Indian businesses planning collaborations with Chinese firms are now facing a heightened atmosphere of caution, with regulatory hurdles expected to intensify. The fresh wave of unease stems from China’s public support for Pakistan amid renewed hostilities, according to an Economic Times report published on Wednesday.
This geopolitical shift has cast a shadow over a number of business proposals, notably Haier’s intended stake sale in its Indian subsidiary. Additionally, two joint venture agreements that were in the pipeline under India’s Press Note 3 rules are now uncertain, the report said.
PLI Partnerships Put on Hold
Discussions between Indian contract manufacturers and their Chinese counterparts regarding joint applications under the government’s production-linked incentive (PLI) scheme for electronics have also hit a pause. The environment for Chinese-linked investment proposals has turned increasingly cautious.
One prominent Indian player that had been considering acquiring a stake in Haier India has chosen to delay the process. A top executive at the company said that the plans will progress only after the company carefully evaluated the developing regulatory climate around Chinese deals.
Haier’s divestment plan involves offering 25–51 per cent of its Indian business, which is valued in the range of $2 billion to $2.3 billion. Among the leading contenders in the bidding process are Reliance Industries and a consortium that includes Bharti Group’s Sunil Mittal and private equity giant Warburg Pincus.
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Regulatory Clampdown Continues
India’s regulatory environment toward Chinese investments has remained tough since the 2020 border conflict. Press Note 3, introduced that year, mandates a layer of government clearances for investments coming from countries that share a land border with India. Since its implementation, only a limited number of large Chinese firms have managed to get through the approval process. Others have either had to divest their stakes or form partnerships with Indian companies.
Citing official sources, the report added that Chinese entities participating in PLI-linked joint ventures may only be allowed minority ownership, and only when critical components cannot be sourced from other countries.
