India’s 10% Chinese Shareholding Rule Opens Door to ₹4,895 Crore FDI

India’s easing of foreign investment rules for companies with limited ownership linked to China and other countries sharing a land border has started attracting capital, with 29 FDI proposals worth ₹4,895.65 crore reported under the revised framework. The Finance Ministry notified the changes under the Foreign Exchange Management Act (FEMA) on May 1, 2026, following the government’s decision to make limited, non-controlling investments eligible for the automatic route.

Under the earlier regime introduced in 2020, any beneficial ownership linked to a country sharing a land border with India could trigger mandatory government approval, even when the foreign investor held only a small stake. This meant eligible proposals could not proceed automatically and had to undergo government scrutiny. The revised framework creates a specific threshold: beneficial ownership from a land-bordering country of up to 10%, provided it remains non-controlling, can qualify for the automatic route, subject to sectoral caps, entry routes and other conditions.

The 10% limit applies to beneficial ownership, rather than meaning that every company with a 10% Chinese shareholding can automatically invest in India. The investee activity must itself be eligible under the automatic route and comply with applicable sectoral restrictions. The move is aimed at reducing approval-related delays, providing greater regulatory certainty and facilitating foreign capital, while retaining safeguards over controlling investments. The government has sought to make investment decisions quicker, particularly for businesses operating across global supply chains and technology-intensive sectors.

The 29 proposals span information technology, artificial intelligence, information and communication, manufacturing, pharmaceuticals, data centres and transport services, among other sectors. The investors/entities are based in jurisdictions including Mauritius, the United States, South Korea, Japan, Singapore, Luxembourg and the Cayman Islands. The relaxation does not mean that entities registered in China, Hong Kong or other land-bordering countries are freely permitted to invest. The broader restrictions on such entities continue to apply, with the new framework carving out qualifying non-controlling ownership of up to 10%.

The government’s approach therefore seeks to balance investment facilitation with national-security considerations, while making India more attractive to global investors.