for President Xi Jinping’s expected visit to India for the BRICS summit in September gather pace, another story is unfolding quietly in the background.Chinese-linked capital is finding its way back into India after years of regulatory roadblocks. Just three months after India relaxed parts of its post-Galwan investment regime, more than $500 million of foreign investment linked to the revised rules has already entered the country. The diplomatic thaw between Asia’s two largest economies is increasingly being accompanied by a cautious reopening of economic channels that were largely frozen after the 2020 border clash.Also Read: India gets nearly Rs 5,000 crore FDI after easing rules for Chinese-linked firmsThe renewed investment flows do not mean India has abandoned its security concerns. Nor do they suggest a return to the pre-2020 era of relatively unrestricted Chinese business activity. What is emerging instead is a more measured framework that allows selected investment and industrial cooperation while keeping scrutiny over strategic sectors and sensitive ownership structures.Doval’s Beijing visit comes at a pivotal momentDoval’s discussions with Wang Yi under the Special Representatives mechanism are officially focused on the boundary dispute. Yet the visit carries significance beyond the border question. It comes ahead of the September BRICS summit in New Delhi, where Xi Jinping is widely expected to attend despite Beijing not having formally confirmed his participation. The talks follow a series of diplomatic engagements over the past two years that have gradually restored political dialogue between the two countries.The message from both governments has been consistent. Peace and stability along the Line of Actual Control remain essential for the broader relationship. Even amid reports of occasional tensions, India has repeatedly stressed that border tranquillity is the prerequisite for normal ties.Also Read: No easy entry for India Inc in China as Beijing tightens business visa rulesThat principle has increasingly translated into a wider effort to stabilise the relationship. Since late 2024, India and China have resumed direct flights, reopened channels for business travel, restarted border trade and expanded diplomatic engagement. Foreign Minister S Jaishankar’s recent discussions with Wang Yi focused not only on political issues but also on market access, supply chains and trade imbalances.The long shadow of Press Note 3Introduced in April 2020 after the Covid outbreak and later reinforced by the deterioration in India-China ties following Galwan, Press Note 3 required government approval for all investments from countries sharing a land border with India. Although the policy covered several countries, it was primarily aimed at China. The objective was to prevent opportunistic acquisitions of Indian assets during a period of economic stress and heightened geopolitical tensions.The impact was immediate. Chinese investment proposals slowed sharply. Funds with even tiny Chinese shareholding found themselves trapped in approval processes. Industry groups repeatedly complained that venture capital investments, follow-on funding rounds and minority investments were being delayed despite posing little strategic risk. Many proposals remained pending for years.Also Read: ‘We have to do business with China too’: JaishankarOver time, the restrictions created an unusual situation. India wanted to accelerate manufacturing, electronics production and supply-chain development. Yet many of the technologies, supplier networks and sources of capital required for those ambitions remained deeply connected to China. That issue eventually forced policymakers to reconsider the framework just when India-China ties also began improving.The May resetIn May this year, the government introduced a significant relaxation. Investors with non-controlling Chinese or land-border-country ownership of up to 10% were allowed to invest through the automatic route. The beneficial ownership test was shifted to the investor entity level, reducing compliance hurdles for global funds that happened to have limited Chinese exposure. Certain sectors were also brought under a time-bound approval framework.According to government data, 29 investment proposals worth nearly Rs 4,900 crore, or more than $500 million, have already been reported under the revised framework. The investments span information technology, artificial intelligence, manufacturing, pharmaceuticals, data centres, information and communication services and transport. The capital has come through entities based in jurisdictions including the United States, Mauritius, Singapore, Japan, South Korea, Luxembourg and the Cayman Islands.What is striking is not just the amount but the speed. Within a few months of the rule change, investment